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Sub: BUYER BEHAVIOR


By: M Rafeeq
UNIT-V
MODELING CONSUMER BEHAVIOR

Public became increasingly concerned about the safety and quality of our physical
environment i.e., pollution, so evolved Green Marketing.
Green Marketing ----- Producing and promoting products that are claimed to be
environmentally kind. E.g.: - Packaging.

I. Introduction: -
Studying of Consumer Behaviour is complex, due to involving many variables. So,
Models of Consumer Behaviour have been developed to overcome these difficulties.
Def. Model: -
A model is a simplified abstract thing, which represents a original thing.

Types of Models: -
1. Verbal Model
2. Diagrammatic Model
3. Mathematical Model
The most commonly used Consumer behaviour models are verbal, oftenly supported by a
schematic drawing.
Uses of Models: -
1. To assist in constructing a theory that guides research on Consumer Behaviour.
(A Theory is an interrelated set of concepts, definitions and propositions that presents
systematic view).
2. To facilitate learning what is presently known about Consumer Behaviour.
(Facilitate learning is helpful for organizing knowledge. It reminds us about the
interrelationships between relevant variables).

II. Models of Consumer Behaviour: -


a) Traditional models of consumers
b) Behavioural Economics
c) Contemporary models.
A) Traditional Models of Consumers:-
These models are devised by economists to understand economic systems.
Economics involves the study of how scarce resources (not enough to meet a demand
readily) are allocated among unlimited wants & needs.
I t has 2 major disciplines
1) Micro economics
2) Macro economics

1) Micro Economic Model: -


This was developed in 19th century, focused on the pattern of goods and prices in
the entire economy.

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This model is to make an assumption of “average” Consumer and his “act of
purchase”.
Micro economists concentrated on what consumers would purchase and in what
quantities their purchases would he made.
The tastes and preferences leading to there purchases were assumed to be known
already i.e., micro economists chose to ignore why consumers develop various needs and
preferences and how consumers ran there needs and preferences.

The assumptions of this theory about consumers.


i) Consumer’s needs & wants are unlimited and therefore cannot be fully satisfied.
ii) With in a limited budget, a consumer maximizes satisfaction of their wants & needs.
iii) Consumers independently develop their own preferences, (without influence of otters)
iv) Consumers have perfect knowledge about the utility of an item.
v) Law of diminishing marginal utility.
As additional units of a given product or services are acquired, the marginal
(additional) satisfaction or utility provided by the next will be less than the marginal
satisfaction or utility provided by previously purchases units.
vi) Consumers are perfectly rational
Based on above assumptions, an economist says that perfectly rational consumers will
always purchase the good that provides them with highest ratio of additional benefit to
cost.
For any given good the benefit/cost ratio is expressed as a ratio of its marginal utility
to price (MU/P).
MU1 MU2 MU3 MUn
P1 P2 P3 Pn
If ratio of one product is greater than ratio, then consumer can achieve greater
satisfaction.

2) Macroeconomic model: -
It focuses an aggregate flows in economy i.e., the monetary value of goods and
resources, where they are directed, and how they change over time.
Consumers divide their income by: Consumption and Savings
a) Relative income hypothesis- influenced by peers & social groups.
b) Permanent income hypothesis- people do not use actual income.

B) Behavioural Economics: - (George Katona)


Traditional economics focused on the results of economic behaviour (supply,
quantity demanded, prices etc.) rather than actual behaviour of consumers themselves.
This approach gives, how psychological variables influence consumers could lead to
deeper understanding of the behaviour of economic agents.
This theory was developed Katona, based on the important changes, which occurred in
our economy, especially after World War – II.
Rising income levels has increased spending power available after necessities are
purchased. (Discretionary income) E.g.: - Stereos, cars, washing machine, etc.
Our economy has changed from one characterised as “much for a few” to “more for many”.

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Actual Consumer
Economic Psychological Economic
Process Sentiment Behaviour
Conditions
Fig:- A simplified representation of Katana’s behavioural economics perspective.
Actual economic conditions – are shown as consumer influencing.
It includes rates of interest, inflation, unemployment, GNP, taxes, incomes, debt.
These are modified to Psychological factors, which include consumers motivation,
knowledge, perception and attitudes.
In 1950 Katona began conducting surveys of consumers to develop Index of
consumer sentiment (ICS), which is published on regular basis, based on economic &
personal finance questions.

C) Contemporary Models: -
(Contemporary --- Occurring or existing on the same time.)
There are 6 comprehensive models of C.B.
1) Nicosia model
2) Howard-Sheth model . Focussed on consumer D.M
3) Engel-Kollat-Blackwell model
(Engel-Blackwell-Miniard)

1) NICOSIA MODEL: -

The Nicosia model focuses on the relationship between the firm and its potential
consumer. In the broadest terms, the firm communicates with consumers through its
marketing messages (advertising), and consumers communicate with the firm by their
purchase responses. Thus the Nicosia model is interactive in design: the firm tries to
influence consumers, and the consumers – by their actions (or inactions) – influence the firm.
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In its original form, the Nicosia model is an elaborate computer flowchart of the
consumer decision-making process. Above represented figure presents a summary flowchart
that highlights the full model. The Nicosia model is divided into four major fields:

The consumer’s attitude based on message exposure.


The consumer’s product search and evaluation.
The act of purchase, and
Feedback in the form of consumers experience to both the firm and consumer.

Field 1: The Consumer’s Attitude Based on the Firm’s Messages.


The first field of the Nicosia model is divided into two sub fields.
Subfield 1 includes aspects of the firm’s marketing environment and communications efforts
that affect consumer attitudes, such as product attributes, the competitive environment,
characteristics of relevant mass media, the choice of coy appeal, and characteristics of the
target market.

Subfield 2 specifies various consumer characteristics (e.g. Personality, experience) that


indicate perception of the firm’s promotional messages.

The output of Field 1 is an attitude toward the product based on the consumer’s
interpretation of the message.

Field 2: Search and Evaluation.


The second field of the Nicosia model deals with the search for relevant information and
evaluation of the firm’s brand in comparison with alternative brands. The output of this stage
is motivation to purchase the firm’s brand. (Evaluation could also lead to rejection of the
firm’s brand; however, the model illustrates a positive response.)

Field 3:The Act of Purchase.


In the third field, the consumer’s motivation toward the firm’s brand results in purchase
of the brand from a specific retailer.

Field 4:Feedback.
The final field consists of two important types of feedback from the purchase
experience; one to the firm in the form of sales data, and the other to the consumer in the
form of experience (satisfaction or dissatisfaction). The consumer’s experience with the
product affects the individual’s attitudes and predispositions concerning future messages from
the firm.

2) HOWARD-SHETH MODEL:
The Howard-Sheth model is a major revision of an earlier systematic effort to develop a
comprehensive theory of consumer decision-making. This model distinguishes among three
levels of learning (i.e., stages of decision making):

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1. Extensive problem solving takes place when the consumer’s knowledge and beliefs
about brands are very limited or nonexistent, and he or she does not have specific
brand preference. Here the consumer actively seeks information concerning a number
of alternative brands.

2. Limited problem solving takes place when the consumer’s knowledge and beliefs
about the brands are only partially established, and he or she is not fully able to assess
brand differences in order to arrive at a preference. Some comparative brand
information is sought, although the decision criteria are likely to be fairly well defined.

3. Routinized response behaviour occurs when the consumer’s knowledge and beliefs
about the brand and its alternatives are well established, and the consumer is
predisposed to the purchase of one particular brand.

Following table summarizes the main characteristics of each of these three stages
of decision-making.

Table - Characteristics of the Three Stages of Decision Making

Amount of
Stage information needed speed of
prior to purchase decision

Extensive Problem Solving Great Slow


Limited Problem Solving Moderate Moderate
Routinized Response Behaviour Little Fast.
A simplified version of the basic Howard-Sheth model is shown in Figure (on page
no: 6). The model consists of four major sets of variables: (1) inputs, (2) perceptual and
learning constructs, (3) outputs, and (4) exogenous (external) variables (not shown in Figure).

Inputs:
The input variables consist of three distinct types of stimuli (information sources) in the
consumer’s environment.
1. Physical brand characteristics (signifcative stimuli)
2. Verbal or visual product characteristics (symbolic stimuli) are furnished by the
marketer in the form of product or brand information.
3. Consumer’s social environment (family, reference groups, social class).
All three types of stimuli provide inputs concerning the product class or specific brands to
the prospective consumer.

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Perceptual and Learning Constructs:


The central component of the Howard-Sheth model consists of psychological variables
that are assumed to operate when the consumer is contemplating a decision. These constructs
are treated as abstractions, and are not operationally defined or directly measured. Some of
the variables are perceptual in nature and are concerned with how the consumer receives and
processes information acquired from the input stimuli and other parts of the model. For
example, stimulus ambiguity occurs if a consumer is unclear about the meaning of

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information received from the environment; perceptual bias occurs if the consumer distorts
the information received so that it fits his or her established needs or experiences.

Learning constructs serve the function of concept formation. Included in this category are
the consumer’s goals, information about brands in the evoked set, criteria for evaluation
alternatives, preferences, and buying intentions. The proposed interaction (linkages) between
the various perceptual and learning variables and the variables in other segments of the model
give the Howard-Sheth model its distinctive character.

Outputs:
The model indicates a series of outputs that correspond in name to some of the perceptual
and learning construct variables (attention, brand comprehension, attitudes, intention), in
addition to the actual purchase.

Exogenous Variables:
Exogenous variables are not directly part of the decision making process and are not
shown in the model presented here. Relevant exogenous variables include the importance of
the purchase, consumer personality traits, time pressure, and financial status.

3) ENGEL-KOLLAT-BLACKWELL MODEL:
The Engel-Kollat-Blackwell model of consumer behaviour (also known as the Engel-
Blackwell-Miniard model) was originally designed to serve as a framework for organizing the
fast-growing body of knowledge concerning consumer behaviour. Like the Howard-Sheth
model, it has gone through a number of revisions aimed at improving its descriptive ability
and clarifying basic relationships between components and subcomponents. Figure (on page
no: 8) depicts the model as consisting of four sections:
(1) Decision-process stages.
(2) Information input,
(3) Information processing, and
(4) Variables influencing the decision process.

Decision-Process Stages.
The central focus of the model is on five basic decision-process stages: problem
recognition, search, alternative evaluation (during which beliefs may lead to the formation of
attitudes, which in turn may result in a purchase intention), purchase, and outcomes. The
number of stages that figure in a specific purchase decision, and the relative amount of
attention given to each stage, are functions of how extensive the problem-solving tasks are felt
to be. For example, in extended problem-solving behaviour, consumers presumably pass
through all five stages: in routine problem-solving behaviour, consumers presumably do not
require external search and altrnativeevaluation – they know what they want.

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Information Input
Information from marketing and non-marketing sources feeds into the information
processing section of the model. After passing through the consumer’s memory, which serves
as a filter, the information has its initial influence at the problem recognition stage of the
decision-making process. Search for external information’s activated if additional information
is required in order to arrive at a choice, or if the consumer experiences dissonance because
the selected alternative is less satisfactory than expected.
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Information Processing
The information processing section of the model consists of the consumer’s exposure,
attention, comprehension/perception, yielding/acceptance and retention of incoming marketer-
dominated and nonmarketing information. Before a message can be used, the consumer must
first be exposed to it, allocate information-processing capacity to it, interpret the stimulus, be
persuaded by it, and retain the message by transferring the input to the long-term memory as
information and experience, the message must pass through sensory memory – which
analyses the input in terms of its physical properties – and short-term memory, where the
message (stimulus) is analysed for meaning.

Variables Influencing the Decision Process


The last section of the model consists of individual and environmental influences that
affect all five stages of the decision process. Individual characteristics include motives,
values, lifestyle, and personality; the social influences are culture, reference groups and
family. Situational influences, such as a consumer’s financial condition, also influence the
decision process.