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Consumer Behavior Project

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This was made as a part of my project at SIMSREE (Sydenham, Mumbai).

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Consumer Behavior Project

  1. 1. CONSUMER BEHAVIOUR The paper discusses consumer behaviour, the model in which this behaviour works and the factors affecting the consumer behaviour. DNYANESH BODHE SIMSREE MMS ROLL NO: 805 SEPT’ 2008
  2. 2. Consumer Behaviour INDEX An Executive Summary………………………………………………………………………. 3 Consumer Behaviour……………………………………………………………………………. 5 Importance of Consumer Behaviour…………………………………………………….. 5 Basic Model of Consumer Decision Making………………………………………… 7  Problem Recognition……………………………………………………………………………………………………………..8  Information Search……………………………………………………………………………………………………………….8  Evaluation and Selection of Alternatives……………………………………………………………………………...9  Purchase Decision………………………………………………………………………………………………………………...11  Post Purchase Evaluation…………………………………………………………………………………………………….12 Factors Influencing Consumer Behaviour……………………………………………14  Internal Influences…………………………………………………………………………………………………………15  Situational Influences…………………………………………………………………………………………………….21  Social Influences…………………………………………………………………………………………………………….22 Case Studies……………………………………………………………………………………..25  Case Study I – Individual Responses to fuel Price Rise…………………………………………………25  Case Study II – Consumer Food Safety Behaviour……………………………………………………………26  Case Study III –Mad Cow Disease ………………………………………………………………………………….27 Conclusion……………………………………………………………………………………….32 2|P age
  3. 3. Consumer Behaviour An Executive Summary It is a widely accepted principle of business that to be more profitable and survive an organisation must understand and stay close to its consumers to provide products and services consumers will purchase. Many companies today have recognised the importance of consumers and use sophisticated approaches to understand consumer behaviour which form the basis of marketing strategies. Therefore an understanding of the theory of consumer behaviour and its application to business and marketing is a vital element of a business education. The Consumer Behaviour for marketing project aims at giving the us an understanding of factors influencing consumer behaviour which can be used in the development of more effective marketing strategies in the future. Aims: To enable us to understand and analyse the key theories, models and factors which influence consumer behaviour and apply them to the development of marketing strategies and the marketing mix within an international context. Learning Outcomes: On the successful completion of the project, we will be able to: 1. Analyse the role of consumer behaviour in marketing strategy formulation for consumer markets in an international context. 3|P age
  4. 4. Consumer Behaviour 2. Demonstrate a clear understanding of the major models of consumer and organisational decision making processes, the key theories about constructs and variables in the model, and their relationships which introduce variations into the process. 3. Analyse and apply these consumer behaviour constructs to strategic and tactical marketing decisions in an international context in the areas of segmentation, positioning and the development of the marketing mix. 4. Have an ethical sensitivity regarding the social legitimacy of consumer influence and consumer response to corporate activity. 5. Interact effectively within a team, recognise, support or be proactive in leadership in a professional context and manage conflict. 6. Engage effectively in discussion and debate in small and large groups in a professional manner and produce detailed and coherent written material. The subject of consumer perception and behaviour is one of the most widely studied and embraced constructs in marketing. Over the last two decades more than 20,000 academic articles have been published on that topic. Models and views presented in these articles are connected with positive change in consumer perception. All these aspects have been highlighted using case studies and many other practical examples from day today life as well. Consumer behaviour is an ever changing phenomenon, it is simply impossible to define it using quantative parameters; it cannot be measured, however an attempt to comprehend the complexities in consumer behaviour and decision making can definitely be made – that is exactly what I‘ve done. 4|P age
  5. 5. Consumer Behaviour Consumer Behaviour Consumer behaviour is the study that focuses on how, what, when and why people buy. It is a study that blends elements from psychology, sociology, anthropology, marketing and economics. It attempts to understand the consumer‘s decision making process, both individually and in groups based on social and economic division. It studies characteristics of individual consumers such as demographics, psychographics, and behavioural variables in an attempt to understand people's wants. Topics under this study include, but are not limited to, affect, mood, and emotion; explicit and implicit attitudes; social identity; self-concept and self-presentation; attachment, commitment, trust, and loyalty; consumer-marketer relationships; motivation, goals, and regulatory focus; conscious and deliberative information processing and reasoning; unconscious, automatic, and intuitive information processing; consumption and culture; consumer decision-making; organisational buying; technology and consumption; consumption value; post-consumption reactions and appraisals; measuring consumption outcomes; and design and aesthetic issues. It also tries to assess influences on the consumer from groups such as family, friends, reference groups, and society in general. Importance of studying consumer behaviour Perhaps the most challenging concept in marketing deals with understanding why consumers do what they do (or don‘t do). But such knowledge is critical for marketers since having a strong understanding of consumer behaviour will help shed light on what is important to the consumer and also suggest the important influences on consumer decision-making. Using this information, marketers can create marketing programs that they believe will be of interest to consumers. The reason for studying consumer behaviour seems very simple – to understand the consumers‘ mindset and the factors that influence it. But, just that much is not enough; today, we 5|P age
  6. 6. Consumer Behaviour need to study consumer behaviour in detail, looking into the smallest nuances of it so as to identify what exactly the consumer desires because in today‘s times with so much of competition in every market segment we cannot afford to take the consumer for granted. With a range of choices in every product, if the consumers‘ desire is not looked after they will surely move on to any one of the competitors. According to a recent study: Out of 11000 products introduced by 77 companies, only 56% are present 5 years later. Only 8% of product concepts offered by 112 leading companies reached the market. Out of that 83% failed to meet marketing objectives. Now, the question that comes to my mind here is – Why exactly did this happen? The answer is the lack of understanding of consumer behaviour. Not only is launching a new product and getting the product noticed by the consumer important but what is more important is to make sure that the consumer is hooked on to the product and comes back for it time and again We can sell a product to a consumer again and again only if the consumer feels that this is the ‗best product‘ in the market to satisfy his needs and maybe even give him some delight and in order to design the ‗best product‘, it is necessary to understand not just the physics and chemistry of the product, but also the psychology of consumers and the sociology of consumer groups or networks. This is exactly why all managers must become astute analysts of consumer motivation and behaviour. A fundamental understanding of consumer behaviour underpins all marketing activity and is a necessary prerequisite to organisations being marketing orientated and thus profitable. 6|P age
  7. 7. Consumer Behaviour Basic Model of Consumer Decision Making 7|P age
  8. 8. Consumer Behaviour Problem Recognition (Motivation) Problem recognition is that result when there is a difference between one's desired state and one's actual/current state i.e. when consumer recognizes a problem or a need e.g. Kathy may realize that her best suit doesn‘t look contemporary any more or, Dan may recognize that his personal computer is not performing as well as he thought it should. These are the kinds of problem that we as consumers encounter all the time. When we find out a difference between the actual state and a desired state, a problem is recognised. When we find a problem, we usually try to solve the problem. The word motivation means "to stimulate toward action," seeing the difference in his/her actual and desired state the consumer is ‗motivated‘ to take action i.e. consumers are motivated to address this discrepancy and hence they commence the buying process. Sources of problem recognition include: An item is out of stock Dissatisfaction with a current product or service Consumer needs and wants Related products/purchases Marketer-induced Information Search (Perception) When a consumer discovers a problem, he/she is likely to search for information regarding what products he/she can use to satisfy his/her need, e.g. Dan may simply pay more attention to product information of a personal computer. He becomes more attentive to computer ads, computers purchased by his friends, and peer conversations about computers. Or, he may more actively seek information by visiting stores, talking to friends, or reading computer magazines, among others. Through gathering information, the consumer learns more about some 8|P age
  9. 9. Consumer Behaviour brands that compete in the market and their features and characteristics. Theoretically, there is a total set of brands available to Dan, but he will become aware of only a subset of the brands (awareness set) in the market. Some of these brands may satisfy his initial buying criteria, such as price and processing speed (consideration set). As Dan proceeds to more information search, only a few will remain as strong candidates (choice set). Once the consumer has recognised a problem, they search for information on products and services that can solve that problem. Consumers undertake both an internal (memory) and an external search. Sources of information include: Personal sources Commercial sources Public sources Personal experience The relevant internal psychological process that is associated with information search is perception. Perception is defined as 'the process by which an individual receives, selects, organizes, and interprets information to create a meaningful picture of the world', which in this case means the picture of the product. Evaluation and Selection of Alternatives (Attitude Formation) How does the consumer process competitive brand information and evaluate the value of the brands? Unfortunately there is no single, simple evaluation process applied by all consumers or by one consumer in all buying situations. One dominant view, however, is to see the evaluation process as being cognitively driven and rational. Under this view, a consumer is trying to solve the problem and ultimately satisfying his/her need. In other words, he/she will look for problem-solving benefits from the product. The consumer, then, looks for products with a certain set of attributes that deliver the 9|P age
  10. 10. Consumer Behaviour benefits. Thus, the consumer sees each product as a bundle of attributes with different levels of ability of delivering the problem solving benefits to satisfy his/her need. The distinctions among the need, benefits, and attributes are very important. One useful way to organize the relationships among the three is a hierarchical one (Figure 1). Although simplified, Figure 1 is an example of how a bundle of attributes (i.e., a product or, more specifically, personal computer) relates to the benefits and underlying needs of Dan. Helps Me Survive SIMSREE MBA Program Underlying Needs Portability Benefits Doesn‘t Break Down Economical Computational Horse Warranty Attributes Size Brand Reputation Price CPU Speed Software Bundle Hard Drive Size Globe Net Ready Figure 1: Hierarchical Views of Needs, Benefits, and Attributes From this figure and the preceding discussion, one might recognize that the product attributes are relevant and important only to the extent that they lead to a certain set of benefits. Likewise, benefits are meaningful only if they can address the problem and be instrumental to satisfy the underlying need – as underlying needs are often personal, consumers differ as to their beliefs about what product benefits and attributes are more (or less) important and relevant in satisfying their needs. Based on their personal judgment on importance of benefits and attributes, consumers develop a set of attitudes (or preferences) toward the various brands. One may express his/her preferences of the brands in terms of ranking, probability of choice, and so 10 | P a g e
  11. 11. Consumer Behaviour forth. What actually happens in this stage is; the consumer compares the brands and products that are in their consideration set. Now, the question that comes to my mind here is – How can the marketing organisations increase the likelihood that their brand is part of the consumer's consideration set? Consumers evaluate alternatives in terms of the functional and psychological benefits that they offer. The marketing organisation needs to understand what benefits consumers are seeking and therefore which attributes are most important in terms of making a decision. The relevant internal psychological process that is associated with the alternative evaluation stage is attitude formation. Attitudes are 'learned predispositions' towards an object. Attitudes comprise both cognitive and affective elements - that is both what you think and how you feel about something. The multi-attribute attitude model explains how consumers evaluate alternatives on a range of attributes. There are a number of strategies that can be used to influence the process (attitude change strategies). Finally, there is a range of ways that consumers apply criteria to make decisions. The marketing organisations should know how consumers evaluate alternatives on salient or important attributes and make their buying. Purchase decision (Integration) To actually implement the purchase decision, however, a consumer needs to select both specific items (brands) and specific outlets (where to buy) to resolve the problems. There are, in fact, three ways these decisions can be made: 1) simultaneously; 2) item first, outlet second; or 3) outlet first, item second. In many situations, consumers engage in a simultaneous selection process of stores and brands. For example, in Dan‘s personal computer case, he may select a set of brands based on both the product‘s technical features (attributes) and availability of brands in the computer stores and mail-order catalogs he knows well. It is also possible, that he decides where to buy (e.g., House of PC‘s in his neighborhood) and then chooses one or two brands the store carries. Once the brand and outlet have been decided, the consumer moves on to the transaction (―buying‖). 11 | P a g e
  12. 12. Consumer Behaviour Sometimes purchase intention does not result in an actual purchase. The marketing organisation must facilitate the consumer to act on their purchase intention. The provision of credit or payment terms may encourage purchase, or a sales promotion such as the opportunity to receive a premium or enter a competition may provide an incentive to buy now. The relevant internal psychological process that is associated with purchase decision is integration. Post-purchase evaluation (Learning) There should be a feedback loop, importance of the post purchase evaluation and that the post purchase evaluation is the key due to its influences on future purchase patterns. Post-purchase evaluation processes are directly influenced by the type of preceding decision-making process. Directly relevant here is the level of purchase involvement of the consumer. Purchase involvement is often referred to as ―the level of concern for or interest in the purchase‖ situation, and it determines how extensively the consumer searches information in making a purchase decision. Although purchase involvement is viewed as a continuum (from low to high), it is useful to consider two extreme cases here. Suppose one buys a certain brand of product (e.g., Diet Pepsi) as a matter of habit (habitual purchase). For him/her, buying a cola drink is a very low purchase involvement situation, and he/she is not likely to search and evaluate product information extensively. In such a case, the consumer would simply purchase, consume and/or dispose of the product with very limited post-purchase evaluation, and generally maintain a high level of repeat purchase motivation. Purchase Figure 2 12 | P a g e Product Use Disposition Low Involvement Purchase Simple Evaluation Repeat Purchase Motivation
  13. 13. Consumer Behaviour Post-purchase Dissonance Purchase Figure3 Product Use Dissatisfaction Disposition Elaborate Evaluation Repeat Purchase Motivation Elaborate Post-purchase Evaluation According to the research, the likelihood of experiencing this kind of dissonance and the magnitude of it is a function of: The degree of commitment or irrevocability of the decision, The importance of the decision to the consumer, The difficulty of choosing among the alternatives, and The individual‘s tendency to experience anxiety. Because dissonance is uncomfortable, the consumer may use one or more of the following approaches to reduce it: Increase the desirability of the brand purchased. Decrease the desirability of rejected alternatives. Decrease the importance of the purchase decision. Reject the negative data on the brand purchased. If the dissonance about the purchase is not reduced, the anxiety may transform into dissatisfaction (general or specific). Certainly, this negative experience leads to new problem recognition, and the consumer will engage in another problem solving process. The difference, however, is that in the next round of process, memory of the previous negative experience and dissatisfaction will be used as part of information. Therefore, the probability for the unsatisfactory brand to be re-selected and repurchased will be significantly lower than before. 13 | P a g e
  14. 14. Consumer Behaviour Factors Influencing Consumer Behaviour: Internal Influences Perception Motivation Learning Attitudes Personality Age Groups Lifestyle Social Influences Culture Subculture Social Class Group Memberships Opinion Leaders Figure 4 Situational Influences Communication Situation Purchase Situation Usage Situation Disposal Situation Decision Process Purchase!! Factors Influencing Consumer Behaviour As we can see there are a number of internal and external influences that can affect a consumer‘s decision/behaviour with respect to a product. Discussing the above in detail would give a holistic perspective on consumer behaviour. 14 | P a g e
  15. 15. Consumer Behaviour Internal Influences Motivation Perception Age Attitudes Lifestyle Personality Figure 4 Internal Influences  Motivation: It is an internal state that drives us to satisfy needs. Motivation is the reason or reasons for engaging in a particular behaviour, especially human behaviour as studied in philosophy, conflict, economics, psychology, and neuropsychology. These reasons may include basic needs such as food or a desired object, hobbies, goal, state of being, or ideal. What it does is, it exerts a push towards action that satisfies a need, which in most of the cases leads to a purchase. The extent to which the consumer is motivated depends on the importance of the need to him. The needs in order of their importance have been described by Abraham Maslow in 1943in a paper called ‗A theory of Human Motivation‘ and is commonly known as Maslow‘s Hierarchy of Needs, represented as a pyramid with the more primitive needs at the bottom. The higher needs in this hierarchy only come into focus when the lower needs in the 15 | P a g e
  16. 16. Consumer Behaviour pyramid are satisfied. Once an individual has moved upwards to the next level, the needs in the lower level will no longer be prioritized. If a lower set of needs is no longer being met, the individual will temporarily re-prioritize those needs by focusing attention on the unfulfilled needs, but will not permanently regress to the lower level. For instance, a businessman at the esteem level who is diagnosed with cancer will spend a great deal of time concentrating on his health (physiological needs), but will continue to value his work performance (esteem needs) and will likely return to work during periods of remission. Figure 5  Maslow’s Hierarchy of Needs Physiological needs: These are the basic human needs for such things as sex, warmth, water, and other bodily needs. If a person is hungry or thirsty or their body is chemically unbalanced, all of their energies turn toward remedying these deficiencies and other needs remain inactive. 16 | P a g e
  17. 17. Consumer Behaviour  Safety Needs: With their physical needs relatively satisfied, the individual's safety needs take over and dominate their behaviour. These needs have to do with people's yearning for a predictable, orderly world in which injustice and inconsistency are under control, the familiar frequent and the unfamiliar rare. In the world of work, safety needs manifest themselves in such things as a preference for job security, grievance procedures for protecting the individual from unilateral authority, savings accounts, insurance policies, and the like.  Social Needs: After physiological and safety needs are fulfilled, the third layer of human needs is social. This psychological aspect of Maslow's hierarchy involves emotionally-based relationships in general. Humans need to feel a sense of belonging and acceptance, whether it comes from a large social group, such as clubs, office culture, religious groups, professional organisations, sports teams, gangs , or small social connections. They need to love and be loved (sexually and non-sexually) by others. In the absence of these elements, many people become susceptible to loneliness, social anxiety, and clinical depression. This need for belonging can often overcome the physiological and security needs, depending on the strength of the peer pressure; an anorexic, for example, ignores the need to eat and the security of health for a feeling of control and belonging.  Esteem Needs: All humans have a need to be respected, to have self-esteem, self-respect, and to respect others. People need to engage themselves to gain recognition and have an activity or activities that give the person a sense of contribution, to feel accepted and self-valued, be it in a profession or hobby. 17 | P a g e
  18. 18. Consumer Behaviour  Self-Actualization: When all of the foregoing needs are satisfied, then and only then are the needs for self-actualization activated. Maslow describes self-actualization as a person's need to be and do that which the person was "born to do." "A musician must make music, an artist must paint, and a poet must write." These needs make themselves felt in signs of restlessness. The person feels on edge, tense, lacking something, in short, restless. If a person is hungry, unsafe, not loved or accepted, or lacking self-esteem, it is very easy to know what the person is restless about. It is not always clear what a person wants when there is a need for selfactualization.  Perception: In psychology and the cognitive sciences, perception is the process of attaining awareness or understanding of sensory information. For us it is the process by which consumers select, organize, and interpret information regarding the product. The consumer is first exposed to the product through various mediums used to grab his attention; the consumer then interprets what‘s been shown to him/her about the product and forms his view or perception of the product. Exposure Attention Interpretation  Age Groups: Consumer behaviour can vary on the basis of age as well; consumers from different age groups might have different preferences. Consumers based on their ages can be 18 | P a g e
  19. 19. Consumer Behaviour broadly classified as children, teens, young adults, middle aged and the elderly. Consumers from different age groups might have different preferences even when it comes to the same product e.g. T-shirts, a child would prefer something with a cartoon character on it, a teenager on the other hand would prefer one with some rock band poster on it, a young adult would prefer clever graffiti, a middle age or older consumer would prefer something sober and plain. Sometimes companies design products that are aimed at specific age groups e.g. products like luxury cruises to exotic locales often target older consumers who are retired and have the time and money for expensive travel, or products like gaming consoles which target consumers from lower age groups. Related to age groups, our purchases also depend on our current position in the family life cycle – stages through which family members pass as they grow older.  Attitude: The term attitude is used here to denote the valuation of a concept or an object, i.e. to which extent the object or concept is judged to be good or bad in a general global meaning i.e. attitude is the amount of affect or feeling for or against a stimulus e.g. how good would it be for Sweden to stay as a member in the European Union? How good is the Indian nuclear power program? Attitude in this sense can be studied with the help of one or a few judgment scales. The object or concept judged can be more general or specific, but usually it is rather specific. In this way attitude is different from value which is a judgment, similar to the one used in the measurement of attitudes, of a general or abstract concept. Examples of such concepts are freedom and equality.  Lifestyle is a term which can have at least three different meanings: 1. The values that a person expresses with reference to a limited number of basic dimensions (freedom, justice, equality, etc). 2. A group or cluster of attitudes, opinions, interests and activities. In this case the investigator usually includes a theoretical mixture of very different concepts 19 | P a g e
  20. 20. Consumer Behaviour which are supposed to serve as a basis for classifying or segmenting a population. The segmentation should in its turn be possible to use in marketing products or influencing habits. 3. Actual ‗patterns of behaviour‘, e.g., lifestyles characterized by substance abuse or an active leisure time involving sports, work in political organisations, etc. A lifestyle is a pattern of living that determines how people choose to spend their time, money, and energy and reflects their status, values, tastes, and preferences expressed through preferences for sports activities, music interests, and political opinions. It is obvious that lifestyle is a very important factor when it comes to consumer behaviour and decision making. There are many products that are based on consumers‘ lifestyle e.g. a person will pay ten to fifteen times more to have an imported luxury sedan even though the same service can be provided by a small car, another example, in a study of electricity consumption it was found in a family which was extreme in its consumption of energy that the reason mainly was that two teenage daughters spent several hours in the shower each day. It was therefore, according to the researchers, the lifestyle which was the explanation of energy consumption in this case. Life values are believed to provide the motivation for buying. They are usually characterized by a set of values, which differ in relative importance from person to person. They tend to be abstract so their impact on consumer behaviour will be quite indirect. The way in which consumers use product and services in a certain area to attain their life values can also be called consumer lifestyle. What is important from a marketing point of view is that different types of consumers have to be addressed in different ways. Lifestyle is thus a useful tool for segmentation.  Personality: An individual‘s personality relates to perceived personal characteristics that are consistently exhibited, especially when one acts in the presence of others. In most, but not all, cases the behaviour one projects in a situation is similar to the behaviour a person 20 | P a g e
  21. 21. Consumer Behaviour exhibits in another situation. In this way personality is the sum of sensory experiences others get from experiencing a person (i.e., how one talks, reacts, etc). For marketers it is important to know that consumers make purchase decisions to support their self concept. Using research techniques to identify how consumers view themselves may give marketers insight into products and promotion options that are not readily apparent. For example, when examining consumers a marketer may initially build marketing strategy around more obvious clues to consumption behaviour, such as consumer‘s demographic indicators (e.g., age, occupation, income, etc). However, in-depth research may yield information that shows consumers are purchasing products to fulfill self-concept objectives that have little to do with the demographic category they fall into e.g., senior citizen making purchases that make them feel younger. Appealing to the consumer‘s self concept needs could expand the market to which the product is targeted. Situational Influences Communication Situation •This refers to the surrounding noise, effective communication between the consumer and the vendor,wether the consumer is alone or with a group. Purchase Situation •This refers to the condition of the consumer's environment while purchasing, is he relaxed or is it an emergency, is he alone or with others, where is he making the purchase, etc. Usage Situation •This is defined by the kind of usage which the product will undergo. Is it going to be used indivisually or by a group, wether it is for pleasure or for business, etc. Disposal Situation 21 | P a g e •Here the consumer regards the product with respect to tradeins before next purchase,or after the purchare, packaging is anather issue here as it affects the ease of disposal and storage.
  22. 22. Consumer Behaviour Social Influences The way we think, perceive and act depends a lot upon social factors. These factors were analysed by a number of scientists such as W. J. Stanton, M. J. Etzel and B. J. Walker (1991). They highlighted four social factors that influence consumer behaviour: o Culture & Sub-Culture o Social Class o Group Behaviour and Reference Groups o Opinion Leaders According to the authors, ―social factors influence consumer behaviour directly and indirectly―. Indirect social factors act through psychological factors. This means that social factors do influence the formation of psychological factors (consumer motivation, perception, attitude, etc) that in turn influence consumer behaviour.  Culture and Subcultures: Culture generally refers to patterns of human activity and the symbolic structures that give such activities significance and importance. Cultures can be "understood as systems of symbols and meanings that even their creators contest, that lack fixed boundaries, that are constantly in flux, and that interact and compete with one another". Culture can be defined as all the ways of life including arts, beliefs and institutions of a population that is passed down from generation to generation. Culture has been called "the way of life for an entire society." As such, it includes codes of manners, dress, language, religion, rituals, norms of behaviour such as law and morality, and systems of belief as well as the art. Culture is the values, beliefs, customs, and tastes produced and valued by a group of people, whereas a subculture is a group coexisting with other groups in a larger culture whose members share a distinctive set of beliefs or characteristics. In sociology, anthropology and cultural studies, a subculture is a group of people with a culture (whether distinct or hidden) which differentiates them from the larger culture to which they belong. 22 | P a g e
  23. 23. Consumer Behaviour For marketers it is very vital to know the culture to which particular consumers belong before he gives out the product to the consumers. Culture is an important cog in the mechanism of consumer behaviour and has to be noticed, e.g. when Mc Donald‘s came to India they realized that Indians do not eat beef as cow is considered holy in our culture, also that most Indians are vegetarians, so what it did to counter these cultural barriers was to introduced Indianised versions of burgers! For better market penetration the subcultures of a society must be taken into account. Acknowledging these subcultures can often be beneficial, e.g. various eateries and food outlets offering ‗Jain Food‘.  Social Class: Social class is the overall rank of people in a society. People in the same class tend to have similar occupations, similar income levels, and share common tastes in clothes, decorating styles, and leisure activities. They may share political and religious beliefs. Social class refers to the hierarchical distinctions (or stratification) between individuals or groups in societies or cultures. Usually individuals are grouped into classes based on their economic positions and similar political and economic interests within the stratification system.  Group Behaviour and Reference Groups: Group behaviour in sociology refers to the situations where people interact in large or small groups. The field of group dynamics deals with small groups that may reach consensus and act in a coordinated way. A question that comes to my mind here is; how can a group behaviour affect an individual consumers’ behaviour? Groups of a large number of people in a given area may act simultaneously to achieve a goal that differs from what individuals would do acting alone (herd behaviour). A large group (a crowd or mob) is likely to show examples of group behaviour when people gathered in a given place and time act in a similar way—for example, joining a protest or march, participating in a fight or acting patriotically, boycotting a product or coming out in support of a product, etc. 23 | P a g e
  24. 24. Consumer Behaviour Reference group is a set of people a consumer wants to please or imitate. The ―group‖ can be composed of one person, a few people, or many people. They may be people you know or don‘t know. – Conformity is at work when people change as a reaction to real or imagined group pressure. E.g. in college if everyone wears Nike shoes you would also feel like wearing shoes of the same brand so as to please your peers and group members and more importantly yourself as the shoes give you a feeling of being ‗in‘ the group or a feeling of being at-par with other group members.  Opinion Leaders: The opinion leader is an agent who is an active media user and who interprets the meaning of media messages or content for lower-end media users. Typically the opinion leader is held in high esteem by those that accept his or her opinions. Opinion leadership tends to be subject specific, that is, a person that is an opinion leader in one field may be a follower in another field. An example of an opinion leader in the field of computer technology might be a neighborhood computer service technician. The technician has access to far more information on this topic than the average consumer and has the requisite background to understand the information. An opinion leader is hence a person who influences others‘ attitudes or behaviours because they are perceived as possessing expertise about the product. They are usually the first ones to buy a product when it enters the market. Marketers generally target these ‗opinion leaders‘ and use them in marketing communications. Any knowledge about the product is conveyed through these opinion leaders as they are heavy users of a wide range of information sources; both getting and giving marketplace information. 24 | P a g e
  25. 25. Consumer Behaviour Case Studies It‘s always easier to understand any management concept with a case study; here forth we shall analyse a few cases as to how consumers behave differently under the effect of various influential factors even when it comes to the same product.  Case I  Individual behavioural responses to higher gasoline prices: New numbers show that Americans drove 4.7 percent less in June 2008 than they did in June 2007, shaving off some 12.2 billion miles. For those keeping track, that makes a total 53.2 billion fewer miles driven between November 2007 and June 2008 than in that eight-month period a year earlier. As would be expected, gasoline and diesel use have also fallen: In the first three months of 2008, Americans burned 400 million fewer gallons of gas than they did in the first three months of 2007, as well as 318 million fewer gallons of diesel. And easing off the gas pedal has eased oil demand as well: In the first half of 2008, U.S. demand for oil fell by an average 800,000 barrels per day compared to the first half of 2007, the biggest decline since 1982. Not to be left out, sales of cars, trucks, and vehicle parts fell 2.4 percent from June to July. This is the biggest decline in oil demand since 1982. This is indeed a textbook case of how response to price signals changes consumer behaviour and ripples through our complex, interconnected global economy, communicating valuable distributed information, reallocating resources, and changing investment decisions along the way. What we are doing here is making the case that as goods are appropriately priced; baking in their negative externalities, consumers will shift spend accordingly. Not only did the consumers spend less on gas, but the sales of cars, trucks and even vehicle parts fell – which implies that the wear and tear of the vehicles was also less which means lesser usage of vehicles. This recent example in gas prices is a great example of how the economic factors affect the consumers‘ behaviour. 25 | P a g e
  26. 26. Consumer Behaviour  Case II  Consumer Food Safety Behaviour: A Case Study in Hamburger Cooking and Ordering: More Americans are eating hamburgers more well-done than in the past, according to national surveys. This change reduced the risk of E. coli O157:H7 infection by an estimated 4.6 percent and reduced associated medical costs and productivity losses by an estimated $7.4 million annually. In a 1996 survey, respondents who were more concerned about the risk of food borne illness cooked and ordered hamburgers more well-done than those who were less concerned. However, respondents who strongly preferred hamburgers less welldone cooked and ordered them that way, even after accounting for their concern about the risk of illness. While E. coli O157:H7 in hamburger is a small part of the burden of food borne illness—estimated at 5,000 deaths and more than $6.9 billion in medical costs and reduced productivity annually—these findings illustrate the potential benefits from encouraging consumers to follow food safety recommendations as part of an overall strategy to reduce the toll of food borne illness. When you analyse this case what you come across is a consumer who is very aware about the product, effects the product will have on his health and has a clear notion of what he wants and what he doesn‘t want. Now this knowledge makes the consumer move away from a trend i.e. it makes the consumer change his behaviour from what it has been in the past. Consumers make their decisions on how to cook and order foods based on several factors, including taste, palatability, and perceived food safety risk. Consumer behaviour has changed over time, due in part to increased awareness of the risk of food borne illness and the importance of thorough cooking in reducing that risk. 26 | P a g e
  27. 27. Consumer Behaviour  Case III  Mad Cow Disease: On 21 March 1996, two British ministers made statements in the House of Commons as to the evidence that Cruetzfelds-Jakobs Syndrome (CJS), a brain disease among humans, might be connected to the ―mad cow disease,". The committee recommended that all cows older than thirty months should be slaughtered and it should be prohibited to feed the cows fodder made of certain animal substances such as brains from sheep and others. The two ministers, however, were not united in their statements: the Minister of Agriculture wanted between three and five million animals slaughtered, while the Minister of Health wanted more than eleven million cows slaughtered. This incongruent information was picked up and published internationally by the mass media, generating global unrest among politicians and consumers. The above incidence had a tremendous impact on the international meat market. The very same day the British Ministers made their statements; France immediately stopped importing any beef from Great Britain. Within a week, thirty six other nations also prohibited importing any meat products from Great Britain. Additionally, several countries outside the EU started cutting down on their imports of meat from other EU countries as well. Within days, many countries had already more or less stopped importing meats from Germany, Switzerland, and Ireland. In spite of arguments of how each country‘s meat production differed from the production in Great Britain, Ireland was hit the most, due to two reasons: One, its geographic proximity to Great Britain automatically connected it with Great Britain in the minds of the consumers, and two, Ireland exports eighty five percent of her meat production. Table 1 illustrates the number of dead cows caused by the disease. In 1990, the number was more than twenty-five thousand for Great Britain and it increased every year until 1994, when it leveled off. 27 | P a g e
  28. 28. Consumer Behaviour Countries 1995 1996 1997 1998 1999 2000 1 Denmark 4 Germany France 5 Ireland 17 1 18 3 3 10 16 19 16 35 2 Italy 1 Portugal 7 14 23 Great Britain 25023 36681 28944 28944 14062 1714 Switzerland 9 15 29 63 68 41 Table 1. Countries and Number of Dead Cows. Ireland, Portugal, and France, however, show an increasing trend. In spite of these facts, the incident became an affair for the media in 1996 and mainly for Great Britain. It was then that the governments of other nations prohibited the import of meat from Great Britain. This episode generated some form of political game in the EU parliament. Those programs that had been drawn up the British Government were considered inadequate, and most of the Health Ministers of nations other than Great Britain demanded quick and drastic measures. The sentiment was that if Great Britain were to accommodate these demands then they could work out a strategy with a time frame to enable Great Britain to export her meat products again. Great Britain in turn reacted negatively to such demands, and used her veto to stop other activities and programs within the EU. In the aftermath of this episode various other players came to the forefront. Several consumer associations around the world published reports or recommendations relating to meat consumption. For example, Great Britain‘s ‗Consumer Association‘ strongly recommended that consumers should avoid eating meat to avoid or minimize the CJS risk. Other players, such as an insurance company in Sweden, started marketing insurance policies that offered CJS coverage. The media in Sweden played an important role in creating and molding opinions of the consumers. On March 19th, an evening newspaper printed an article with the message that more than ninety Swedes had died as a consequence of CJS. This figure had then not been verified but the article generated similar stories in other, serious daily newspapers. They 28 | P a g e
  29. 29. Consumer Behaviour featured reports of their own, interviewing various experts, who more or less contributed to spreading the news about the serious effects of ―mad cow disease‖ upon meat consumers. The end user reacted to the media coverage: within two weeks after the British Ministers‘ statements, the consumption of beef in Sweden generally dropped twenty percent. Instead, the consumers started to buy other types of meat. Most of those who continued to consume beef switched from buying imported beef to Swedish beef. Additionally, the consumers, as a consequence of the beef problem, started to boycott other imported meat types. A sort of mass hysteria prevailed during a period of time following the revelation of the ‗mad cow disease‘. 1996 1997 1998 1999 2000 Beef 322 408 431 576 665 Other Meat 466 512 298 456 893 Dried, Canned, 374 482 454 425 526 Salted Meat, etc. Table 2. Import of Meat to Sweden in Swedish Crowns Until 1996, the import of meat products from Great Britain, Ireland, and Denmark, as illustrated in Table 2 increased every year. Table 2 shows the value of these imports to the Swedish economy over a 5-year period. Contrary to other studies that observe the role of media as a means to support market activities, we will consider media and its influence on consumer perception from a different angle. We will study how variations in intensity of negative news released by the media influence the consumer. This is done by two surveys conducted during two periods of time one when media discussed the incident intensively and then again three months later, examining the permanency of the perception change. The defined network for this study is a set of loosely interconnected entities of the international market consumers, vendors, national and international media, governments, and specialists in different countries, and public opinion. This case attempts to expand and enrich the already known set of ideas about 29 | P a g e
  30. 30. Consumer Behaviour consumer-environment interaction and add more knowledge about the use of network models for consumer marketing: When the French tested their nuclear weapons, people from several nations boycotted French wine and cheese. After major oil spills, people stop buying petrol from the firms responsible for the oil catastrophes. ―Mad cow disease‖ prompted people to avoid buying beef and even other products from Great Britain. News about these incidents, which are spread by the media, are examples of events which influence entities participating in the international market place. Because of the increased globalization of our communication systems, an incident in one country can no longer be treated as an isolated phenomenon. News of the incident can rapidly spread to other markets and influence the behaviour of participants in other countries. Consumers, either because of their individual or social attachment to the subject, subsequently adapt their behaviour to the perceived turmoil. Internationalization of the media has changed the market conditions drastically. Media‘s influence and ability to change perceptions and behaviours is so strong that traditional analytical tools for studying the market are insufficient. Against this background, this paper aims to explore the influence of media on the exchange in a consumer-vendor relationship. It will study the process of consumer perception, starting with when the media suddenly informed consumers about the mad cow disease and following it up to the point when this case was no longer newsworthy. Media‘s affect on a consumer‘s mind today is something one cannot afford to ignore. Media can help the consumers‘ perception of a product; it can play a vital role in getting a consumer‘s attention to the product. 30 | P a g e
  31. 31. Consumer Behaviour The media is presented as a marketing tool for a variety of promotions aimed at gaining success in the market. It also can serve as a means for positive change in consumer perception. However, the media is filled with discussions about events that will probably affect the behaviour of the consumers in a negative manner. 31 | P a g e
  32. 32. Consumer Behaviour Conclusion As mentioned in the beginning it is impossible to define ‗consumer behaviour‘ in quantitative parameters, what I‘ve tried is to develop an understanding of consumer‘s thought process and his reactions when exposed to different products under different conditions. As a marketer it is imperative to understand what the consumer‘s expectations are from a product, and how he will react to a marketing initiative taken by you or your team. To understand consumers‘ reaction one must consider various factors that influence the consumer‘s mindset – both, within our control and the ones not under our control. An acute understanding of these influences can go a long way in successfully marketing a product. We began with the consumer realizing that there is a need, then he takes action to fulfill the need, he makes a decision and makes a purchase to fulfill his desire, finally after the purchase the customer will evaluate the product as to whether it satisfies him or not, if yes then he again uses the product and eventually becomes a ‗loyal consumer‘, and that is when a marketer attains his goal. When the consumer is undergoing the above process, he tends to get influenced by various factors. These factors are mainly divided into three categories – internal, social and situational. A good marketer will know these influences and how to regulate them to attain his goal. To explain above theories many a practical examples have been used. To give it an analytical view a few case studies have also been inserted in the end. These case studies are to give a deeper insight into consumer reactions to various influences around them that may affect their normal behaviour. * 32 | P a g e * * * * *

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