Consumer behaviour (Mod. 1)

 Prepared By-
Prof. Niraj Rajyaguru
NET (Management)
NET (Commerce)
MBA (Marketing)
M.com (Marketing)
M. Phil (Pursuing)

Mod. 1 – Understanding the
Consumer

 The terms "consumer" and "customer" are often used
interchangeably, but a consumer and customer are
not always the same entity. In essence, consumers
use products while customers buy them. A consumer
may also be a customer and a customer can also be a
consumer, but situations occur where this is not the
case. In general, your marketing efforts should be
geared toward the consumer, rather than the
customer.

 “It is the response of the system
or organism to various stimuli or
inputs, whether internal or
external, conscious or sub
conscious, overt or covert, and
voluntary or involuntary.”

 “Consumer behaviour is the behaviour that
consumers display in searching for, purchasing,
using, evaluating, and disposing of products and
services that they expect will satisfy their needs.”
 Consumer behaviour focuses on how individual
consumers and families or households make
decisions to spend their available resources on
consumption related items.

 Consumers will favour those products
that are widely available and low in cost.
 Therefore increase production and cut
down costs.
 And build profit through volume.

Produce
Sell
Consumers
Company
Produce more & more
Practically sells itself

 Consumers will favour those products
that offer the most quality, performance,
or innovative features.
 Therefore, improve quality, performance
and features.
 This would lead to increased sales and
profits.

Produce
Quality
Products
Practically sells itself,if
it gives most quality
for money
Sell Consumers
Buyers admire well-made products and can
appraise product quality and performance.

 Consumers , if left alone , will not buy
enough of company’s products.
 Therefore, promote sales aggressively.
 And,build profit through quick
turnover.

 Consumers have normal tendency to
resist.
Produce
Aggressive selling &
promotion efforts
Sell it Consumers
Making sales becomes primary function and
consumer satisfaction secondary .

 The key to achieving organizational
goals consist in determining the needs
and wants of target markets and
delivering the desired satisfactions more
effectively and efficiently than
competitors.
 And build profit through customer
satisfaction and loyalty.

 “ LOVE THE CUSTOMER , NOT THE
PRODUCT ”
Consumers
Produce it
Market it
Learn what they want
Sell what they want(Satisfy
needs of customers)

 It is Marketing Concept (+) Society’s well
being.
 Balancing of following three considerations
while setting marketing policies :
-Customer’s want satisfaction
-Society’s well being
-Company’s profits

 The societal marketing concept holds that
the organization’s task is to determine the
needs, wants, and interests of target markets
and to deliver the desired satisfactions more
effectively and efficiently than competitors
in a way that preserves or enhances the
consumer’s and the society’s well being.

 Value is the bundle of benefits the customer derives from a
purchase
 Customer value can be thought of as the ratio between the
customers’ perceived benefits (economic, functional, and
psychological) and resources (monetary, time, effort,
psychological) used to obtain that benefits.

 How does McDonald’s
create value for the
consumer?
 How do they
communicate this
value?

 A value proposition in business and marketing is the
emotional & rational statement set summarizing the customer
segment and the core differentiation of one's product/service
from the offerings of competitors.
 A value proposition is a clear statement of the tangible results
a customer gets from using your products or services.
 How Value Proposition is Different than Unique
selling proposition?
 Unique selling proposition means The factor or consideration
presented by a seller as the reason that one product or service
is different from and better than that of the competition.

 Part of a firm’s business model
 An element of strategy
 A reflection of the value a firm offers its customers
 And finally… A carefully crafted marketing message
› Communicates a clear point of differentiation
› Is highly persuasive
› Supports sales
› And more…

 A value proposition describes why a
customer should buy a product or service
 It targets a well defined customer segment
 It convinces prospective customers that a
particular product or service will add more
value or better solve a problem than
competitive products or services


Harley Davidson
› "Harley-Davidson stands for independence,
freedom, individuality, expressing one’s self,
adventure on the open road, and experiencing
life to its fullest. This is what people are buying
when they buy a Harley."
 Walmart
› Leader in low prices and huge selection
 McDonald’s
› As introduced by their founder, Ray Kroc, many
years ago: "friendliness, cleanliness, consistency,
and convenience."

 Customer satisfaction is the individual consumer’s
perception of the performance of the product or
service in relation to his or her expectations.
 A customer whose experience falls below
expectations will be dissatisfied.
 And a customer whose expectations are exceeded
will be very satisfied or even Delighted.

 Positive side:-
 Loyalists- They are completely satisfied customers who keep
purchasing.
 Apostles- whose experiences exceed their expectations, and
who provide very positive word-of- mouth about the
company to others.

 Negative side:-
 Defector- who feel neutral or merely satisfied.
 Hostages- who are unhappy customers who stay with the
company because of a monopolistic environment or low
prices and who are difficult and costly to deal with because of
their frequent complaints.
 Terrorists- who have had negative experiences with the
company and who spread negative word of mouth.
 Mercenaries- who while being satisfied customers, really do
not have any real loyalty and may defect at any point for a
lower price elsewhere.

 Trust is the foundation for maintaining a long standing
relationship with customers, and it helps to increase the
chances that customers will remain loyal. If for some reasons
a situation occur where a customer’s relationship is at risk in
terms of trust, there is also the related concept of delight, in
which company seeks to recover in the eyes and minds of
consumers by setting things right with the customer, and
further demonstrates to that customer that he or she is valued
as a customer.

 The overall objective of providing value to customers
continuously and more effectively than the competitors is to
have and to retain highly satisfied and trusting customers, and
from time to time even surprise them by providing the
element of delight to their dealings with the company.
 “A strategy of customer retention is designed to make it in
the best interest of customers to stay with a company rather
than switch to another company”

 Loyal customers buy more products.
 Loyal customers are less price sensitive and pay less
attention to competitor’s advertising.
 Servicing existing customers, who are familiar with
the company’s offering and processes, is cheaper.
 Loyal customers spread positive word of mouth and
refer other customers.

 Sophisticated marketers build selective relationships
with customers, based on where customers rank in
terms of profitability, rather than try hard to retain
all customers.
 These marketers closely monitors its customer’s
consumption volume and patterns, establishes tiers
of customers according to their profitability levels,
and develops distinct strategies for each group of
customers

 Customer profitability focused marketing tracks cost and
revenues of individual customers and then categorizes
customers into tiers based on consumption behaviours that are
specific to the company’s offerings.

 The Platinum tier- it includes heavy users who are not
price sensitive and who are willing to try new offerings.
 The Gold tier- it consist of customers who are heavy users
but not as profitable because they are more price sensitive
than those in the higher tier, ask for more discounts.
 The Iron tier- It consist of customers whose spending
volume and profitability do not merit special treatment from
the company.
 The Lead tier- it includes customers who actually cost the
company money because they claim more attention than is
merited by their spending, tie up company resources and
spread negative word of mouth.

The Traditional Marketing concept Value and Retention Focused
Marketing
“Make only what you can sell” Use technology that enables customers
to customize what you can make
Do not focus on the product, focus on
‘need’,
Focus on product’s perceived value, as
well as the need that it satisfies.
Market products and services that
match customers needs better than
competitors offerings.
Utilize an understanding of customer
needs to develop offerings that
customers perceive as more valuable
than competitor’s offerings.
Research consumer needs and
characteristics.
Research the levels of profit associated
with various consumer needs and
characteristics.
Understand the purchase behaviour
process and the influences on
consumer behaviour.
Understand consumer behaviour in
relation to the company’s product.
Realize that each customer transaction
is a discrete sale.
Make each customer transaction part
of an ongoing relationship with the
customer.
Create loyalty programmes based on
the volume purchased.
Create customer tiers based on both
volume and consumption patterns.

Marketing
Segment the market based on
customer’s geographic, demographic,
psychological, socio cultural, lifestyle.
Use hybrid segmentation that
combines the traditional segmentation
bases with data on the customer’s
purchase levels and patterns of use of
the company’s product.
Target large groups of customers that
share common characteristics with
message transmitted through mass
media.
Invest in technologies that enable you
to send one-to-one promotional
messages via digital channel.
Use one way promotions whose
effectiveness is measured through sales
data.
Use interactive communications in
which message to customers are
tailored according to their response to
previous communications.
Encourage customers to stay with the
company and buy more.
Make it very unattractive for your
customers to switch to a competitors.

Marketing
Conduct customer satisfaction surveys
and present the result to management.
Conduct customer satisfaction surveys
including components like customers
word of mouth about the company,
and use result immediately to enhance
customer relationship.
Determine Marketing budgets on the
basis of the numbers of customers you
are trying to reach.
Determine marketing budget on the
“life time” value of typical customers in
each of targeted segments compared
with the resources needed to acquire
them as customer.
Create customers trust and loyalty to
the company and high level of
customer satisfaction.
Create customer intimacy and bonds
with completely satisfied, “delighted”
customers.

 On Marketer-
 Customize their product, service and
promotional message
 Adapt Marketing mix to specific customers
needs
 Quick and efficiently build and maintain
relationship with customers
 Collecting and analysing complex data on
consumers buying pattern and characteristics
 Marketer can offer more services and products
than ever before

 On Customer-
 Search information about goods and services more easily and
efficiently
 Consumers can enjoy more power than ever before
 Impact reaches beyond the PC-Based connection of the Web.

 Iams, a Procter & Gamble brand that makes
pet food, noticed that some consumers were
supplementing dry pet food with some form of
treat, particularly to get older pets with dental
problems to eat it. Iams then conducted
quantitative research to determine if this
practice was common among consumers. The
research indicated that 40% of pet owners use
such methods. In response, Iams launched
Savory Sauce, a more convenient alternative to
table scraps. The product has been so
successful that Iams has since extended this line
to include eight varieties, including sauces for
use with puppies.

 Research means to search
again..
 “Consumer research is the
action or activity of
gathering information
about consumers needs and
preferences, especially in
relation to a product or
service.”

 Marketers must understand
customers to design effective:
› marketing strategies
› products
› promotional messages

 Primary Research- “New research especially
designed and collected for purposes of a current
research problem.”
 Secondary Research- “Research that is carried out by
information already collected for some other
purpose, but able to provide in part or even in full
answers about a current problem.”

The Consumer
Research
process

 Defining the objectives of Research
 Collecting and evaluating secondary
data
 Designing a primary research study
 Collecting primary data
 Analyzing the data
 Preparing a report of the findings

 The first and most difficult step in the consumer
research process is to accurately define the
objectives of the research.
 A carefully thought out statement of research
objectives helps to insure that the information
needed is secured, and that costly errors are avoided.

 Consider your customer research goals and define a clear set
of objectives that identify what you need to know and what
you're going to do with the information. The Objective of
research should be S-M-A-R-T.
• Specific - state clearly what you want to achieve
• Measurable - set tangible measures so you know when you've
achieved your goals
• Achievable - set goals that are within your capacity and
budget
• Relevant - set goals that will help you improve particular
aspects of your business
• Time-bound - set goals you can achieve within the time you
need them.

 If the purpose of a particular study is to come up with new
ideas for product extensions or concepts for future
promotional campaigns, then a qualitative study, consisting of
focus group or one-on-one depth interviews are usually
undertaken.
 If the purpose of the study is to find out how many target
consumers there are in the population (i.e. What percentage of
consumers) who use a particular product, and how frequently
they use it, then a quantitative study should be conducted.
Because the research task is to provide quantitative
information upon which a marketer take strategic decisions.

 Before undertaking a full scale quantitative study, the
researcher is likely to conduct a small-scale
exploratory study.
 Exploratory Research- Exploratory research is
research conducted for a problem that has not been
clearly defined. Exploratory research helps
determine the best research design, data collection
method and selection of subject.

 Second step in the consumer research process is to search for
the availability of secondary data.
 Secondary data is already existing information that was
originally gathered for a research purpose other than the
present research.
 Secondary consumer related data can be secured from either
internal sources within the company or organization, or
external sources for free or at a cost.

 Internal Secondary Data-
 Such information or data could consist of previously collected
in house information that was originally used for some other
purpose.
 It might have originally been gathered as part of a sales audit,
or from past customer service calls, or letters of inquiry from
customers, or data collected via warranty cards.
 Companies use internal secondary data to compute customers
lifetime value profiles. (customer acquisition cost, profit generated
from individual sales, cost of handling orders, expected duration of the
relationship)

 Disadvantage-
• Time frame
• Less reliable
• Not collected for particular research
 Advantage-
• Availability
• Less expensive
• Less time intensive
• Less efforts

 External Secondary Data-
• Such information or data on consumer behaviour comes from
sources outside of the firm or organization.
• That can be collected from public library, business journals,
publishing groups, books, periodicals, newspapers, consumer
panels etc.
• Secondary Research is also provided by companies that
routinely monitor a particular consumption related behaviour,
and sell their data to marketing companies who use insights to
make more informed strategic decision.

 Sources of External Secondary Data
Business
Jouranls
Research
Agencies
News Papers Business
Magazines
Business world’s
The Marketing
Whitebook
NCAER Wall street
Journal
Business weel
Journal of
Marketing
Research
Hansa Research
Group
New York TImes Forbes
Journal of
Consumer
Research
Pathfinders India Fortune

 Established in 1956, NCAER is India’s oldest and largest independent, non-profit,
economic policy research institute. Six decades in the life of a nation is a
long time. It is even longer in the life of an institution. But the promise of NCAER
—to ask the right questions, gather good evidence, analyse it well, and share the
results widely—has endured. India has achieved much, and much remains undone.
As the economy has changed, so too has NCAER, to continue to help understand
India’s rapid economic and social transformation. As newer and more complex
economic challenges emerge, NCAER will have to do more to keep its promise.
To do this well, that is NCAER’s promise renewed.
 NCAER’s work falls into four thematic areas:
• Growth, Macro, Trade, and Economic Policy
• Investment Climate, Industry, Infrastructure, Labour, and Urban
• Agriculture and Rural Development, Natural Resources, and Environment
• Poverty, Equity, Human Development, and Consumers
 The focus of NCAER’s work in these areas is on generating and analysing
empirical evidence to support and inform policy choices. It is also one of a
handful of think tanks globally that combine rigorous analysis and policy outreach
with deep data collection capabilities, especially for household surveys

 Hansa Research is a global Market research agency conducting market research
in 77 countries with offices in India and the US. It is the only global market
research agency headquartered in India. Under the leadership of Mr. Ashok Das,
the Managing Director, Hansa Research became one of the fastest growing market
research agencies in India.
Nielsen Media Research (www.nielsenmedia.com)
 Whether you’re eyeing markets in the next town or across continents, we
understand the importance of knowing what consumers watch and buy. That’s our
passion and the very heart of our business.
 We study consumers in more than 100 countries to give you the most complete
view of trends and habits worldwide. And we’re constantly evolving, not only in
terms of where we measure, or who we measure, but in how our insights can help
you drive profitable growth.
 Whether your business is a multinational enterprise or a single storefront, we
believe innovation is the key to success, in both what you create and how you
market your products and ideas. That’s why we continue to develop better
solutions to help you meet the needs of today’s consumers, and find out where
they’re headed next.
 So let’s put our heads together. We’ll bring our insight to your business and help
you grow.

 Consumer Panel-
 Secondary data provider company generally collect consumer
behaviour data from household or family consumer panels.
 The members of these consumer panels are paid for recording
their purchases and/or media viewing habits in diaries that are
then combined with thousands of households and analyzed by
the data providers. On the other hand marketers and
advertising agencies pay the panel providers a subscription
fee for the regular flow of reports of research findings.

 Evaluation of the collecting secondary data-
 Advantage-
• Eliminate need for primary data
• Help to clarify and redefine Objectives of primary study
 Disadvantage-
• Some secondary data may not be accurate
• Data has been collected in a biased pattern in order to support
a particular point
• Data may be outdated

 After considering the collection of secondary research, the
diagram splits into two paths, with the left side route taking a
path of qualitative research, and the right side route taking a
path of quantitative research.
 If the purpose is to get new ideas then a Qualitative study is
often undertaken; and if quantitative information is sought,
then some form of a Quantitative study is likely to be
undertaken.

 Qualitative researchers aim to gather an in-depth
understanding of human behaviour and the reasons that
govern such behaviour. The qualitative method investigates
the why and how of decision making, not just what, where,
when. Hence, smaller but focused samples are more often
used than large samples.
 Focus groups and depth interviews are very well established
tools that are regularly used to take insights about developing
new product and future promotional campaign.

 Depth Interviews-
 A depth interview is frequently referred to as a “one to one”
interview, is a somewhat lengthy non-structural interview
between a single respondent and a highly trained researcher.
 Depth interview takes place in a professionally set up
interviewing room. These rooms are designed to provide
audio and video recording equipment.
 Stimulus material like photos, drawings, samples, videos etc.
Can be used.

 Focus Group-
 A Discussion group or focus group often consists of 8 to 10
participants who meet with a moderato-researcher-analyst to
‘focus on’ or ‘explore’ a particular product or product
category.
 Like depth interviews, focus group sessions are invariably
audio taped and videotaped.
 Focus groups are usually held in specially designed
conference rooms with one-way mirrors that enable marketers
and advertising agency staff to observe sessions without
disrupting the responses.

 Online focus group-
 Over the past 5 to 10 years, there has been a increase in
online focus groups.
 Consumers can provide a “virtual focus group room”
environment – one where consumer participants and a
moderator can log on to participate in an online focus group
session. In certain ways, it can be similar to a regular off-line
focus group session.

 Discussion Guides-
 A discussion guide is step by step outline that sets out the line
of questioning that the researcher needs to cover with the
respondent in a depth interview or a group of respondent in
the case of a focus group session.
 It is a kind of “agenda” of topics and issues that need to be
covered.

 Some emerging Qualitative research tool
 Projective Techniques-
 Projective exercise consist of a variety of disguised ‘tests’
that contains ambiguous stimuli, such as incomplete
sentences, untitled pictures or cartoons, and other person
characterizations. They are all designed to make it easier for
consumer to express themselves and reveal their inner
motivations.
 Projective techniques are generally part of depth interviews.
 Exercises covered under projective techniques-
I. Word associations
II. Sentence completions
III. Photo for story telling
IV. Role playing

 Metaphor Analysis-
 The use of one form of expression to describe or represent
feelings about another is called a metaphor.
 Since most communications are non verbal and that people do
not think in words but in images, it is important to use a set of
engaging tasks and exercises to get consumer participants to get
in touch with their own inner feelings.
 Moreover if consumers thought process consist of a series of
images or pictures in their minds, then it is likely that many
respondents cannot adequately convey their feelings and
attitudes about the research subject through the words only.

 A substantial portion of quantitative research is used by
consumer researcher to better understand the acceptance of
various products or specific brands, as well as the impact of
promotional messages on consumers.
 Quantitative research includes Experimentation, survey
techniques, and observations.

 Observational Research-
 Watching or carefully observing consumer’s actions of
purchasing and consuming, especially in realistic
surrounding. (in stores, malls, watching TV, and even in their
home environment)
 Observational research is an important research tool because
marketers recognize that often the best way to gain an in-depth
understanding of the relationship between people and
product is by watching them in the process of buying and/or
using the product.

 Experimentation-
 It is possible to test the relative sales appeal of many types of
variables, such as package design, prices, promotional offers
by experiments designed to identify cause and effect.
 In the simplest form of such experiments (causal research)
only one variable is manipulated (called independent
variable), while all other elements are kept constant.
 A controlled experiment of this type ensure that any
differences in the outcome (dependent variable) is due to
different treatments of the variable under study and not to
extraneous factors.

 A major application of causal research is test marketing, in
which prior to launching a new product, elements such as
package, price, promotion, are manipulated in a controlled
setting in order to predict sales and possible responses to the
product.

 Surveys-
 It includes direct interaction with respondents and it includes
survey method. In research surveys are most commonly used
and most common means of collecting primary data.
 Types of surveys
1) Personal Interview survey
2) Telephone interview survey
3) Mail survey
4) E-mail survey

 QUANTITATIVE RESEARCH DATA
COLLECTION INSTRIMENTS-
 Questionnaire-
 For quantitative research, the primary data collection
instrument is the questionnaire, which can be sent through
mail or online.
 Questions can be..
I. Open ended
II. Close ended

 Attitude scales-
 Researchers often present respondents with a list of products
or product attributes for which they are asked to indicate their
relative feelings or evaluations.
 Types of scales
I. Likert scale
II. Sementic differential scale
III. Behaviour intension scale
IV. Rank order scales

 Sampling and Data collection-
 A sample is the subset of the population that is used to
estimate the characteristics of the entire population. Therefore
the sample must be representative of the universe under study.
Probability sample Non probability sample
Simple random sampling Convenience sample
Systematic random sampling Judgement sample
Stratified random sampling Quota sample
Cluster sample

 It is quite common for marketers, to frequently
combine both a qualitative component and a
quantitative component.
 The predictions made possible by quantitative
research and the understanding provided by
qualitative research together produce richer and
more robust profile of consumer behaviour.

 In qualitative research, the moderator-researcher
usually analyzes the responses received.
 In quantitative research, the researcher supervise
the analysis.
 Open ended responses are first coded and
quantified.
 All the responses are tabulated and analyzed
using sophisticated analytical programs.

 Research Report must include-
 Brief executive summary
 Recommendation
 Tables and graphs to support findings
 Description of the methodology used.

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