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Consumer Behaviour &
Market segmentation
In the study of Consumer Behaviour
main focus is the customer
satisfaction because customer is the
only person with whose presence
businesses actually exists
It attempts to understand the
buyer decision making
process both individually &
in groups.
Consumer Behavior
is the study of
when, why, how
and where people
do or do not buy a
product.
It basically depends
on the psychology
of the consumer.
It studies the individual consumers
such as demographics & behavioural
aspects to understand the people’s
wants.
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Consumer Behaviour
Definition and Meaning of Consumer Behaviour:
Definition:
• Kotler Consumer behaviour is the study of how
people buy, what they buy, when they buy and why
they buy.
• Solomon Consumer behaviour is the study “of the
processes involved when individuals or groups select,
purchase, use, or dispose of products, services, ideas,
or experiences to satisfy needs and desires”
Meaning: Consumer behavior is “the study of
individuals, groups, or organizations and all the
activities associated with the purchase, use and disposal
of goods and services.
Consumer behaviour consists of how the
consumer's emotions, attitudes, and preferences affect
buying behaviour”.
Characteristics of consumer behaviour
I. It is a process where consumer decide what
II. It comprises of both
of consumer.
III. Consumer behaviour is
which keeps on changing
constantly.
IV. Individual buying behaviour is affected by
various like his needs,
wants, attitudes & motives and also by
like social groups, culture ,
status, environmental factors etc.
V. Consumer behaviour starts
Importance/Need of study of
consumer behaviour
I. To make better strategies for
II. To take into consideration
III. To know the and
how consumer make
.
IV. Consistent change in
V. Consumer behavior study is
necessary to make
.
VI. To avoid future
Factors Influencing Consumer Behaviour
Social Factors
1.Reference Groups
2.Family
3.Roles and status
1 2 3 4 5
Cultural Factors
1.Religion
2.Sub Culture
3.Social Class
Personal Factors
1.Age Factor
2.Gender
3.Education
4.Income level
5.Status in society
Psychological Factors
1.Learning
2.Attitude
3.Motive
4.Perception
Marketing Factors
1.Product
2.Pricing
3.Promotion
4.Place
Social Factors
 Reference Groups: Small group of people such as
colleagues at work place, friends etc. influence
values and choices of other members, expose them to
new lifestyles and create pressure to choose certain
products. E.g. Mobiles
 Family: Family members influence buying
decision. Parents influence decision of children.
However, nowadays, children are well informed
about products and services through social media and
therefore, they influence the buying decision of
parents.
 Roles and Status: A person performs certain roles
in a particular group in the organization. E.g.
Person may perform the role of senior executive in a
firm and therefore, enjoys higher status. People may
purchase the products that conform to their status,
especially in the case of branded clothes, cars, shoes
etc.
Cultural Factors
 Religion: may influences consumer
behavior to a certain extent. E.g.
consumption of alcohol, tobacco or
meat products is restricted in certain
religions.
 Sub-culture: Each culture consists of
sub-cultures that provide specific
identity to its members. Subculture
includes nationalities, racial groups,
language etc.
 Social Class: Human societies exhibit
social stratification, that may
sometimes take the form of a caste
system where the members share
similar values, interest and behaviour.
Personal Factors
 Age Factor: The age factor influence buying
behavior. E.g. teenagers may prefer trendy
watches, whereas, office executives may prefer
formal ones.
 Gender: The consumer behavior varies across
gender. E.g. girls may prefer certain feminine
colours such as pink, boys may prefer blue, brown.
 Education: Highly educated persons may spend on
books and personal care products than the people
with low education.
 Income Level: Normally, higher the income level,
higher is the level of spending and vice-versa.
 Status in Society: Persons enjoying higher status in
society spend good amount on luxury items such
as luxury cars, luxury watches, premium brands of
clothing etc.
Psychological Factors
 Learning: takes place through information and experience.
E.g. when customer buys a new brand of shampoo and is
satisfied with it, he is likely to be brand loyal.
 Attitude: Tendency to respond in a given manner to a
particular situation or object or idea. Consumers may
develop a positive, or negative or neutral attitude towards
certain products or brands.
 Motive: the inner drive that motivates a person to act or
behave in a certain manner. Marketer must identify the
buying motives of the target customers and influence them
to respond positively.
 Perception: It is the impression, which one forms about a
certain situation or object. E.g. a student may perceive
Sports Day as an important event and therefore, he/she
would make every possible effort including purchase of
new shoes, jersey etc. whereas, another student may be
casual about it and therefore, would not make any such
extra efforts.
Marketing Factors
Product: The features of the product, its uniqueness,
packaging etc. should appeal to the customers.
Pricing: Pricing is a very sensitive decision. Premium
pricing strategy may appeal to upper income customers.
groups and discount pricing may appeal to price sensitive
Promotion: Promotion greatly influences buyer choice.
The elements of promotion mix include publicity,
advertising, sales promotion, salesmanship etc.
Place: The number of middlemen involved, type of
channels, area coverage etc.
Consumer decision process
 The consumer decision process also called the
buyer decision process, helps markets identify how
consumers complete the journey from knowing
about a product to making the purchase decision.
The buying process starts when the customer
identifies a need or problem or when a need arises. It
can be activated through internal or external stimuli.
 Need recognition (awareness): The first and most
important stage of the buying process, because every
sale begins when a customer becomes aware that they
have a need for a product or service.
 Search for information (research): During this
stage, customers want to find out their options.
 Evaluation of alternatives (consideration): This
is the stage when a customer is comparing options
to make the best choice.
 Purchasing decision (conversion): During this stage,
buying behavior turns into action – it’s time for the consumer
to buy!
 Post-purchase evaluation (re-purchase): After making a
purchase, consumers consider whether it was worth it,
whether they will recommend the product/service/brand to
others, whether they would buy again, and what feedback
they would give.
1. Need recognition (awareness)
The need recognition stage of the consumer decision making
process starts when a consumer realizes a need. Needs come
about because of two reasons:
1.Internal stimuli, normally a physiological or emotional
needs, such as hunger, thirst, sickness, sleepiness, sadness,
jealousy, etc.
2.External stimuli, like an advertisement, the smell of
yummy food, etc.
2. Information search (research)
When researching their options, consumers again rely on
internal and external factors, as well as past interactions
with a product or brand, both positive and negative. In the
information stage, they may browse through options at a
physical location or consult online resources, such as
Google or customer reviews.
Another important strategy is word of mouth––since
consumers trust each other more than they do businesses,
make sure to include consumer-generated content, like
customer reviews or video testimonials, on your website.
3. Evaluation of alternatives (consideration):
Alternatives may present themselves in the
form of lower prices, additional product benefits,
product availability, or something as personal as color
or style options. Your marketing material should be
geared towards convincing consumers that your
product is superior to other alternatives.
4. Purchasing decision (conversion):
This is the moment the consumer has been waiting for:
the actual purchase. Once they have gathered all the
facts, including feedback from previous customers,
consumers should arrive at a logical conclusion on the
product or service to purchase.
If you’ve done your job correctly, the consumer will
recognize that your product is the best option and
decide to purchase.
5. Post-purchase evaluation (re-purchase):
In the buyer decision process’s final stage, post-
purchase-purchase behavior, the consumer takes action
based on satisfaction or dissatisfaction.
This part of the consumer decision-making process
involves reflection from both the consumer and the seller.
As a seller, you should try to gauge the following:
Did the purchase meet the need the consumer identified?
Is the customer happy with the purchase?
How can you continue to engage with this customer?
In this stage, the consumer determines if they are satisfied
or dissatisfied with the purchasing outcome. Here is
where cognitive dissonance occurs, “Did I make the right
decision.”
At this stage of the buyer decision process, consumers
take further action after purchase based on their
satisfaction or dissatisfaction.
MARKETING RESEARCH
According to American Marketing
Association (AMA), “Marketing Research
is the systematic gathering, recording and
analysing of data about problems relating to
the marketing of goods and services.”
According to Philip Kotler, “Marketing
research is a systematic problem analysis,
model building and fact finding for the
purpose of improved decision-making and
control in the marketing of goods and
services.”
Meaning: The Marketing Research is the
systematic collection, analysis, and
interpretation of data pertaining to the
marketing conditions.
MARKETING RESEARCH PROCESS
Define the Problem:
 The foremost decision that every firm has to
undertake is to find out the problem for which the
research is to be conducted.
 This enables us to understand the root questions that
need to be informed by market research.
 The problem should not be too broad or too narrow
but specific for market research.
 While defining the problem, the researcher should
take into account the purpose of the study, the
relevant background information, important
information, and uses.
 Problem definition involves discussion with the
decision-makers, interviews with industry experts,
analysis of secondary data, literature review, case
studies, etc.
Develop the Research plan: This step involves
gathering the information relevant to the research
objective. It includes:
Data Sources: The researcher can collect the data
pertaining to the research problem from either the
primary source or the secondary source or both the
sources of information.
Research Approaches: Observational Research,
Ethnographic Research, Focus Group Research, Survey
Research, behavioral data, Experimental research.
Sampling plan
The sampling Unit i.e. whom, shall we survey?
The sample size, i.e., How many units in the population
shall be surveyed?
The sampling procedure, i.e. How the respondents shall
be chosen?
Contact methods
The researcher has to choose the medium through which
the respondents can be contacted. The respondents can be
reached via emails, telephone, in person or online.
Collect the Information:
At this stage, the researcher has to adopt the methods to
collect the information, he may find it difficult to gather
the correct information because of the respondent’s
biasedness, unwillingness to give answers.
Analyze the Information:
Once the information is collected the next step is to
organize it in such a way that some analysis can be
obtained. The researchers apply several statistical
techniques to perform the analysis, such as they compute
averages and measures of dispersion. Also, some
advanced decision models are used to analyze the data.
Present the Findings: Finally, all the findings and the
research are shown to the top management level viz.
Managing director, CEO, or board of directors to make
the marketing decisions in line with the research.
.
Make the Decision: This is the last step of the marketing
research, once the findings are presented to the top level
management it is up to them either to rely on the findings
and take decisions or discard the findings as unsuitable.
Meaning: Market segmentation is defined as the
segmentation or division of markets into various
homogenous coups of customers, each of them
reacting differently to promotion,
communication, pricing and other variables of the
marketing mix.
Definition of Marketing Segmentation
“Market segmentation is the subdividing of customers
into a homogeneous subset of customers where any
subset may conceivably select as a market target to be
reached with a distinct marketing mix.” – Philip
Kotler
“Market segmentation consists of taking the total
heterogeneous market for a product and dividing it into
several submarkets of segment each of which tends to
be homogeneous is full of significant aspects.” –
William Stanton
Different Levels of Market Segmentation
 Marketers subdivide markets into segments, so they can do focus on marketing plans.
 Each Level of market segmentation determines the strategy a company will follow to promote, distribute and
position its product in the market and respectively target audience or its customers.
 Before developing a marketing plan, one must know the what are the levels of market segmentation.
Mass Marketing
I. In Segemetation, Mass marketing refers to the strategy of targeting the entire potential customer
market by means of a single marketing message.
II. The marketing strategy used in this segmentation does not target the specific requirements or needs of customers.
III. Mass marketing strategy, instead of focusing on a subset of customers, focuses on the entire market segment that
can be a probable customer of a product.
An example of mass marketing strategy is of Baygon cockroach spray or Mortein mosquito repellent coils that target
all its potential customers through a single marketing message.
Segment Marketing
I. Segment marketing refers to a strategy where the company divides its target audience into different segments
based on their unique needs and requirements.
II. This way the company targets different messages to different segments, appealing them towards the unique
features the product offers.
III. This strategy creates product differentiation for customers with similar needs and preferences, based on their
gender, age, income and location.
The example Executive class and economy class of ticketing in the airlines’ industry, Room segmentation in hotel
business are the example of segment marketing. These products are carefully designed to meet the needs of each
segment served.
Niche Marketing
I. This strategy of marketing focuses on a narrower customer segmentation.
II. Customers may want or desire a product that is not met completely by the products offered in a market.
III. When companies move forward and develop highly specialized products to offer these customers their
specific needs, they offer distinct products in a market that caters to specific customer segments only.
Mountain bikes are an example of a niche marketing segment. where the market segmentation will be individuals
interested in mountain biking only. Since not every bike manufacturing company caters to mountain bikers, it is a
niche segment. Companies that produce mountain bikes target the niche segment of mountain bikers and cater to their
specific needs, preferences and requirements.
Micro Marketing
Micro marketing follows an even narrower segmentation marketing strategy, catering to the attribute of a much-
defined subset of potential customers such as catering to individuals of a specific geographical location or a very
specific lifestyle.
An example of niche marketing is luxury cars that are very high priced and offer exceptional features such as
high speed, customized look, etc. Since these cars are very expensive and limited in number, the niche market for
these vehicles target rich, car lovers that are interested in the unique features and has the financial capability to buy
them.
Micro Marketing is further classified into THREE categories
I. Local Marketing: Products and promotions to meet the needs and wants of the local customer group.
II. Individual Marketing: Products and marketing programs to meet the needs of the individual customer.
III. Mass Customization: Preparing individually designed product and communication on large scale.
Basis of Market segmentation
Demographic segmentation
Demographic Characteristics:
Factors like age, gender, income, occupation, family size, education; marital status is used singly or in
combination to segment the market.
i. Age: Age is one of the most important factors for segmenting the market. The market the producer should
know for what age group his product could be most suited so that he can plan his pricing policy, advertisement
policy, marketing policy and strategy accordingly.
For example, Cloth market or Garment market may be segmented on this basis of age as –
Children b/w the age group of 3-12yrs
Children b/w the age group of 13-15yrs
Teenagers’ b/w the age group of 16-20yrs
Adults’ b/w the age group of 21-30yrs and so on
ii. Income: The manufacturer should also bear in mind while preparing his marketing policy, the income of the
prospective buyers of his product. Consumer’s needs, behaviour, persuasion etc. differ in different income
groups. For example, people in high-income group prefer quality of goods, design, fashion-oriented products,
etc. hence they can be motivated on these factors. People in low-income group attract towards low price.
iii. Gender:
Marketers may also be divided on the basis of sex i.e., male and female. Some products are exclusively produced for
women while some others are for men. For example, Lip Stick is meant for a woman and on the other hand Shaving
cream is only meant for men.
iv. Occupation:
Occupation is also another variable in segmenting the market. An individual’s employment does definitely affect the
consumption; different categories of segments can be identified like doctors, consultants, entrepreneurs, lecturers etc.
v. Education:
Education of the consumer also affects the preference and taste. The choice of literate person would obviously differ
from that of an illiterate, as a literate he would be having a lot of exposure to the outside worlds where as an illiterate
although exist the same environment would lack the ability to understand
vi. Marital Status:
Marital status is another demographics variable used. The behavioral of single and married people differs. Married
people are more conservative than unmarried people.
vii. Family Size and Structure:
Markets may also be segmented on the basis of size of family Refrigerators and cookers are produced in different
sizes to suit the needs of families of different sizes.
Behavioral segmentation
In behavioral segmentation, marketers divide buyers into groups on the basis of their knowledge of, attitude toward,
use of, or response to a product.
Occasion: Marketers can distinguish buyers according to the occasion when they develop a need, purchase a
product, or use a product. For example: Travel agencies
Benefits sought: It divides the market into groups according to the different benefits that consumers seek from the
product. Examples: A shampoo for example, may offer various benefits, such as basic cleaning, conditioning, shine
and bounce, dandruff control, or suitability for different hair types.
User status: Every product has its nonusers, ex-users, potential users, first time users and regular users. A company
cannot always rely on the regular users, it has to attract the other types as well. Example: Blood bank cannot rely
only on regular donors to supply blood; they must also recruit new first time donors and contact ex donors, each with
a different marketing strategy.
Usage rate: Marketers can segment markets into light, medium, and heavy product users. Example: Cellular phone
service providers calculate the average revenue per user (ARPU) and the heavy user account for a significantly
higher proportion of revenue than casual or occasional users. Marketers would rather attract one heavy user than
several light users.
5. Loyalty Status: Marketers usually envision four based on brand loyalty status:
Hard Core Loyal: Consumer who buys only one brand all the time.
Split Loyal: Consumers who are loyal to two or three brands.
Shifting Loyal: Consumers who shift loyalty from one brand to another.
Switchers: Consumers who show no loyalty to any brand.
6. Readiness to Buy: Some people are unaware of the product, some are aware, some are informed, some are
interested, some desire the product, and some intend to buy. The proportions of consumers at different stages make
a big difference in designing the marketing program.
In case of product of services that consumers are not familiar with, marketers need to educate, inform, and
persuade consumers so that they start accepting the new offer.
7. Attitude Toward Product: Five customer attitudes about products are1. Enthusiastic 2. Positive Attitude 3.
Negative Attitude 4. Indifferent 5. Hostile.
Geographic segmentation
Geographic segmentation involves segmenting your audience based on the region they live or work in. This can
be done in any number of ways: grouping customers by the country they live in, or smaller geographical divisions,
from region to city, and right down to postal code.
In total, there are six factors that pertain to geographic segmentation and can be used to create customer segments:
1. Country- Certain companies make products or services which are specific to only a country. This type of
geographic segmentation helps target people from a specific country. Ex: Sarees are sold in countries like India,
flags are sold only in their respective country etc
2. City- Cities offer a huge potential market to companies. Hence companies often select specific cities for their
products or services.
Ex: Replicas of Eiffel Tower will be sold in Paris, products depicting Taj Mahal will do well in Agra etc
3. Villages- Some villages can be identified by companies which give the best set of customers to companies to
their business with.
Ex: Companies doing sugar business can target villages growing sugarcane, tea manufacturing companies can
target tea farms etc
4. Urban/ Rural- Certain products or services can be offered only to the urban population and certain products are
rural area specific.
Ex: Hand pumps are required in rural areas, stores of premium watch or car brands can be opened in urban areas
etc
5. Climate and weather- Companies use this type of geographic segmentation and identify customers of a region
with similar climatic conditions. Areas based on climate can be hot, cold, humid etc and based on weather can be
snowfall, rainfall, desert etc regions.
Ex: Beachwear can be sold in areas close to the sea, sweaters in cold regions, raincoats in areas receiving high
rainfall, ice-creams in hot regions etc
6. Population density- Depending upon the number of people in an area or region, companies can use density of
population as a parameter to effectively segment the market.
7. cultural preferences - Different regions will have different values that determine whether or not customers
decide to make a purchase. In some cases, these values will be determined by the dominant local religion or long-
standing traditions and customs,
Psychographic segmentation
Psychographic segmentation is defined as a market segmentation technique where groups are formed according
to psychological traits that influence consumption habits drawn from people’s lifestyle and preferences. It is mainly
conducted on the basis of “how” people think and “what” do they aspire their life to be.
Personality: Customer personality and purchasing habits are strongly related. For businesses to develop products
that add value to customers based on their habitual needs – is key towards creating a successful product/service.
A few defined personalities are: creative, emotional, friendly, opinionated, introvert, extrovert, etc. help
organizations to filter their customers in a systematic manner.
Lifestyle: The habits, attitudes, tastes, moral standards, economic level, etc., that together constitute the mode of
living of an individual or group.
The lifestyle of a particular person or group of people is the living conditions, behaviour, and habits that
are typical of them or are chosen by them.
Social Status: Social status refers to the honor or prestige attached to one's position in society.
In most cases, the social status of people primarily decides the products they use and their preferences (in
general). Each social class has its choice of clothes, shoes, food, cars, electronics, etc. For example, elitists would
generally prefer solitaires, luxury cars, holiday homes, etc.
Activities, interests, and opinions: This psychographic segmentation is based on what activities are the customers
inclined towards, which topics are they enthusiastically interested in or what are their opinions about specific
matters. These parameters are called AIO (Activities, Interests, and Opinions).
Attitudes: An individual’s attitude is molded by the way he/she was raised and their cultural background. Each
prospective customer will have a different attitude which can be a variable for psychographic segmentation.
Ex: Person belonging to a high-income group will prefer dining at premium restaurants and drive a Mercedes Benz
and a middle-class individual will be bothered more about saving a few extra bucks and not on luxury.
Marketing Research Defined The planning, collection, and analysis of data relevant to market decision making and
communication of the results of this analysis to management.
The roles of Marketing Research to Management
 Descriptive function: Gathering and presenting factual statements
 Diagnostic function: Explaining data
 Predictive function: Address “What if” questions
The Unrelenting drive for Quality and Customer Satisfaction
The Paramount Importance of Keeping Existing Customers managers Must Understand the Ever-Changing
Marketplace
A proactive management: alters the marketing mix to fit newly emerging patterns in economic, social, and
competitive environments new opportunities develops a long-run marketing strategy
Consumer Behavior Models
Customer behavior models help you understand your unique customer base and more effectively attract, engage,
and retain them. These models are either traditional or contemporary.
TRADITIONAL CONSUMER
BEHAVIOR MODELS
CONTEMPORARY CONSUMER
BEHAVIOR MODELS
Learning Model Engel-Kollat-Blackwell (EKB) Model
Psychoanalytical Model Black Box Model
Sociological Model Impulse buying Theory Model
Economic Model Howard Sheth Model
Nicosia Model
Webster and Wind Model
Traditional Behavior Models
Traditional behavior models were developed by economists hoping to understand what customers purchase based on their wants
and needs. Traditional models include the following:
 Learning Model
 Psychoanalytical Model
 Sociological Model
 Economic Model
The Learning Model of customer behavior theorizes that buyer behavior responds to the desire to satisfy basic needs required
for survival, like food, and learned needs that arise from lived experiences, like fear or guilt.
The psychoanalytical model draws from his theories and says that individual consumers have deep-rooted motives, both
conscious and unconscious, that drive them to make a purchase. These motives can be hidden fears, suppressed desires, or
personal longings.
Ex: Thus, customers make purchases depending on how stimuli from your business, like an advertisement on Instagram, appeal
to their desires.
The Sociological Model of consumer behavior says that purchases are influenced by an individual's place within different
societal groups: family, friends, and workgroups, as well as less-defined groups like Millennials or people who like yoga. An
individual will essentially purchase items based on what is appropriate or typical of the groups they’re in.
The economic model of consumer behavior is the most straightforward of the traditional models. This model argues
that consumers try to meet their needs while spending as few resources (e.g. money) as possible.
Ex: That means that businesses and manufacturers can predict sales based on their customers’ income and their
products’ price. If companies offer the lowest-priced product, they may feel that they’re guaranteed a consistent
level of profit.
Contemporary Models
Contemporary models of consumer behavior focus on rational and deliberate decision-making processes rather than
emotions or unconscious desires. The contemporary models include:
 Engel-Kollat-Blackwell (EKB) Model
 Black Box Model
 Impulse Buying TheoryModel
 Howard Sheth Model
 Nicosia Model
 Webster and Wind Model
The Engel-Kollat-Blackwell model of consumer behavior outlines a five-stage decision process that consumers go
through before purchasing a product or service.
 Awareness
 Information Processing
 Evaluation
 Purchasing Decision
 Outcome Analysis
The Black Box model, sometimes called the Stimulus-Response model, says that customers are individual thinkers
that process internal and external stimuli to make purchase decisions. The graphic below illustrates the decision
process.
The Impulse Buying theory is an alternative to the Learning Model and EKB, as it claims that purchases aren’t
always a result of rational thought.
Escape Purchase: Sometimes called pure impulse, this involves purchasing an item that isn’t a routine item or on
a shopping list.
Reminder Purchase: A consumer makes a reminder impulse purchase when they come across a product through
in-store setups, promotional offers, or a simple reminder that a product exists.
Suggested Purchase: Suggested impulse purchases occur when a consumer is made aware of a product after a
recommendation or suggestion from an in-store salesperson or online algorithms.
Planned Purchase: Although planned is the opposite of impulse, these purchases occur when a consumer knows
they want a particular product but will only buy it if there is a deal involved.
The Howard Sheth model of consumer behavior posits that the buyer’s journey is a highly rational and methodical
decision-making process.
Extensive Problem-Solving: In this stage, customers know nothing about the product they’re seeking or the
brands that are available to them. They’re in active problem-solving mode to find a suitable product.
Limited Problem-Solving: Now that customers have more information, they slow down and begin comparing
their choices.
Habitual Response Behavior: Customers are fully aware of all the choices they have and know which brands they
prefer. Thus, every time they make a purchase, they know where to go.
The Nicosia Model places emphasis on the business first and the consumer second. It argues that the company’s
marketing messages determines whether customers will buy.
• One: The business’ characteristics and the customer’s characteristics.
• Two: Search and evaluation.
• Three: Purchase decision.
• Four: Feedback.
The Webster and Wind Model is a B2B buying behavior model that argues there are four major variables that affect
whether an organization makes a purchase decision. Those are:
Environmental Variables: Environmental variables refer to any external factors that could sway a purchase
decision.
Organizational Variables: Organizational variables refer to internal factors that could sway a purchase decision,
such as the organization’s goals and evaluation criteria.
Buying Center Variables: Who makes the final purchase decision? Who has the authority to sign the contract, and
who influences the buying process?
Individual Variables: These variables refer to the demographic and psychographic information of the individual
prospect at the business.

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consumer Behaviour

  • 2. In the study of Consumer Behaviour main focus is the customer satisfaction because customer is the only person with whose presence businesses actually exists It attempts to understand the buyer decision making process both individually & in groups. Consumer Behavior is the study of when, why, how and where people do or do not buy a product. It basically depends on the psychology of the consumer. It studies the individual consumers such as demographics & behavioural aspects to understand the people’s wants. Your Text Here Easy to change colors, photos and Text. 01 02 04 Consumer Behaviour
  • 3. Definition and Meaning of Consumer Behaviour: Definition: • Kotler Consumer behaviour is the study of how people buy, what they buy, when they buy and why they buy. • Solomon Consumer behaviour is the study “of the processes involved when individuals or groups select, purchase, use, or dispose of products, services, ideas, or experiences to satisfy needs and desires” Meaning: Consumer behavior is “the study of individuals, groups, or organizations and all the activities associated with the purchase, use and disposal of goods and services. Consumer behaviour consists of how the consumer's emotions, attitudes, and preferences affect buying behaviour”.
  • 4. Characteristics of consumer behaviour I. It is a process where consumer decide what II. It comprises of both of consumer. III. Consumer behaviour is which keeps on changing constantly. IV. Individual buying behaviour is affected by various like his needs, wants, attitudes & motives and also by like social groups, culture , status, environmental factors etc. V. Consumer behaviour starts Importance/Need of study of consumer behaviour I. To make better strategies for II. To take into consideration III. To know the and how consumer make . IV. Consistent change in V. Consumer behavior study is necessary to make . VI. To avoid future
  • 5. Factors Influencing Consumer Behaviour Social Factors 1.Reference Groups 2.Family 3.Roles and status 1 2 3 4 5 Cultural Factors 1.Religion 2.Sub Culture 3.Social Class Personal Factors 1.Age Factor 2.Gender 3.Education 4.Income level 5.Status in society Psychological Factors 1.Learning 2.Attitude 3.Motive 4.Perception Marketing Factors 1.Product 2.Pricing 3.Promotion 4.Place
  • 6. Social Factors  Reference Groups: Small group of people such as colleagues at work place, friends etc. influence values and choices of other members, expose them to new lifestyles and create pressure to choose certain products. E.g. Mobiles  Family: Family members influence buying decision. Parents influence decision of children. However, nowadays, children are well informed about products and services through social media and therefore, they influence the buying decision of parents.  Roles and Status: A person performs certain roles in a particular group in the organization. E.g. Person may perform the role of senior executive in a firm and therefore, enjoys higher status. People may purchase the products that conform to their status, especially in the case of branded clothes, cars, shoes etc.
  • 7. Cultural Factors  Religion: may influences consumer behavior to a certain extent. E.g. consumption of alcohol, tobacco or meat products is restricted in certain religions.  Sub-culture: Each culture consists of sub-cultures that provide specific identity to its members. Subculture includes nationalities, racial groups, language etc.  Social Class: Human societies exhibit social stratification, that may sometimes take the form of a caste system where the members share similar values, interest and behaviour.
  • 8. Personal Factors  Age Factor: The age factor influence buying behavior. E.g. teenagers may prefer trendy watches, whereas, office executives may prefer formal ones.  Gender: The consumer behavior varies across gender. E.g. girls may prefer certain feminine colours such as pink, boys may prefer blue, brown.  Education: Highly educated persons may spend on books and personal care products than the people with low education.  Income Level: Normally, higher the income level, higher is the level of spending and vice-versa.  Status in Society: Persons enjoying higher status in society spend good amount on luxury items such as luxury cars, luxury watches, premium brands of clothing etc.
  • 9. Psychological Factors  Learning: takes place through information and experience. E.g. when customer buys a new brand of shampoo and is satisfied with it, he is likely to be brand loyal.  Attitude: Tendency to respond in a given manner to a particular situation or object or idea. Consumers may develop a positive, or negative or neutral attitude towards certain products or brands.  Motive: the inner drive that motivates a person to act or behave in a certain manner. Marketer must identify the buying motives of the target customers and influence them to respond positively.  Perception: It is the impression, which one forms about a certain situation or object. E.g. a student may perceive Sports Day as an important event and therefore, he/she would make every possible effort including purchase of new shoes, jersey etc. whereas, another student may be casual about it and therefore, would not make any such extra efforts.
  • 10. Marketing Factors Product: The features of the product, its uniqueness, packaging etc. should appeal to the customers. Pricing: Pricing is a very sensitive decision. Premium pricing strategy may appeal to upper income customers. groups and discount pricing may appeal to price sensitive Promotion: Promotion greatly influences buyer choice. The elements of promotion mix include publicity, advertising, sales promotion, salesmanship etc. Place: The number of middlemen involved, type of channels, area coverage etc.
  • 11. Consumer decision process  The consumer decision process also called the buyer decision process, helps markets identify how consumers complete the journey from knowing about a product to making the purchase decision. The buying process starts when the customer identifies a need or problem or when a need arises. It can be activated through internal or external stimuli.  Need recognition (awareness): The first and most important stage of the buying process, because every sale begins when a customer becomes aware that they have a need for a product or service.  Search for information (research): During this stage, customers want to find out their options.  Evaluation of alternatives (consideration): This is the stage when a customer is comparing options to make the best choice.  Purchasing decision (conversion): During this stage, buying behavior turns into action – it’s time for the consumer to buy!  Post-purchase evaluation (re-purchase): After making a purchase, consumers consider whether it was worth it, whether they will recommend the product/service/brand to others, whether they would buy again, and what feedback they would give.
  • 12. 1. Need recognition (awareness) The need recognition stage of the consumer decision making process starts when a consumer realizes a need. Needs come about because of two reasons: 1.Internal stimuli, normally a physiological or emotional needs, such as hunger, thirst, sickness, sleepiness, sadness, jealousy, etc. 2.External stimuli, like an advertisement, the smell of yummy food, etc. 2. Information search (research) When researching their options, consumers again rely on internal and external factors, as well as past interactions with a product or brand, both positive and negative. In the information stage, they may browse through options at a physical location or consult online resources, such as Google or customer reviews. Another important strategy is word of mouth––since consumers trust each other more than they do businesses, make sure to include consumer-generated content, like customer reviews or video testimonials, on your website.
  • 13. 3. Evaluation of alternatives (consideration): Alternatives may present themselves in the form of lower prices, additional product benefits, product availability, or something as personal as color or style options. Your marketing material should be geared towards convincing consumers that your product is superior to other alternatives. 4. Purchasing decision (conversion): This is the moment the consumer has been waiting for: the actual purchase. Once they have gathered all the facts, including feedback from previous customers, consumers should arrive at a logical conclusion on the product or service to purchase. If you’ve done your job correctly, the consumer will recognize that your product is the best option and decide to purchase.
  • 14. 5. Post-purchase evaluation (re-purchase): In the buyer decision process’s final stage, post- purchase-purchase behavior, the consumer takes action based on satisfaction or dissatisfaction. This part of the consumer decision-making process involves reflection from both the consumer and the seller. As a seller, you should try to gauge the following: Did the purchase meet the need the consumer identified? Is the customer happy with the purchase? How can you continue to engage with this customer? In this stage, the consumer determines if they are satisfied or dissatisfied with the purchasing outcome. Here is where cognitive dissonance occurs, “Did I make the right decision.” At this stage of the buyer decision process, consumers take further action after purchase based on their satisfaction or dissatisfaction.
  • 15. MARKETING RESEARCH According to American Marketing Association (AMA), “Marketing Research is the systematic gathering, recording and analysing of data about problems relating to the marketing of goods and services.” According to Philip Kotler, “Marketing research is a systematic problem analysis, model building and fact finding for the purpose of improved decision-making and control in the marketing of goods and services.” Meaning: The Marketing Research is the systematic collection, analysis, and interpretation of data pertaining to the marketing conditions. MARKETING RESEARCH PROCESS
  • 16. Define the Problem:  The foremost decision that every firm has to undertake is to find out the problem for which the research is to be conducted.  This enables us to understand the root questions that need to be informed by market research.  The problem should not be too broad or too narrow but specific for market research.  While defining the problem, the researcher should take into account the purpose of the study, the relevant background information, important information, and uses.  Problem definition involves discussion with the decision-makers, interviews with industry experts, analysis of secondary data, literature review, case studies, etc. Develop the Research plan: This step involves gathering the information relevant to the research objective. It includes: Data Sources: The researcher can collect the data pertaining to the research problem from either the primary source or the secondary source or both the sources of information. Research Approaches: Observational Research, Ethnographic Research, Focus Group Research, Survey Research, behavioral data, Experimental research. Sampling plan The sampling Unit i.e. whom, shall we survey? The sample size, i.e., How many units in the population shall be surveyed? The sampling procedure, i.e. How the respondents shall be chosen? Contact methods The researcher has to choose the medium through which the respondents can be contacted. The respondents can be reached via emails, telephone, in person or online.
  • 17. Collect the Information: At this stage, the researcher has to adopt the methods to collect the information, he may find it difficult to gather the correct information because of the respondent’s biasedness, unwillingness to give answers. Analyze the Information: Once the information is collected the next step is to organize it in such a way that some analysis can be obtained. The researchers apply several statistical techniques to perform the analysis, such as they compute averages and measures of dispersion. Also, some advanced decision models are used to analyze the data. Present the Findings: Finally, all the findings and the research are shown to the top management level viz. Managing director, CEO, or board of directors to make the marketing decisions in line with the research. . Make the Decision: This is the last step of the marketing research, once the findings are presented to the top level management it is up to them either to rely on the findings and take decisions or discard the findings as unsuitable.
  • 18. Meaning: Market segmentation is defined as the segmentation or division of markets into various homogenous coups of customers, each of them reacting differently to promotion, communication, pricing and other variables of the marketing mix. Definition of Marketing Segmentation “Market segmentation is the subdividing of customers into a homogeneous subset of customers where any subset may conceivably select as a market target to be reached with a distinct marketing mix.” – Philip Kotler “Market segmentation consists of taking the total heterogeneous market for a product and dividing it into several submarkets of segment each of which tends to be homogeneous is full of significant aspects.” – William Stanton
  • 19. Different Levels of Market Segmentation  Marketers subdivide markets into segments, so they can do focus on marketing plans.  Each Level of market segmentation determines the strategy a company will follow to promote, distribute and position its product in the market and respectively target audience or its customers.  Before developing a marketing plan, one must know the what are the levels of market segmentation.
  • 20. Mass Marketing I. In Segemetation, Mass marketing refers to the strategy of targeting the entire potential customer market by means of a single marketing message. II. The marketing strategy used in this segmentation does not target the specific requirements or needs of customers. III. Mass marketing strategy, instead of focusing on a subset of customers, focuses on the entire market segment that can be a probable customer of a product. An example of mass marketing strategy is of Baygon cockroach spray or Mortein mosquito repellent coils that target all its potential customers through a single marketing message. Segment Marketing I. Segment marketing refers to a strategy where the company divides its target audience into different segments based on their unique needs and requirements. II. This way the company targets different messages to different segments, appealing them towards the unique features the product offers. III. This strategy creates product differentiation for customers with similar needs and preferences, based on their gender, age, income and location. The example Executive class and economy class of ticketing in the airlines’ industry, Room segmentation in hotel business are the example of segment marketing. These products are carefully designed to meet the needs of each segment served.
  • 21. Niche Marketing I. This strategy of marketing focuses on a narrower customer segmentation. II. Customers may want or desire a product that is not met completely by the products offered in a market. III. When companies move forward and develop highly specialized products to offer these customers their specific needs, they offer distinct products in a market that caters to specific customer segments only. Mountain bikes are an example of a niche marketing segment. where the market segmentation will be individuals interested in mountain biking only. Since not every bike manufacturing company caters to mountain bikers, it is a niche segment. Companies that produce mountain bikes target the niche segment of mountain bikers and cater to their specific needs, preferences and requirements. Micro Marketing Micro marketing follows an even narrower segmentation marketing strategy, catering to the attribute of a much- defined subset of potential customers such as catering to individuals of a specific geographical location or a very specific lifestyle. An example of niche marketing is luxury cars that are very high priced and offer exceptional features such as high speed, customized look, etc. Since these cars are very expensive and limited in number, the niche market for these vehicles target rich, car lovers that are interested in the unique features and has the financial capability to buy them.
  • 22. Micro Marketing is further classified into THREE categories I. Local Marketing: Products and promotions to meet the needs and wants of the local customer group. II. Individual Marketing: Products and marketing programs to meet the needs of the individual customer. III. Mass Customization: Preparing individually designed product and communication on large scale.
  • 23. Basis of Market segmentation
  • 25. Demographic Characteristics: Factors like age, gender, income, occupation, family size, education; marital status is used singly or in combination to segment the market. i. Age: Age is one of the most important factors for segmenting the market. The market the producer should know for what age group his product could be most suited so that he can plan his pricing policy, advertisement policy, marketing policy and strategy accordingly. For example, Cloth market or Garment market may be segmented on this basis of age as – Children b/w the age group of 3-12yrs Children b/w the age group of 13-15yrs Teenagers’ b/w the age group of 16-20yrs Adults’ b/w the age group of 21-30yrs and so on ii. Income: The manufacturer should also bear in mind while preparing his marketing policy, the income of the prospective buyers of his product. Consumer’s needs, behaviour, persuasion etc. differ in different income groups. For example, people in high-income group prefer quality of goods, design, fashion-oriented products, etc. hence they can be motivated on these factors. People in low-income group attract towards low price.
  • 26. iii. Gender: Marketers may also be divided on the basis of sex i.e., male and female. Some products are exclusively produced for women while some others are for men. For example, Lip Stick is meant for a woman and on the other hand Shaving cream is only meant for men. iv. Occupation: Occupation is also another variable in segmenting the market. An individual’s employment does definitely affect the consumption; different categories of segments can be identified like doctors, consultants, entrepreneurs, lecturers etc. v. Education: Education of the consumer also affects the preference and taste. The choice of literate person would obviously differ from that of an illiterate, as a literate he would be having a lot of exposure to the outside worlds where as an illiterate although exist the same environment would lack the ability to understand vi. Marital Status: Marital status is another demographics variable used. The behavioral of single and married people differs. Married people are more conservative than unmarried people. vii. Family Size and Structure: Markets may also be segmented on the basis of size of family Refrigerators and cookers are produced in different sizes to suit the needs of families of different sizes.
  • 28. In behavioral segmentation, marketers divide buyers into groups on the basis of their knowledge of, attitude toward, use of, or response to a product. Occasion: Marketers can distinguish buyers according to the occasion when they develop a need, purchase a product, or use a product. For example: Travel agencies Benefits sought: It divides the market into groups according to the different benefits that consumers seek from the product. Examples: A shampoo for example, may offer various benefits, such as basic cleaning, conditioning, shine and bounce, dandruff control, or suitability for different hair types. User status: Every product has its nonusers, ex-users, potential users, first time users and regular users. A company cannot always rely on the regular users, it has to attract the other types as well. Example: Blood bank cannot rely only on regular donors to supply blood; they must also recruit new first time donors and contact ex donors, each with a different marketing strategy. Usage rate: Marketers can segment markets into light, medium, and heavy product users. Example: Cellular phone service providers calculate the average revenue per user (ARPU) and the heavy user account for a significantly higher proportion of revenue than casual or occasional users. Marketers would rather attract one heavy user than several light users.
  • 29. 5. Loyalty Status: Marketers usually envision four based on brand loyalty status: Hard Core Loyal: Consumer who buys only one brand all the time. Split Loyal: Consumers who are loyal to two or three brands. Shifting Loyal: Consumers who shift loyalty from one brand to another. Switchers: Consumers who show no loyalty to any brand. 6. Readiness to Buy: Some people are unaware of the product, some are aware, some are informed, some are interested, some desire the product, and some intend to buy. The proportions of consumers at different stages make a big difference in designing the marketing program. In case of product of services that consumers are not familiar with, marketers need to educate, inform, and persuade consumers so that they start accepting the new offer. 7. Attitude Toward Product: Five customer attitudes about products are1. Enthusiastic 2. Positive Attitude 3. Negative Attitude 4. Indifferent 5. Hostile.
  • 31. Geographic segmentation involves segmenting your audience based on the region they live or work in. This can be done in any number of ways: grouping customers by the country they live in, or smaller geographical divisions, from region to city, and right down to postal code. In total, there are six factors that pertain to geographic segmentation and can be used to create customer segments: 1. Country- Certain companies make products or services which are specific to only a country. This type of geographic segmentation helps target people from a specific country. Ex: Sarees are sold in countries like India, flags are sold only in their respective country etc 2. City- Cities offer a huge potential market to companies. Hence companies often select specific cities for their products or services. Ex: Replicas of Eiffel Tower will be sold in Paris, products depicting Taj Mahal will do well in Agra etc 3. Villages- Some villages can be identified by companies which give the best set of customers to companies to their business with. Ex: Companies doing sugar business can target villages growing sugarcane, tea manufacturing companies can target tea farms etc 4. Urban/ Rural- Certain products or services can be offered only to the urban population and certain products are rural area specific. Ex: Hand pumps are required in rural areas, stores of premium watch or car brands can be opened in urban areas etc
  • 32. 5. Climate and weather- Companies use this type of geographic segmentation and identify customers of a region with similar climatic conditions. Areas based on climate can be hot, cold, humid etc and based on weather can be snowfall, rainfall, desert etc regions. Ex: Beachwear can be sold in areas close to the sea, sweaters in cold regions, raincoats in areas receiving high rainfall, ice-creams in hot regions etc 6. Population density- Depending upon the number of people in an area or region, companies can use density of population as a parameter to effectively segment the market. 7. cultural preferences - Different regions will have different values that determine whether or not customers decide to make a purchase. In some cases, these values will be determined by the dominant local religion or long- standing traditions and customs,
  • 34. Psychographic segmentation is defined as a market segmentation technique where groups are formed according to psychological traits that influence consumption habits drawn from people’s lifestyle and preferences. It is mainly conducted on the basis of “how” people think and “what” do they aspire their life to be. Personality: Customer personality and purchasing habits are strongly related. For businesses to develop products that add value to customers based on their habitual needs – is key towards creating a successful product/service. A few defined personalities are: creative, emotional, friendly, opinionated, introvert, extrovert, etc. help organizations to filter their customers in a systematic manner. Lifestyle: The habits, attitudes, tastes, moral standards, economic level, etc., that together constitute the mode of living of an individual or group. The lifestyle of a particular person or group of people is the living conditions, behaviour, and habits that are typical of them or are chosen by them. Social Status: Social status refers to the honor or prestige attached to one's position in society. In most cases, the social status of people primarily decides the products they use and their preferences (in general). Each social class has its choice of clothes, shoes, food, cars, electronics, etc. For example, elitists would generally prefer solitaires, luxury cars, holiday homes, etc.
  • 35. Activities, interests, and opinions: This psychographic segmentation is based on what activities are the customers inclined towards, which topics are they enthusiastically interested in or what are their opinions about specific matters. These parameters are called AIO (Activities, Interests, and Opinions). Attitudes: An individual’s attitude is molded by the way he/she was raised and their cultural background. Each prospective customer will have a different attitude which can be a variable for psychographic segmentation. Ex: Person belonging to a high-income group will prefer dining at premium restaurants and drive a Mercedes Benz and a middle-class individual will be bothered more about saving a few extra bucks and not on luxury.
  • 36.
  • 37. Marketing Research Defined The planning, collection, and analysis of data relevant to market decision making and communication of the results of this analysis to management. The roles of Marketing Research to Management  Descriptive function: Gathering and presenting factual statements  Diagnostic function: Explaining data  Predictive function: Address “What if” questions The Unrelenting drive for Quality and Customer Satisfaction The Paramount Importance of Keeping Existing Customers managers Must Understand the Ever-Changing Marketplace A proactive management: alters the marketing mix to fit newly emerging patterns in economic, social, and competitive environments new opportunities develops a long-run marketing strategy
  • 38. Consumer Behavior Models Customer behavior models help you understand your unique customer base and more effectively attract, engage, and retain them. These models are either traditional or contemporary. TRADITIONAL CONSUMER BEHAVIOR MODELS CONTEMPORARY CONSUMER BEHAVIOR MODELS Learning Model Engel-Kollat-Blackwell (EKB) Model Psychoanalytical Model Black Box Model Sociological Model Impulse buying Theory Model Economic Model Howard Sheth Model Nicosia Model Webster and Wind Model
  • 39. Traditional Behavior Models Traditional behavior models were developed by economists hoping to understand what customers purchase based on their wants and needs. Traditional models include the following:  Learning Model  Psychoanalytical Model  Sociological Model  Economic Model The Learning Model of customer behavior theorizes that buyer behavior responds to the desire to satisfy basic needs required for survival, like food, and learned needs that arise from lived experiences, like fear or guilt. The psychoanalytical model draws from his theories and says that individual consumers have deep-rooted motives, both conscious and unconscious, that drive them to make a purchase. These motives can be hidden fears, suppressed desires, or personal longings. Ex: Thus, customers make purchases depending on how stimuli from your business, like an advertisement on Instagram, appeal to their desires. The Sociological Model of consumer behavior says that purchases are influenced by an individual's place within different societal groups: family, friends, and workgroups, as well as less-defined groups like Millennials or people who like yoga. An individual will essentially purchase items based on what is appropriate or typical of the groups they’re in.
  • 40. The economic model of consumer behavior is the most straightforward of the traditional models. This model argues that consumers try to meet their needs while spending as few resources (e.g. money) as possible. Ex: That means that businesses and manufacturers can predict sales based on their customers’ income and their products’ price. If companies offer the lowest-priced product, they may feel that they’re guaranteed a consistent level of profit. Contemporary Models Contemporary models of consumer behavior focus on rational and deliberate decision-making processes rather than emotions or unconscious desires. The contemporary models include:  Engel-Kollat-Blackwell (EKB) Model  Black Box Model  Impulse Buying TheoryModel  Howard Sheth Model  Nicosia Model  Webster and Wind Model
  • 41. The Engel-Kollat-Blackwell model of consumer behavior outlines a five-stage decision process that consumers go through before purchasing a product or service.  Awareness  Information Processing  Evaluation  Purchasing Decision  Outcome Analysis The Black Box model, sometimes called the Stimulus-Response model, says that customers are individual thinkers that process internal and external stimuli to make purchase decisions. The graphic below illustrates the decision process.
  • 42. The Impulse Buying theory is an alternative to the Learning Model and EKB, as it claims that purchases aren’t always a result of rational thought. Escape Purchase: Sometimes called pure impulse, this involves purchasing an item that isn’t a routine item or on a shopping list. Reminder Purchase: A consumer makes a reminder impulse purchase when they come across a product through in-store setups, promotional offers, or a simple reminder that a product exists. Suggested Purchase: Suggested impulse purchases occur when a consumer is made aware of a product after a recommendation or suggestion from an in-store salesperson or online algorithms. Planned Purchase: Although planned is the opposite of impulse, these purchases occur when a consumer knows they want a particular product but will only buy it if there is a deal involved. The Howard Sheth model of consumer behavior posits that the buyer’s journey is a highly rational and methodical decision-making process. Extensive Problem-Solving: In this stage, customers know nothing about the product they’re seeking or the brands that are available to them. They’re in active problem-solving mode to find a suitable product. Limited Problem-Solving: Now that customers have more information, they slow down and begin comparing their choices. Habitual Response Behavior: Customers are fully aware of all the choices they have and know which brands they prefer. Thus, every time they make a purchase, they know where to go.
  • 43. The Nicosia Model places emphasis on the business first and the consumer second. It argues that the company’s marketing messages determines whether customers will buy. • One: The business’ characteristics and the customer’s characteristics. • Two: Search and evaluation. • Three: Purchase decision. • Four: Feedback. The Webster and Wind Model is a B2B buying behavior model that argues there are four major variables that affect whether an organization makes a purchase decision. Those are: Environmental Variables: Environmental variables refer to any external factors that could sway a purchase decision. Organizational Variables: Organizational variables refer to internal factors that could sway a purchase decision, such as the organization’s goals and evaluation criteria. Buying Center Variables: Who makes the final purchase decision? Who has the authority to sign the contract, and who influences the buying process? Individual Variables: These variables refer to the demographic and psychographic information of the individual prospect at the business.