CB 1.pptx

Objectives of this course
Understand the complex nature of consumer decision
making
Define consumer behavior
Understand the reasons why we study consumer behavior
Know the scope of consumer behavior field
Comprehend few consumer terminologies.

INTRODUCTION
“Sales determine profit, and consumers’
actions determine sales.”
As the twentieth century has come to a close and we
have moved into the third millennium, we can see
many developments and changes taking place around
us with all the industries and firms within each
industry trying to keep pace with the changes and
diverse needs of the people. This can largely be
attributed to the prevailing market situation. Not only
competition has become intense but over an above
with the market being flooded with many products.
The challenge before the marketers is to understand
the diversity of consumer behavior and offer goods
and services accordingly.

• Today, the digital revolution of the market place
allows much greater customization of products,
services, and promotional messages than older
marketing tools.
• Digital technologies enable marketers to collect
and analyze increasingly complex data on
consumers’ buying patterns and personal
characteristics. Over a period of a decade, the
digital revolution has introduced several drastic
changes into the business environment:
1. Consumer has more power than ever before.
Consumers can use “intelligent agents” to locate the
best prices for products or services, bid on various
marketing offerings, by pass distribution outlets and
middlemen,

2. Consumers have access to more information than ever
before. Consumers can easily find reviews for products
they are considering buying.
3. Marketers can offer more services and products than
ever before. The digitalization and services they are
selling and still sell them at reasonable prices.
4. The exchange between marketers and customers is
increasingly interactive and instantaneous. Traditional
advertising is a one-way street where the marketer pays a
large sum of money to reach a large number of potential
buyers via a mass medium, and then assesses whether or
not the message was effective via future sales or market
studies.

DEFINITION OF CONSUMER BEHAVIOR
• Consumer behavior focuses on how individuals
make decisions to spend their available resources
(time, money, effort) on consumption related
items.
• The term consumer behavior is defined as the
behavior that consumers display in searching for,
purchasing, using, evaluating and disposing of
products and services that they expect will satisfy
their needs.

• Consumer behaviors reflects the totality of
consumers’ decisions with respect to the acquisition,
consumption, and disposition of goods, services,
time, and ideas by (human) decision making units
[overtime]. (Mussen and Rosenzweig 1976; 331-
358).
• Consumer behavior may be defended as:
• The decision process and physical activity
individuals engage in when evaluating, acquiring,
using, or disposing of goods and services. (Loudon
and Della Bitta 2004; 5) OR
• Consumer behaviour refers to “the mental and
emotional processes and the observable behaviour of
consumers during searching for, purchasing and post
consumption of a product or service.”.

SCOPE OF CONSUMER BEHAVIOR
Consumer behavior field explores the decision process
and acts of people involved in buying and using
products. Thus the field of consumer behavior tries to
find out the answers to the following questions:
What are the products people buy?
Why they buy them?
How they buy them?
When they buy them?
Where they buy them?
How often they buy them?
How is the decision process of the consumer?
Based on these company can take decisions related to
Product Development, Pricing, Promotion

Nature of consumer behaviour
The nature of consumer behavior is
multidisciplinary and involves various factors that
influence the decision-making process of
consumers. These factors include cultural, social,
personal, and psychological factors.
Cultural factors refer to the values, beliefs, and
customs that influence the behavior of individuals
in a particular society.
Social factors include family, friends, and other
social networks that influence consumer behavior.
Personal factors include age, gender, income, and
lifestyle, while psychological factors refer to the
attitudes, beliefs, and perceptions of individuals.

Importance/Significance of consumer behaviour
• Consumer behavior is an important aspect of marketing
that helps businesses understand their target customers.
By studying consumer behavior, businesses can identify
what motivates customers to buy their products or
services, which can help them develop effective
marketing strategies.
1-Understanding Customer Needs
One of the primary reasons why consumer behavior is
important is because it helps businesses understand the
needs and preferences of their target customers.
2-Developing Effective Marketing Strategies
Effective marketing strategies require an understanding
of consumer behavior. By analyzing consumer behavior
data, businesses can identify the most effective
communication channels and messaging strategies for
their target audience.

3-Identifying Opportunities for Growth
Analyzing consumer behavior data can also
help businesses identify opportunities for
growth.
4-Enhancing Customer Satisfaction
By understanding consumer behavior,
businesses can also enhance customer
satisfaction. By identifying the features and
benefits that are most important to customers,
businesses can develop products and services
that meet their needs and preferences.

Applications of consumer behavior
1-Analyzing market opportunity
Consumer behavior study help in identifying the
unfulfilled needs and wants of consumers. This requires
examining the friends and conditions operating in the
Marketplace, consumer’s lifestyle, income levels, and
energy influences. This may reveal unsatisfied needs
and wants.
2- Selecting the target market
• Review of market opportunities often helps in
identifying district consumer segments with very
distinct and unique wants and needs. Identifying these
groups, behave and how they make purchase decisions
enable the marketer to design and market products or
services particularly suited to their wants and needs.

Applications of consumer behavior…………..
3- Marketing-mix decisions
Once unsatisfied needs and wants are
identified, the marketer has to determine the
right mix of product, price, distribution, and
promotion.
4- Use in social and nonprofits marketing
Consumer behavior studies are useful to
design marketing strategies by social,
governmental, and not for profit organizations
to make their programs more effective such as
family planning, awareness about AIDS.

Application To Decision Making
• Consumers are often studied because certain decisions
are significantly affected by their behavior or expected
actions. For this reason, consumer behavior is said to
be an applied discipline. Such applications can exist at
two different level of analysis:
1. The Micro perspective 2. The Macro perspective
• MICOR PERSPECTIVE
• The micro perspective involves understanding
consumers for the purpose of helping a firm or
organization accomplish its objectives. Advertising
managers, product designers, and many others in
profit-oriented businesses are interested in
understanding consumers in order to be more effective
at their task.

• MACRO PERSPECTIVE
• On the macro, or aggregate, level we know that
consumers collectively influence economic and social
conditions within an entire society. In market systems
based on individual choice, consumers strongly
influence what will be produced, for whom it will be
produced, and what resources will be used to produce
it.

CONSUMER BUYING BEHAVIOUR PROCESS

Stages of the Buying Process
To understand buying behavior, it is necessary to
look at the buying process as a set of stages
consumers go through. Consumer behavior can
be divided into three very distinct stages.
These stages are as follows:
 Stage 1: pre-purchase stage
 Stage 2: purchase stage
 Stage 3: post-purchase stage

1-Pre-purchase Stage: Pre-purchase behavior is what the
consumer does before making a purchase, often determining
what the decision will be. The pre-purchase stage consists
of three separate steps. First, the consumer must become
aware of both a need to be satisfied and the availability of
the product or service.
• In second step consumer obtain information about how the
particular need can be satisfied. Information can be
collected from friends, relatives, acquaintances, or from
various promotional efforts of the firm and its competitors.
• The third step in this stage is for the consumer to analyze
the information collected, considering the advantages and
disadvantages of holding money (and thereby not satisfying
the need) as well as weighing attributes of the competing
products.

2- Purchase Stage: After analyzing the information available,
the consumer’s purchase behavior comes into focus. The
first decision the consumer makes is whether the need
should even be satisfied, i.e., should the consumer make a
purchase or hold his or her money? Purchase behavior does
not end when the decision is made to buy a particular
product or service. The physical exchange must still take
place.
3- Post-purchase Stage: The primary concern with post-
purchase behavior is making sure that customer needs are
satisfied through the product’s use. Another concern with
post-purchase behavior is that after most high-cost
purchases, a buyer may experience cognitive dissonance,
questioning the wisdom of the decision.

Allport Consumer behavior Model

Socio-Cultural Factors and Their Influences on Buying:
What products you buy, the way you use them, the
frequency with which you buy and use them, and even the
methods you apply to buy them all are determined by the
cultural context of which you are a part. For example,
putting on ear rings by males is not approved by our
culture, but in the western culture it is not discouraged.
WHAT IS CULTURE ?
• Culture is a society’s personality. Culture can be defined
as the sum total of learned beliefs, values, and customs
that serve to direct the consumer behavior of members of
a particular society. The belief and value components
refer to the accumulated feelings and priorities that
individuals have about “things” and possessions.

• Culture was seen to consist of basic behavioral patterns
which exist in a society.
• Cultural traits are not same everywhere. There are great
diversity found among cultures. Certain cultures are
characterized by value shifts and technological change
(such as western cultures), where others are characterized
by insularity and tradition (such as Bangladesh culture).
These differences affect the products and services people
buy.

• Characteristics of culture:
-Culture influences consumers through the norms
and values established by the society in which
they live.
-The impact of culture is automatic and almost
invisible.
-Within the given framework of culture, individual
and household lifestyles evolve.
-Members of a society obey cultural norms without
deliberation because behaving otherwise is
viewed as unnatural.
-Culture not only influences consumer behaviour
but also reflects it.
-It has a broad influence on their buying and usage
behaviour of products and services

There are often subcultures within a culture, adding to the
complexity of cultural influence on consumer behavior.
Just as there are unique market segments within a more
generally defined market, there are also diversities within
a culture. The urban people, for example, eat bread at
breakfast where rural people eat rice at their breakfasts.
This is an influence of subculture. The upper class in the
city areas like to eat out frequently as a result of which
restaurant and fast food shops have established heavily in
these areas.
Subcultures are important to marketers because they
represent groups with distinct values, customs, and
purchasing habits. The more distinctive and homogeneous
a subculture, the greater will be its influence on consumer
purchases.

• …….The marketers have increasingly directed strategies to
these groups.
• India presents a picture of varying styles and consumption
pattern. Each state and religion has got its own traditional
styles of dressing, wearing ornaments, food preferences,
etc. In North India, wheat and wheat products are
consumed more, where as in the south rice and rice
products are the staple food. Certain communities do not
accept non vegetarian food, while among the other
communities, non vegetarian food is popular with slight
differences. Depending on the subcultural category, the
marketers will have to identify who belong to the particular
subculture, what are their habits, life style, stage of family
life cycle etc. This information can be used to create a
value added segmentation of the subcultural group. Thus
the marketing manager will have to ensure that product
characteristics tailored to the specialized needs of the
market segment is communicated through a suitable media,
so as to build a brand

Social Factors and Their Influences on
Purchase/Consumption Decision: Human beings work
and live with each other, and generally are influenced by
some of the people around them. In particular, consumers
are affected by their social class, reference group, and
family. The influences of these social factors are just as
pervasive as the cultural factors. People belonging to a
particular social class tend to have similar beliefs, life
styles and buying patterns. They purchase similar
products from same stores, and live in the same types of
neighborhoods and houses. People conform to patterns of
living and buying accepted by the other members.
Although lifestyles are quite similar within a social class,
they vary considerably from class to class.

• Consumers can belong to a variety of reference groups.
A reference group is a group of people with whom the
individual looks to for association, information, and
standards of behavior. These groups can be formed on
many bases, including family, work, professional,
religion, civic, educational, etc. These groups exert
tremendous and widespread impact on consumer buying
behavior. It is quite possible for reference groups to
influence both the type of product purchased and the
brand name selected.
• From a marketing perspective, reference groups are groups
that serve as frames of reference for individuals in their
purchase or consumption decisions. The usefulness of this
concept is enhanced by the fact that it places no restrictions on
group size or membership.

TYPES OF REFERENCE GROUPS
 ASPIRATIONAL
Aspirational reference groups are groups that we
admire and wish to be like but are not currently a
member of. For example, groupies often aspire to be
like members of a rock band. Or, a younger brother
may want to be like his older brother and other older
children.
 ASSOCIATIVE
Associative reference groups are groups that we do
belong to. For example, you are an accepted member of
a clique of friends and an extended family. You might
also be a member of a particular work group, club, or
school group. The gender, ethnic, geographic, and age
groups to which you belong are also associative,
reference groups. They are two type….

a)-Primary Groups
Primary reference groups are basically the set of people
whom you meet every day. They can be from your family,
your close friends, your roommates, etc.
b)- Secondary Groups
Secondary reference groups are usually formal and they
speak less frequently. They might be professionals, your
collogues, your seniors at work or your acquaintance at club,
etc.
 DISSOCIATIVE : Dissociative reference groups are
groups whose attitudes, values, and behaviors we disapprove
of and that we do not wish to emulate.
NATURE OF REFERENCE GROUPS
Reference groups have certain characteristics that effect their
influence on consumers. They establish norms, roles,
status, socialization, and power.

Social Class and Life Style
• A social class is a group of people of similar status, rank, or
common characteristics (i.e. lifestyle) and commonly sharing
similar levels of power and wealth.
• In the social classes, we usually find people with similar
values, lifestyle and behavior.
• Now a marketer or a researcher needs to pay attention here
because generally the buying behavior of people in a
particular social class to some extent is similar, though the
level of influence may be low or high, he can tailor his
marketing activities according to different social classes. A
person from a low-income group may focus on price while
making the purchase while a person from a higher income
group may consider the quality and uniqueness of the
product. For ex. A person from a low-income group may
focus on price while making the purchase while a person
from a higher income group may consider the quality and
uniqueness of the product.

 The Relationship between Social Class and Lifestyle
This reflected that lifestyle and social class can not be
separate, because people whenever and wherever they are
consistently have a lifestyle in correlation with the social
class.
 Behaviour of a person that known as lifestyle reflected the
social class they were or they want to be.
 APPROACHES TO STUDY LIFESTYLE : Because
lifestyle refers to the way in which people live and spend
money, consumers psychographic profiles are derived by
measuring different aspects of consumer behavior such as:
1-Products and services consumed
2-Activities, interests and opinions
3-Value systems
4-Personality traits and self-conception
5-Attitude towards various product classes

Activities, Interests, and Opinions (AIO) Model:
 Activities
Activities focus on someone's daily routine and hobbies. A
person who rides their bicycle to work and plays sports on
the weekends likely has different purchasing patterns than an
employee who drives a car to work and watches a lot of
movies. Club memberships, entertainment choices, vacations,
and social events can give marketers clues about a
consumer's activities.
 Interests
A person's interests reveal concepts and ideals that drive their
passions. Interests may also include hobbies, affiliations, and
pastimes. A consumer may have varied interests, By
identifying the interests of a target consumer, companies can
better identify how to appeal to them.

Activities, Interests, and Opinions (AIO) Approach /
Model:
 Opinions
Everyone has opinions, and consumers are no different.
Marketers would like to know people's opinions about
movies, public figures, politicians, actors, and television
shows. Marketing agencies also need to know
consumers' opinions about brands, products, and stores.
AIO model aims to create a psychographic profile of a
consumer, with the goal of targeting advertising to
various types of people.

 In India, one of the agencies is trying to create a psychographic
profile of the Indian child based on a sample of over 4463 in 8
metros and mini-metros. As an outcome given below:
6-7 years: A fun seeker, heavily influenced by the family and by
teachers.
8-10 years: A role player, influenced primarily by school and by
friends.
11-15 years: An emulator, influenced by the peer group. At this
stage, gradual non-acceptance of the family begins.
16-18 years: Young adults, almost entirely conforming to the
group.
Some of the interesting findings of this survey are:
• Children love to see commercials on TV.
• They have their favourite actors and cricketers.
• Most of them are adventurous and like trying out new brands.
• Children feel savings are necessary.
• A very large percentage of children visit religious places.
• Newspaper and magazine reading figures are impressive-
particularly for 16 to 19 years age group.

V.A.L.S. Model (Values and Lifestyles OR Values attitude
lifestyle):
VALS which is also known as values attitude and lifestyle is
one of the primary ways to perform psychographic
segmentation. All three terms are intangible in nature and
therefore give an idea of the inert nature of the consumer. If
you know what your consumer is thinking, you would know
what kind of promotions or communications will attract him
most.
VALS is different for different people. Lets take income as an
example. If you are a person with high income your lifestyle
would probably include habits of dining out of home
frequently and that too in top class restaurants, wearing only
branded clothes and buying the best cars out there. Whereas
if you are a middle class income group consumer, you would
be more wary of spending money and would rather
concentrate on savings.

The VALS framework
As mentioned in the history of VALS, The VALS
framework was developed keeping a consumers
resources as well as his capacity to accept innovation in
mind.
After researching above 1500 consumers, Arnold
Mitchell actually divided consumers into 8 different
types based on the amount of resources they had as well
as their capacity for primary motivation.
1- Innovator: They are characterized by High income and
high resource individuals for whom independence is very
important. They have their own individual taste in things
and are motivated in achieving the finer things in life.
Image is important to them as an expression of taste,
independence, and character.

2. Thinkers.
They are mature, responsible, well-educated professionals.
Their leisure activities center on their homes, but they are well
informed about what goes on in the world and are open to new
ideas and social change. They have high incomes but are
practical consumers and rational decision makers.
3. Believers
The subtle difference between thinkers and believers is that
thinkers make their own decisions whereas believers are more
social in nature and hence also believe other consumers. They
have modest income and are less likely to accept innovation on
their own. They are the best class of word of mouth consumers.
4.Achievers
These consumers are the high-resource group of those who are
motivated by achievement. They are successful work-oriented
people. The achievers are said to be high resource consumers
but at the same time, if any brand is rising, they are more likely
to adopt that brand faster.

5. Strivers
These consumers are the low-resource group of those
who are motivated by achievements. They have
values very similar to achievers but have fewer
economic, social, and psychological resources. Style
is extremely important to them as they strive to
emulate people they admire.
6. Experiencers.
These consumers are the high-resource group of
those who are motivated by self-expression. They are
the youngest of all the segments, with a median age
of 25. They have a lot of energy, which they pour to
physical exercise and social activities. They are avid
consumers, spending heavily on clothing, fast-foods,
music, and other youthful favorites, with particular
emphasis on new products and services.

7. Makers.
These consumers are the low-resource group of those
who are motivated by self-expression. They are
practical people who value self-sufficiency. They are
focused on the familiar-family, work, and physical
recreation-and have little interest in the broader
world. As consumers, they appreciate practical and
functional products.
8. Survivors
These consumers have the lowest incomes. They
have too few resources to be included in any
consumer self-orientation and are thus located below
the rectangle. They are the oldest of all the segments,
with a median age of 61. Within their limited means,
they tend to be brand-loyal consumers.

Family Life Cycle: Stages and Definition
The life cycle of the family is the process and stages that a
family typically goes through in its life course.
• Basically, the family life cycles model describes the stages
through which consumers pass through their lives when
they have families. There are different versions of the
categorization of the stages but the most common are:
• The bachelor stage—young and single.
• The newly married couples—young, no children.
• Full nest 1—young, married, with child.
• Full nest 2—older, married, with children.
• Full nest 3–older, married, with dependent children.
• Empty nest—older, married, with no children living with
them.
• Solitary survivor—older, single, retired people

1) Bachelor stage in the family life cycles –
During the bachelor stage people are usually characterized
by being interested mainly in appearances. Therefore,
people at this stage tend to invest more in fashionable
clothing and vehicles. Impulsive buying as well as
premium buying is a common characteristic of the
Bachelor stage.
2) The newly married couples –
In the family life cycle, the new married couples are
considered to be in a better financial position in the initial
stage due to the absence of children. It might be possible
that both, the husband and wife, are earning members.
Thus, the buying decisions focus on quality and not
quantity. A family person will always think about savings
and insurances, and at the same time, they will invest in
long term products like good furniture, new home, etc.
Once married, they are less prone to impulsive decisions.

3.Full Nest I:
With the arrival of the first child, parents being to
change their roles in the family, and decide if one
parent will stay to care for the child or if they will
both work and buy daycare services .Either route
usually leads to a decline in family disposable
income and a change in how the family spends its
income. In this stage, families are likely to move into
their first home;purchases furniture and furnishings
for the child; buy a washer and dryer and home
maintenance items; and purchase new items such as
baby food, cough medicine, vitamins, toys, sleds,and
skates. These requirements reduce families’ ability to
save,and the husband and wife are often dissatisfied
with their financial position.

4. Full Nest II
In this stage, the youngest child has reached school age,
the employed spouse’s income has improved, and the other
spouse often returns to part-or full-time work outside the
home. Consequently, the family’s financial position usually
improves,but the family finds itself consuming more and in
larger quantities.
5. Full Nest III
As the family grows older and parents enter their min-40s,
their financial position usually continues to improve
because the primary wage earner’s income rises, the
second wage earner is receiving a higher salary, and the
children earn spending an education money from
occasional and part-time employment.The family typically
replaces some worn pieces of furniture,purchases another
automobiles, buys some luxury appliances,and spends
money on dental services (braces) and education .

6. Empty nest
Older married with no children living with them.
Financial position stabilizes and there is no
expense on children. The couple is free to enjoy
their own pursuits and spend on luxury or self-
improvement items and medical care.
7. Solitary survivor
Older single retired people. Retired people living
alone after the death of a partner. Life becomes
lonely and income may reduce due to retirement.
This again changes the consumption pattern and
living style of old people.

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