Consumer behavior


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Consumer behavior

  1. 1. 1
  2. 2. Indian Consumer changes Middle class segment bulging Greater global exposure Larger disposable income Greater appetite & demand for global products Differentiated product & service requirements 2
  3. 3. FMCG space dynamics Explosion of products Explosion of markets (Kirana & Organized Retail) Rush of new players Global players bringing process and intelligence maturity Increasing competition Supply chain bottlenecks 3
  4. 4. Marketing can not be standardized, because of •Cross – cultural styles. •Fragmented markets. 4
  5. 5. 11,000 New products were introduced by 77 companies. only 58% are present 5 yrs later. •Only 8% of the new products offered by 112 leading companies reached the market. •Of he above 83% failed to meet the marketing objectives. 5
  6. 6. Managers must analyze consumer motivations and behavior. 6
  7. 7. More successful a firm has been in the past, are more likely to fail. In future. Why ?? ??. 7
  8. 8. Because people tend to repeat behavior for which they have been successful and rewarded 8
  9. 9. Needs and wants = Needs and wants Problem specific 9
  10. 10. Ultimate Goal of marketing To make selling a redundant process •By being focused on customer– understanding clearly –customer is the end and manufacturer as the means •By understanding the customer’s implicit and explicit needs •Creating a self generating pull for the market offering. 10
  11. 11. customer consumers 11
  12. 12. Customers do not BUYS A PRODUCT ! What do they buy?? 12
  13. 13. Manufacturer specific Four P’s Four C’s Customer specific 13
  14. 14. MARKET 14
  15. 15. The activities that people engage in when selecting, purchasing and using products and services so as to satisfy needs and desires. Such activities involve mental ,emotional processes and physical action Is Consumer behavior 15
  16. 16. 1. Consumer behavior is motivated 2. Consumer behavior includes many 3. Consumer behavior is a activities. process 4. Consumer behavior varies in timing and complexity 5. Consumer behavior involves different 6. Consumer behavior is roles influenced by external factors 7. Consumer behavior differs for different people These seven aspects hold key to understand consume behavior. Model’s acronym is “MAPTRIP” 16
  17. 17. customer •To understand the customer –basic is to know that s/he is buying / using the products as a means to solve or address their own problem, reason and strategy and not yours and therefore unless marketer is customer specific in terms of marketing mix elements, success is usually evasive. •Customer does not buy a brand s/he buys their perception, and choose a brand which offers the best solution to their problem •Marketers only brief is to synergize the capabilities of the organization so as to address customer’s specific needs. 17
  18. 18. Customer defections customer defections 3% 1% 5% 11% 20% 60% indifference product price death relocation new avenues 18
  19. 19. Seven sins of service 1. Apathy—indifference,boredom (a matter of attitude) 2. Brush off--- getting rid of customer, not owning responsibility. 3. Coldness---chilly, hostility, curtness, unfriendliness. 4. Condensation---treating customer with a patronizing attitude. 5. Robotize---thank you, have a nice day –next 6. Rule book--- rules above the customer. 7. Run around----sorry you will have to ……. Calling mediocre service excellent doesn't make it excellent 19
  20. 20. Importance of perceived risk •A financial loss-when the product is faulty and needs replacement or repair at one’s own cost. •A loss of time – due to hours of making complaints, returning to distributors, repairs etc. • a psychological risk- when a bad purchase leads to loss of self esteem or creates general dissatisfaction •A physical risk- due to consumption or use of products potentially harmful to one’s health or the environment. 20
  21. 21. Problem solving approaches •Extensive problem solving-is adopted when the value of information and/or the perceived risk is high (unfamiliar brand in an unfamiliar product class) •Limited problem solving- applies to the situation of the buyer confronted with a new, unfamiliar brand in a familiar product class. where existing brands do not provide an adequate level of satisfaction) •Routine response behavior-is observed in the case where the consumer has accumulated enough experience and knowledge and has definite preference about one or more familiar brands (low cost, frequently purchased items) 21
  22. 22. Ten questions 1. 2. 3. 4. 5. 6. 7. Will the product Will the product Will the product Will the product Will the product Will the product Will the product better liked. 8. Will the product 9. Will the product health? 10.Is this purchase make me feel more important? make me happier? make me more comfortable? make me more prosperous make my work easier? give me more security? make me more attractive? Or give me more distinction? improve, protect, or maintain my a bargain for me ? 22
  23. 23. Defining Customer Value Total Customer Value = (Product, Service, Personnel, & Image Values) Total Customer Cost (Monetary, Time, Energy, & Psychic Costs) Customer Delivered Value (Profit to the Consumer) 23
  24. 24. Customer Satisfaction Product’s Actual Performance Customer Satisfaction Results When a Company’s Performance Has Fulfilled a Buyer’s Expectations. Performance Exceeds ExpectationsCustomer is Delighted Buyer’s Expectations Are Based On: Customer’s Past Buying Experiences Opinions of Friends & Associates Marketer/ Competitor Information & Promises Performance Below Expectations Customer is Dissatisfied 24
  25. 25. Total Customer Satisfaction Highly satisfied (delighted) customers produce benefits: – – – They are less price sensitive, They remain customers longer, They talk favorably about the company and products to others. Delighted customers have emotional and rational preferences for products, and this creates high customer loyalty. Therefore, the purpose of Marketing is to generate customer value profitably. 25
  26. 26. The Need for Customer Retention The Key to Customer Retention is Superior Customer Value and Satisfaction. Companies Must Consider: New Customer Costs Lost Customer Costs Customer Lifetime Value 26
  27. 27. Building Customer Satisfaction and Loyalty by Relationship Marketing Relationship Marketing Involves Creating, Maintaining, and Enhancing Strong, Long-Term Relationships with Customers and Other Stakeholders. Methods for Building Relationships Include Offering: Financial Financial Benefits Benefits Social Social Benefits Benefits Structural Structural Ties Ties 27
  28. 28. Buying behavior Buying behavior covers all activity preceding, and following purchase decisions The purchasing behavior is seen as a process of problem solving and can be grouped into five stages 1. Problem recognition 2. Information search 3. Evaluation of alternatives 4. Purchase decision 5. Post-purchase behavior 28
  29. 29. The 5 stage process 1:Problem recognition • The internal recognition by the consumer that their current needs are not being met • Discrepancy between actual & desired state • Leads to motivation • Could be real or imagined, physical or psychological • Implications? Construction of advertising; penetration pricing strategies for new products; importance of peers; social construction of desire. 2:Information Search Next we ask ourselves the question of how do we solve our problem? •May already be familiar with options available •May consult people whose opinions we respect •May browse around the shops •May consult independent experts •Amount of information required dependent on risk attached •Implications? Role of marketing communications 29
  30. 30. The 5 stage process (continued) 3:Evaluation of alternatives •In deciding which product to buy we have to weigh up which product best suits our needs •We construct criteria upon which to base our choice •We already may have a list of criteria or we may form one during the information search •Compensatory vs. non compensatory evaluation 4: Product choice •Having weighed up the pros and cons between alternatives eventually we have to make a choice •Could be as a result of the outcome of our evaluation process against important criteria – best fit. •Choice could be affected by availability, payment options etc. •Implications? Make it easy! 30
  31. 31. The 5 stage process (continued) 5: Post purchase evaluation Once we have made our purchase we decide whether its met our expectation •If it does great positive brand associations and visa versa •Implications? After sales service, marketing communications 31
  32. 32. Value Creation 32
  33. 33. Reference Group Influences A reference group is the group whose perspective an individual takes on in forming values, beliefs, attitudes, opinions, and overt behaviors. – They set levels of aspiration – They help define the actual items/services considered acceptable for displaying those aspirations. 33
  34. 34. Social Norms and Conformity Social norm – any rule or behavior for meeting societal expectations  normative system Conformity pressures – actions taken to encourage or force members to act, think and/or express themselves in certain ways. The more important a group is in our lives, the greater our desire to accept and conform to its norms 34
  35. 35. Homan’s Equation The difference between the “price” we pay for conformity and the rewards obtained for doing so determines for each of us whether we will conform to group expectations and to what extent. Price: •Loss of freedoms •Time commitment •Financial commitment •Etc. Rewards: •Levels of acceptance •Advancement within the group •Prestige gained •Etc. 35
  36. 36. Reference Group Types Primary reference group: one with which the individual has frequent face-to-face contact and in which members are close-knit. – Examples: families, households, study groups, work teams, roommates, etc. Secondary reference group: one in which interaction with other members is less frequent Formal group: one in which there is some sort of structure and/or for which there are specific membership requirements. Informal group: one that has no special membership or attendance requirements, other than common interests. 36
  37. 37. Reference Group Types (continued) Membership group: one to which a person currently belongs. Aspirational group: a group that a person would like to be part of, but to which he or she does not currently/ may never belong Dissociative group: a group that an individual avoids or denies connection with. 37
  38. 38. Reference Group Influences Reference groups as – part of the socialization process – setters of roles – information sources – normative influences – an expression of self-value 38
  39. 39. Conformity Pressure and Marketplace behavior The influence of reference groups varies Groups tend to be more influential on product decisions than they are on either brand or outlet choices – Conspicuousness “based on exclusivity” -product decisions (bikers and black leather jackets) – Conspicuousness “associated with the individual” -- brand decisions possible within product class, “allowed personal 39 expression”
  40. 40. Social Power Power of reward – praise, approval, acceptance, status, recognition, etc. Coercive power – unacceptable behavior strongly discouraged Expert power – informational attraction Referent power – closer the match between person and group, more willingness to conform 40
  41. 41. Awaren ess set Evoked Set Choice set decisiion Total set 41
  43. 43. Realistic view This realistic view is important to the marketer because , 1. It gives an external view of the customer. 2. An aggregate view of the customer 3. A product specific view of the customer 4. A brand preference /purchase point of view 5. A behavioral influence orientation • who does or does not use the product • Who uses the competitors Brand 43
  44. 44. Comparison of two perspectives Perspective Marketer’s characteristics perspective Point of view External (buyers) Level of Aggregate interest (markets) Scope of Product interest specific (what I make) correct Brand specific choice (my brand) Role of Influence Customer’s perspective Internal (me) Individual (myself) Across products (what I buy) Best alternative (best brand for me) 44 Handle
  45. 45. Perspectives-contd. customer marketer Most behaviors are internally focused –we think silently-observe privately-& evaluate according to our own dictates Marketer can only have an external view. Focus on themselves as individuals Market segmentation as a process of comprehending markets. Marketers try to find sub markets within the total markets for economic viability. Not an expert for many of their purchases An expert for his brand / category Choose only one brand from a given set, meaning , making a wrong choice from the point of view of every marketer but, one. (branding helps) Best brand is the one that we make (building brand equity helps) someTime and effort required to Targeting markets of interest. react to stimuli. (only if it is Creating stimuli-intrinsically interest to me otherwise ignored) interesting to consumers stimuli are simple and easy on 45
  46. 46. Lavidge hierarch of effects model Conative The realm of motives, ads stimulate or direct desires Affective The realm of emotiions.Ads change attitudes & feelings Cognitive The realm of thoughts. Ads provide information & facts PURCHASE POP ads/deals/price appeals / testimonials CONVICTION PREFRENCE Competitive ads. Argumentative copy LIKING KNOWLEDGE AWARENESS “image” ads Status glamour appeals Publicity -advertising campaign 46
  47. 47. Black box/CIP models External world inputs External world Consumer’s outputs Mind Black box External world Consumer”s inputs Mind CIP External world output 47
  49. 49. Attitudes Global evaluative judgments Intentions Subjective judgments by people about how they will behave in the future Beliefs Subjective judgments about the relationship between two or more things Feelings An affective state (e.g. current mood state) or reaction (e.g. emotions experienced during product consumption) 49
  50. 50. Relationships between consumer beliefs, feelings, attitudes and intentions 50
  51. 51. Consumer beliefs A sampling of consumer beliefs – If a deal seems to good to be true, it probably is. – You can’t believe what most advertising says these days. – Auto repair shops take advantage of women. – People need less money to live on once they retire. – It’s not safe to use credit cards on the Internet. – Appliances today are not as durable as they were 20 years ago. – Extended warranties are worth the money. – You get what you pay for: lower price means lower quality. – Changing the oil in your car every three thousand miles is a waste of money. 51
  52. 52. Consumer beliefs Expectations Brand distinctiveness Inferential beliefs Consumer confusion 52
  53. 53. Consumer expectations Expectations are beliefs about the future Consumers’ willingness to spend is influenced by beliefs about their financial future 53
  54. 54. Brand distinctiveness Why should a consumer want to buy your brand instead of the competitor’s? The desirability of products having something unique to offer to their consumers is also known as the Unique Selling Proposition (USP) 54
  55. 55. Inferential beliefs Consumers use information about one thing to form beliefs about something else Beliefs are often inferred when product information is incomplete Also undertaken when consumers interpret certain product attributes as signals of product quality, e.g. price-quality inferential beliefs 55
  56. 56. Consumer confusion Sometimes consumers do not know what to believe due to many different reasons – May arise due to conflicting information and knowledge – Mistaking one company’s product for the product of another company – Due to changes in a product’s position and image Consumers respond to confusion by: – Undertaking further information search – Basing their decision on things that are perfectly clear, e.g. price – Deferring product purchase indefinitely 56
  57. 57. Types of consumer feelings Upbeat Active Adventurous Alive Attractive Confident Creative Elated Energetic Good Happy Pleased Negative Angry Annoyed Bad Bored Critical Defiant Disgusted Fed-up Insulted Irritated Regretful Warm Affectionate Calm Concerned Contemplative Emotional Hopeful Kind Peaceful Pensive Touched Warm-hearted 57
  58. 58. Attitude towards objects • Attitudes---people form attitudes toward objects on the basis of their beliefs (perception and knowledge ) about these objects, beliefs in turn acquired by processing information which is obtained by Direct experience with objects and from communications about them received from other sources • Information—experience based with objects +communication received about objects from others. • Belief---perceptions and knowledge 58
  59. 59. Fishbeins model of ATO IS DESIGNED TO DETERMINE A PERSON’S OVERALL ATTITUDE TOWARD AN OBJECT. IT IS BASED ON HIS /HER BELIEFS AND FEELINGS ABOUT VARIOUS ATTRIBUTES OF THE PRODUCT/OBJECT. MODEL IS ALSO REFERRED TO AS MULTIATTRIBUTE MODEL. n model Ao = ∑biei e =1 Ao = a persons overall attitude towards the object. Bi = the strength of his/her belief that object is related to attribute “I” Ei = evaluation or intensity of feeling towards attribute “I” N = number of relevant beliefs for that person. 59
  60. 60. Fishbein Behavior –as a function of intentions to behave in a certain manner+ other intervening factors Attitude– attitude towards acting in that manner + subjective norms,.(others perceptions) B ≈ BI = w1( Ab) + w2( SN ) behavior Behavior intention Attitude Towards Performing behavior Subjective Norms about behavior tksabarwal@gmail.comand w2 are the W1 weights of relative influence of Ab +SN on Behavioral intention 60
  61. 61. Continued. To predict behavior •We determine Ab & SN •Each is then weighted to reflect importance (add up to 1.0) Ab=the individual Oveeerall attitude n Ab =∑ iei b i= 1 k b ∑ imi SN = i= 1 performing specific behavior. B1=persons belief that performing that behavior results in consequence. E1 =persons evaluation of the consequences I. And n= number of relevant behavior beliefs. Where SN=the individual's subjective norms regarding the specific behavior. Bi= normative belief that reference group or person I thinks he should or should not perform the behavior. Mi= his motivation to comply with the thoughts of referent I.k= the number of relevant 61 references
  62. 62. BI model Beliefs about Consequences of behavior Evaluation of consequences Belief about Perception of others Attitude towards behavior BI Subjective norms About behavior Motivations to comply Other Intervening factors behavior 62
  63. 63. he Consumer Decision-Making Process Problem Recognition Information Search Individual and Individual and Social Factors Social Factors and Buying and Buying Situation Situation Evaluation of Alternatives Purchase Post-purchase Behaviour 63
  64. 64. Types of Consumer Buying Decisions Routine Routine Response Response Behaviour Behaviour Limited Limited Decision Decision Making Making Extensive Extensive Decision Decision Making Making Less Involvement Length of time; Cost of goods; information lacking Length of time; Cost of goods; information lacking And number of alternatives available And number of alternatives available More Involvement 64
  65. 65. Decisions The buying-decision process not always straightforward, e.g. level of involvement Level of involvement is the amount of effort that is expended in satisfying a need. Level of involvement normally higher when Consumer lacks information 65
  66. 66. actors Affecting Involvement Levels Previous Previous Experience Experience Factors Factors Influencing Influencing Involvement Involvement Interest Interest Perceived Risk Perceived Risk Situation Situation Social Visibility Social Visibility 66
  67. 67. Involvement High involvement: promotion extensive and informative. Provide information and specify benefits. Low involvement: In-store promotions and packaging important. Must be eyecatching and easily 67
  68. 68. Influencing CB Perception Perception is the process of receiving, organising, and assigning meaning to information or stimuli detected by our five senses Selective perception/exposure Selective distortion Selective retention 68
  69. 69. Influencing CB Motivation All behaviour start with a need Maslow Theory - Adverts play on motives Physiological - Beer bill boards Safety - Burglar alarms, Insurance Affiliation - Hansa/Tea (part of a family) 69