Buying behaviour


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Buying behaviour

  2. 2. INDIVIDUAL CUSTOMER DECISION MAKING Problem Information Alternative PostRecognition Search Evaluation Purchase Purchase BehaviorIn individual decision making unit as opposed to institutional – All the threerole (buyer, user, payer) all can be the same or each could be played by adifferent individual.Tendency when an individual is making the decision, is to look only atperformance related or social/psychological outcomes.But in reality he will be confronted with the Buyer/Payer outcomes whichare convenience & service and economy & financing.These outcomes will depend on individual or combination of roles thatpeople take.
  3. 3. INDIVIDUAL CUSTOMER DECISION MAKING• Locational & Cost Factors related To Decision Making• Consumption can occur in three places –• 1. HOME 2. WORK (ACTIVITY) PLACE 3. PUBLIC PLACE• For products/services consumed at home, decisions are made well in advance. (one will search for discount shops)• For consumption in work place or at public places, its convenience that has priority over economy.• Consumption in public place bring into prominence the social value of the user. (Rolex, Ray Ban, Jaguar cars).• Price sensitivity gets lessened in favor of how good the product will look in future.• Price value for the payer gains prominence while shopping on the internet. ( people can easily compare prices easily)• When things are given free, its accepted disregarding its quality. Moment you have to pay for it user values (performance / quality) become salient.
  4. 4. CUSTOMER DECISION PROCESS• Customer decisions which individuals make as Buyers, Payers & Users.• Whether to purchase? What to? Where ---? & When --?• Customers have finite amount of money & time. They must allocate them judiciously. Alternative demands on time and alternative need for product category for allocation of money comes in.• Product/Service level choice – Whether to buy? (& What to buy?)• An important customer behavior at this stage is mental budgeting.• Concept of mental budgeting can help in positioning, in deciding on to which category your product should be kept. As each person would have mentally earmarked an amount to spend in that category.• Brand Level Choice: What to purchase?• Select among the various alternatives available – product/service categories, brands, and then it moves on to• Stores/ Suppliers Choice: Where to purchase?• Timing of purchase : When to purchase?
  5. 5. INVOLVEMENT & TYPES OF DECISIONNominal decision Making Limited Decision Making Extended Decision making Problem Recognition Problem Recognition Problem Recognition selective Generic Generic Information search Information search Information search Internal Internal Limited Internal Limited External External Alternative Evaluation Alternative Evaluation Few attributes Many Attributes Simple Decision Rules Complex Decision Rules Few Alternatives Many Alternatives Purchase Purchase Purchase Post Purchase Post Purchase Post Purchase No Dissonance Low Dissonance Dissonance V. Ltd evaluation Limited evaluation Complex Evaluation Low Involvement Purchase Hi Involvement Purchase
  6. 6. NOMINAL DECISION (HABITUAL/RRB)• Problem is recognized, internal search (long term memory) Provides single preferred solution Brand.• Low involvement with purchase.• An evaluation occurs only if it fails to perform as expected.• Brand Loyal Purchases: at one point you would have been highly involved in selecting a brand of tooth paste (EPS). Once decided you will continue to buy till you are challenged by a superior product (ads etc) ------ back to EPS situation.• High product involvement, low purchase involvement.• Repeat Purchases: belief that all Tooth pastes are the same, can lead to low product & purchase involvement, you may continue to buy (Colgate) it as you are satisfied with it.• You will continue to buy till you are challenged with a superior offer (discount) --------- LPS situation to make the decision.
  7. 7. LIMITED DECISION MAKING (LPS)• Involves internal and limited external search, few alternatives, simple decision rules on a few attributes and little post purchase evaluation. Similar to RRB situation.• A store situation where you find the display of Kelloggs and decides to buy Kelloggs without seeking information beyond your memory (Kelloggs has iron in it) or “I have not had Kelloggs for a long time”. You have not considered another alternative other than the “do not buy” option.• LPS also occurs in response to some environmental or emotional needs• (Decision to buy new because you are bored with the existing which is otherwise satisfactory. You will evaluate the novelty factor only). You will decide on the restaurant or order Beer with dinner based on who is with you for dinner.• Very little post Purchase evaluation unless there is a failure.
  8. 8. EXTENDED DECISION MAKING (EPS)• Involves an extensive internal and external information search followed by a complex evaluation of multiple alternatives and significant post-purchase evaluation.• After the purchase, doubt about its correctness is likely and a through evaluation of the purchase take place.• Hence marketers will have to take up post purchase dissonance reducing efforts.• Very few consumer decisions reach this level of complexity. Products such as Homes, Investments, Stereo, TV’s, Fridge Personal Computers etc reach this level.• There is high purchase involvement which is due to the higher risk involved. Risk may can be because of factors beyond cost. Decisions which are heavily emotional also lead to cognitive exercises (Baby Food, certain drugs).
  9. 9. PROBLEM RECOGNITION• The decision process starts with consumer recognizing the need for solving the problem (the office copier has run out of paper and ----.)• Customer problem is any state of deprivation, discomfort or wanting something (physical or psychological) felt by a person.• Problem Recognition is a realization by the customer that he/she needs to buy something to get back to normal state.• Stimuli For Problem Recognition• Problem recognition can occur in two ways:• Internal stimuli : perceived state of discomfort (physical/ psychological)• External Stimuli : market place information that lead the customer to realize the problem (window display, Pizza hut logo, ads.)• More apt terms can be Problem stimuli & Solution stimuli.• Problem Stimulus – Problem itself is the source of information. Source can be within the customer (hunger pangs) or outside (dirty laundry).• Solution Stimulus – information emanating from the solution itself. Exposure to potential solution leads to need arousal. (Strong aroma of coffee, product or service sample•
  10. 10. PROBLEM RECOGNITION (2)• Customers can expect to encounter solution stimuli in three states of mind.• 1. Have already realized the problem and looking for a solution (Heightened attention : Dandruff in hair - looking for a new shampoo).• 2. Problem had been recognized in the past but it was not salient (planned to buy an exercise equipment – now seeing a friend buying one rekindles the desire for having one.)• 3. When you never recognized the need in the past, but exposure to the solution product makes you realize that it will solve a condition now perceived as a problem . (Power supply which was reliable has changed. To overcome frequent failures – purchase an inverter).• Life situations that cause inconvenience but have no solutions are not viewed as problems but as life conditions. Only when a solution appears, these turn out to be perceived as problems --Latent need.
  11. 11. PROBLEM RECOGNITION (3)• Latent need brings in the need for Pioneering or educational marketing.• Pioneering marketing and communications promote a new product / service by educating the consumer about the product and how it can solve their unresolved problems – generating primary demand.• Primary Demand – converting non buyers of product category into buyers.• Secondary Demand – in contrast is to deflect demand from one brand to another (selective demand).• Does marketing create a need or it just fulfils it?• No one needed a VCR, Video camera, a Rs.2000/- Nike Shoe, until advertising started projecting them in an enticing way.• Need ought to be defined in terms of the function the product serves rather in terms of the product.• Once needs are defined in terms of function, then one can note that only products that satisfy the function are successful in the market. VCR serves the function of time-shifted viewing. – a latent need .
  12. 12. PROBLEM RECOGNITION – FOUR SITUATIONS Need/ Want Level Vivid Latent Familiar Stock Depletion Concept Marketing Familiarity Level (Routine) (Planning) Novell Life-stage Change New Product (Emergency) Technology (Evolving)•Familiar problems generally occur due to what is generally called stockdepletion (feeling of thirst, squeezed out tooth paste tube)•Novell problems arise generally due to events that move one from one lifecycle stage to another (new job, marriage, regional relocation, birth of childor firms going public, change of ownership, alliances and expansions etc)•Vivid problem situations are obvious and recognized fast (empty bottle).•A latent problem is not immediately obvious and needs shaping usually byan external stimuli which will trigger the need (Ads, Sales person).
  13. 13. PROBLEM RECOGNITION – FOUR SITUATIONS• Latent Problem Recognition• Examples of latent problems are – Preventive maintenance, AMC’s, Health Checkups, Insurance, Geographic Mapping for vehicles, Caller ID for telephones etc.• Availability of the caller ID service from the local phone co. make the Novell-Latent need salient (recognized).• The recognition of novel-latent problem is stimulated by solution stimuli, generally in the form of new technologies and new products and services.• However the recognition of latent problems, whether familiar or new, generally requires educational/concept level marketing. In case of latent novel concept level and product level impulses are required as product is new.
  14. 14. INFORMATION SEARCH Total Set Awareness Set (All the Brands aware of) Evoked set Brands not (Brands Recalled) Recalled Brands Not Consideration Set Considered•Evoked Set consists of brands/suppliers remembered at thetime of decision making.•Consideration Set consists those from the evoked set afterthose which are unfit are eliminated.
  15. 15. INFORMATION SEARCH (1)• Search never is for every brand available. Customers seek information about the consideration set of brands.• New information can bring in new Brands/suppliers to awareness, evoked and consideration set.• It should be minimum objective of all marketing communi- cations to place the brand in the consideration set and not merely awareness or evoked set.• Consideration set will include alternatives from different categories when the consumer expects goal conflicts. Eg: Looking for a vehicle which is stylish and also can transport small quantity of goods.• Three elements that characterize Info-Search Phase• 1. Sources of Information 2. Search Strategies 3. Amount of search
  16. 16. INFORMATION SEARCH (2)• Sources of information• Marketer Sources: Advertising, sales persons, product service brochures, store displays, company Web sites.• Non Marketer Sources:• Personal: Friends & other acquaintances, Past Experience• Independent Sources: Public Information (Consumer reports, News report, Business bulletins, Govt. publications, Census / Directory of manufacturers) Product or Service Experts (Auto critic, fashion/Art critic, Consultants, pharmacist,) Internet: Bulletin Boards, Consumer websites.• Systematic Search Vs. Heuristic Search: Systematic search consists of a comprehensive search and evaluation of alternatives. Heuristic are quick rules of thumb (hunch)
  17. 17. INFORMATION SEARCH (3)• Determinants of the amount Of Risk: (5 types of risks)• Performance Risk: Not performing as well as the alternatives.• Social Risk: reference group may not like it (clothing, membership)• Psychological Risk: Product may not reflect oneself.• Financial risk: Alternative may be overpriced at the point where you checked or even being unaware of other cheaper alternatives.• Obsolescence Risk: Chances of newer substitutes will be coming in pretty soon. (fashion, software/IT products).• Financial risk is to the payer. Other risks are more pertinent to the user
  18. 18. INFORMATION SEARCH (4)• Other aspects which determines the search activity• Involvement: RRB, LPS & EPS based on risk factor. Two types of involvement• Purchase decision involvement: Degree of concern and care brought to the buy. High for most high ticket items.• But price and involvement do not have one to one correlation.• Enduring Involvement: ongoing involvement in product/ service where involvement continue well after purchase. ( cars, home theatre, single source supplier in B-B)• Familiarity & Expertise – inversely related to search.• Exceptions are when technology has changed since last purchase.• Aim is to build an assortment rather than replace the older.• Purchase is infrequent and long after previous purchase.
  19. 19. INFORMATION SEARCH (5)• Time Pressure• Both husband and wife working Increased work pressure / working hours Customers being employed in more than one job Many taking on to part time education to enhance skills New interest in leisure activities .• Will lead to cutting short the search process, shifting the buy and also looking for more convenient outlets.• Relative Uncertainty about Brands:• Which brand is best among a set of brands & uncertainty about what each brand offers. Such uncertainty leads to information search.• Information Overload: Being exposed to too much information ---- difficult to make decisions
  20. 20. ALTERNATIVE EVALUATION• The Compensatory Model:• Customer arrives at a choice by considering all the attributes and benefits of a product &• Mentally trading off perceived weakness on one or more attributes to the perceived strength on one/more attributes.• Method 1. Simply add the number of positive attributes and subtract the number of negative attributes. Alternative with maximum positive value is selected.• Method 2• Crucial attributes are identified & weights are fixed• Customer rates each attribute for considered brands• Ratings are multiplied by weights• Sum for each alternative is made.• Compensatory because a shortfall on one attribute can be compensated by good rating on an other attribute.
  21. 21. ALTERNATIVE EVALUATION• Non Compensatory Models• The Conjunctive Model: customer begins by setting minimum cutoffs on all salient attributes ---• only those that meet min. criteria on all attributes is considered.• If no alternatives are selected then the cutoffs are altered.• Car priced below Rs.3.0 Lacs, gets 20 kms/litre mileage, reasonable reliability and repair record (Rs. 10,000 for 2 years) and average power and pick up (ratings can be obtained from reports).
  22. 22. ALTERNATIVE EVALUATION (2)• 2. The Disjunctive Model: ( Non Compensatory Models)• All brands which surpass at least one or two key attributes are considered. If more than one• Entails trade off between different aspects of choice alternatives (customer ready to trade off one feature for another).• Want a house with four bedrooms or three with a large hall. A business customer requiring a copier with 200copy/min speed or with lesser speed but dual copying (both sides)• Model considers the sheer presence of attributes and not the degree or amount in which these attributes are present. In compensatory model the attributes traded off need not serve the same purpose but in disjunctive model they tend to• Mileage of a car can be compensated by superior rating on a unrelated attribute in compensatory model but in disjunctive it can be traded off only for another cost saving alternative.
  23. 23. ALTERNATIVE EVALUATION (3)• Non Compensatory Models• 3. The Lexicographic Model: The most important attribute/ criterion is selected and customers examine all alternatives against this (ranking - selecting one with highest ranking).• If more than one alternative remain, then the next most important criteria is considered. The process continues -----• Business Traveler deciding on a Hotel --- 1) do not consider Hotels away from city center--first criteria 2) Check availability of business services (second criteria) 3) Select one with the lowest price. If there are two with same rate then he picks up one more attribute which is at next level.• 4. Elimination By Aspects (EBA)• Similar to Lexicographic. Customer rates the attributes in the order of importance, but also keeps a cut off value.• Rates all alternatives on an attribute
  24. 24. ALTERNATIVE EVALUATION (4)• How and When The Models Are Used• Processing By Brand or By Attribute• Processing by brand - One brand or supplier at a time all the attributes (conjunctive – provides for thorough evaluation).• Processing by attribute – Lexicographic and EBA use one attribute at a time for all the brands. (Focal Brand/ Referent Brand - where attention gets primarily on to focal).• Comparative Features of various Choice Models• Non compensatory models as treatment is each attribute at a time a good choice can get eliminated for being deficient marginally on first or second criteria while being superior on many other attributes.• Two stage Choice Process: use non compensatory at first and then to further identify the choice use compensatory.• Satisficing: Customers do not make the optimal choice & never very exhaustive and end up with basing the decision on one key attribute as in Lexicographic or EBA (Herbert Simon).
  25. 25. PURCHASE ACTION• Behavior can be broken into 3 sub steps• 1. When customer identifies the preferred alternative• Concerns of the user most salient - User (whether his wants/need will be satisfied. And so also his psychological and social needs) Buyer (where to get it) and for payer (is it affordable /right price).• 2. To form a purchase intent; determination to buy – The payers concern becomes salient.• 3. Implementing The Purchase: entails arranging the transaction, change of title deed, making payments etc. Buyers concerns gets prominence (convenience & service).• Delay in Implementation (more in this stage than others)• Deviation From Identified Choice
  26. 26. POSTPURCHASE EXPERIENCES• Experience of buying & using the product provides inform- ation that the customer will use in future decision making.• Decision Confirmation: Customer (EPS) will need to confirm the decision in terms of wisdom.• Cognitive dissonance as a result of comparing one’s out- come with a different one if another alternative is chosen.• Experience Evaluation: Knowledge about how product is actually consumed. Whether consumers routinely use it or whether they consciously evaluate it while using.• Products evaluated while in use (products which people are enthusiastic about – wine, pickles, sports goods, cars).• Products bought on trial basis or received as sample even if not of high involvement, customers will use with an eye of appraisal.
  27. 27. POSTPURCHASE EXPERIENCES• Satisfaction / Dissatisfaction• Whether or not they actively evaluate– users do experience usage outcome. To understand why customers feel that way• Rate product on its attributes ---- total of all this provide an indication of overall level satisfaction level.• What causes satisfaction/dissatisfaction with each attribute is not explained. Here we have to consider the expected levels (absolute levels) and compare it with actual.• 1994 American Customer satisfaction Index – covering 40 industries and four major sectors.• Future Response: Exit, Voice or Loyalty• Exit: dissatisfied customers---to the start of decision process• Voice: dissatisfied customers complain--- but are ready to give one more chance• Loyalty: Consistent buying of brands. (merely due to conv- enience/ routinization of purchase/ genuine preference