Consumer Behavior Assignment #1 Submitted by: BSBA-OM Chapter 1 *The Nature of Consumer Behavior 1.

Process: -Consumer behavior is a systematic process relating to buying decisions of the customers. The buying process consists of the following steps; a. Need identification to buy the product b. Information search relating to the product. c. Listing of alternative brands. d. Evaluating the alternative (cost-benefit analysis) e. Purchase decision. f. Post-purchase evaluation by the marketer. Influenced by various factors: -Consumer behavior is influenced by a number of factors. The factors that influenced consumer are as follow; marketing, personal, psychological, situational, social, cultural etc. Different for different customers: -All consumers do not behave in the same manner. Different consumers behave differently. The difference in consumer behavior is due to individual factors such as nature of the consumers life style, culture, etc. Different for different products: -Consumer behavior is different for different products. There are some consumers who may buy more quantity of certain items and very low/no quantity of some other items. Various across regions: -The consumer behavior very across states, regions and countries. For instance, the behavior of urban consumers is different from that of rural consumers. Normally, rural consumers are conservative (traditional) in their buying behavior. Vital for marketers: -Marketers need to have a good knowledge of consumer behavior. They need to study the various factors that influence consumer behavior of their target customers. The knowledge of consumer behavior enables marketers to take appropriate marketing decisions. Reflects Status: -Consumers buying behavior is not only influenced by status of a consumer, but it also reflects it. Those consumers who own luxury cars, watches and other items are considered by others as persons of higher status.

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Result in spread-effect: -Consumer behavior has a spread effect. The buying behavior of one person may influence the buying behavior of another person. For instance, a customer may always prefer to buy premium brands of clothing, watches and other items etc. this may influence some of his friends, neighbors, colleagues. This is one of the reasons why marketers use celebrities like sharuk khan, sachin to endorse their brands. 9. Improves Standard of Living: -Consumer buying behavior may lead to higher standard of living. The more a person buys the goods and services, the higher is the standard of living. *History of Consumer Behavior Research & Theories

Consumer behaviour is the study of when, why, how, and where people do or do not buy a product. It blends elements from psychology,sociology, social anthropology and economics. It attempts to understand the buyer decision making process, both individually and in groups. It studies characteristics of individual consumers such as demographics and behavioural variables in an attempt to understand people's wants. It also tries to assess influences on the consumer from groups such as family, friends, reference groups, and society in general. Customer behaviour study is based on consumer buying behaviour, with the customer playing the three distinct roles of user, payer and buyer. Research has shown that consumer behavior is difficult to predict, even for experts in the field.[1] Relationship marketing is an influential asset for customer behaviour analysis as it has a keen interest in the re-discovery of the true meaning of marketing through the reaffirmation of the importance of the customer or buyer. A greater importance is also placed on consumer retention, customer relationship management, personalisation, customisation and one-to-one marketing. Social functions can be categorized into social choice and welfare functions. Each method for vote counting is assumed as social function but if Arrows possibility theorem is used for a social function, social welfare function is achieved. Some specifications of the social functions are decisiveness, neutrality, anonymity, monotonicity, unanimity, homogeneity and weak and strong Pareto optimality. No social choice function meets these requirements in an ordinal scale simultaneously. The most important characteristic of a social function is identification of the interactive effect of alternatives and creating a logical relation with the ranks. Marketing provides services in order to satisfy customers. With that in mind, the productive system is considered from its beginning at the production level, to the end of the cycle, the consumer *Marketing Segmentation & Positioning Segmentation, targeting, and positioning together comprise a three stage process. We first (1) determine which kinds of customers exist, then (2) select which ones we are best off trying to serve and, finally, (3) implement our segmentation by optimizing our products/services for that segment and communicating that we have made the choice to distinguish ourselves that way.

Segmentation involves finding out what kinds of consumers with different needs exist. In the auto market, for example, some consumers demand speed and performance, while others are much more concerned about roominess and safety. In general, it holds true that You cant be all things to all people, and experience has demonstrated that firms that specialize in meeting the needs of one group of consumers over another tend to be more profitable. Generically, there are three approaches to marketing. In the undifferentiated strategy, all consumers are treated as the same, with firms not making any specific efforts to satisfy particular groups. This may work when the product is a standard one where one competitor really cant offer much that another one

cant. Usually, this is the case only for commodities. In the concentrated strategy, one firm chooses to focus on one of several segments that exist while leaving other segments to competitors. For example, Southwest Airlines focuses on price sensitive consumers who will forego meals and assigned seating for low prices. In contrast, most airlines follow the differentiated strategy: They offer high priced tickets to those who are inflexible in that they cannot tell in advance when they need to fly and find it impractical to stay over a Saturday. These travelersusually business travelerspay high fares but can only fill the planes up partially. The same airlines then sell some of the remaining seats to more price sensitive customers who can buy two weeks in advance and stay over. Note that segmentation calls for some tough choices. There may be a large number of variables that can be used to differentiate consumers of a given product category; yet, in practice, it becomes impossibly cumbersome to work with more than a few at a time. Thus, we need to determine which variables will be most useful in distinguishing different groups of consumers. We might thus decide, for example, that the variables that are most relevant in separating different kinds of soft drink consumers are (1) preference for taste vs. low calories, (2) preference for Cola vs. non-cola taste, (3) price sensitivitywillingness to pay for brand names; and (4) heavy vs. light consumers. We now put these variables together to arrive at various combinations. Several different kinds of variables can be used for segmentation. Demographic variables essentially refer to personal statistics such as income, gender, education, location (rural vs. urban, East vs. West), ethnicity, and family size. Taking this a step farther, it is also possible to segment on lifestyle and values. Some consumers want to be seen as similar to others, while a different segment wants to stand apart from the crowd. Another basis for segmentation is behavior. Some consumers are brand loyali.e., they tend to stick with their preferred brands even when a competing one is on sale. Some consumers are heavy users while others are light users. One can also segment on benefits sought, essentially bypassing demographic explanatory variables. Some consumers, for example, like scented soap (a segment likely to be attracted to brands such as Irish Spring), while others prefer the clean feeling of unscented soap (the Ivory segment). Some consumers use toothpaste primarily to promote oral health, while another segment is more interested in breath freshening. In the next step, we decide to target one or more segments. Our choice should generally depend on several factors. First, how well are existing segments served by other manufacturers? It will be more difficult to appeal to a segment that is already well served than to one whose needs are not currently being served well. Secondly, how large is the segment, and how can we expect it to grow? (Note that a downside to a large, rapidly growing segment is that it tends to attract competition). Thirdly, do we have strengths as a company that will help us appeal particularly to one group of consumers? Firms may already have an established reputation. Positioning involves implementing our targeting. For example, Apple Computer has chosen to position itself as a maker of user-friendly computers. Thus, Apple has done a lot through its advertising to promote itself, through its unintimidating icons, as a computer for non-geeks. The Visual C software programming language, in contrast, is aimed a techies.

Michael Treacy and Fred Wiersema suggested in their 1993 book The Discipline of Market Leaders that most successful firms fall into one of three categories: Operationally excellent firms, which maintain a strong competitive advantage by maintaining exceptional efficiency, thus enabling the firm to provide reliable service to the customer at a significantly lower cost than those of less well organized and well run competitors. The emphasis here is mostly on low cost, subject to reliable performance, and less value is put on customizing the offering for the specific customer. Wal-Mart is an example of this discipline. Elaborate logistical designs allow goods to be moved at the lowest cost, with extensive systems predicting when specific quantities of supplies will be needed. Customer intimate firms, which excel in serving the specific needs of the individual customer well. There is less emphasis on efficiency, which is sacrificed for providing more precisely what is wanted by the customer. Reliability is also stressed. Nordstroms and IBM are examples of this discipline. Technologically excellent firms, which produce the most advanced products currently available with the latest technology, constantly maintaining leadership in innovation. These firms, because they work with costly technologies that need constant refinement, cannot be as efficient as the operationally excellent firms and often cannot adapt their products as well to the needs of the individual customer. Intel is an example of this discipline. The emphasis, beyond meeting the minimum required level in the two other dimensions, is on the dimension of strength. Repositioning involves an attempt to change consumer perceptions of a brand, usually because the existing position that the brand holds has become less attractive. Sears, for example, attempted to reposition itself from a place that offered great sales but unattractive prices the rest of the time to a store that consistently offered everyday low prices. Repositioning in practice is very difficult to accomplish. A great deal of money is often needed for advertising and other promotional efforts, and in many cases, the repositioning fails. To effectively attempt repositioning, it is important to understand how ones brand and those of competitors are perceived. One approach to identifying consumer product perceptions is multidimensional scaling. Here, we identify how products are perceived on two or more dimensions, allowing us to plot brands against each other. It may then be possible to attempt to move ones brand in a more desirable direction by selectively promoting certain points. There are two main approaches to multi-dimensional scaling. In the prior approach, market researchers identify dimensions of interest and then ask consumers about their perceptions on each dimension for each brand. This is useful when (1) the market researcher knows which dimensions are of interest and (2) the customers perception on each dimension is relatively clear (as opposed to being made up on the spot to be able to give the researcher a desired answer). In the similarity rating approach, respondents are not asked about their perceptions of brands on any specific dimensions. Instead, subjects are asked to rate the extent of similarity of different pairs of products (e.g., How similar, on a scale of 1-7, is Snickers to Kitkat, and how similar is Toblerone to Three Musketeers?) Using a computer algorithm, the computer then identifies positions of each brand

on a map of a given number of dimensions. The computer does not reveal what each dimension means that must be left to human interpretation based on what the variations in each dimension appears to reveal. This second method is more useful when no specific product dimensions have been identified as being of particular interest or when it is not clear what the variables of difference are for the product category. *Decision Process

Behind the visible act of making a purchase lies a decision process that must be investigated. The purchase decision process is the stages a buyer passes through in making choices about which products and services to buy. :
Problem Recognition

Information Search

Evaluation and Selection of Alternatives

Decision Implementation

Post-purchase Evaluation

Problem Recognition In this information processing model, the consumer buying process begins when the buyer recognizes a problem or need. Information Search When a consumer discovers a problem, he/she is likely to search for more information. Two Steps of Information Search: A. Internal Search Scanning ones memory to recall previous experiences with products or brands. Often sufficient for frequently purchased products. When past experience or knowledge is insufficient The risk of making a wrong purchase decision is high The cost of gathering information is low.

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External Search Personal sources, such as friends and family. Public sources, including various product-rating organizations such as Consumer Reports. Marketer-dominated sources, such as advertising, company websites, and salespeople

Evaluation and Selection of Alternatives The information search clarifies the problem for the consumer by: (1) (2) (3) Suggesting criteria to use for the purchase. Yielding brand names that might meet the criteria. Developing consumer value perception.

Decision Implementation To actually implement the purchase decision, however, a consumer needs to select both specific items (brands) and specific outlets (where to buy) to resolve the problems. There are, in fact, three ways these decisions can be made: 1) simultaneously; 2) item first, outlet second; or 3) outlet first, item second. Post Purchase Evaluation Post-purchase evaluation processes are directly influenced by the type of preceding decision-making process. Directly relevant here is the level of purchase involvement of the consumer. Purchase involvement is often referred to as the level of concern for or interest in the purchase situation, and it determines how extensively the consumer searches information in making a purchase decision. Simple Repeat Purchase Purchase Product Use Disposition Evaluation Motivation *Involvement High Involvement and Low Involvement: Consumer decision-making varies with the level of involvement in the purchase decision. Low Involvement When a consumer buys a low cost frequently purchased item that they are very familiar with, purchase decisions are usually routine. This type of purchase is what is known as a Low Involvement purchase Good examples of low involvement purchases might be buying bread, milk, soft drinks, yoghurt or many other everyday grocery purchases. High Involvement When a consumer buys more expensive less frequently purchased products in an unfamiliar category, purchase decisions are more about problem solving. This type of purchase is what is known as a High Involvement purchase. Good examples, in the food and beverage sector, may be an expensive bottle of wine or spirits. *Levels of Consumer Decision Making Minor New Purchases

Minor new purchase decisions, also known as habitual decisions, are considered purchases that are effortless. The cost of these items is not important to the consumer; however, it is something they have never purchased before. These types of decisions don't require any research or price comparisons because it is usually an item consumers have bought out of the blue at least once in their lifetime. A new brand name purse or pair of designer shoes can be considered minor new purchases and may be purchased on impulse. Minor repurchases are items that consumers will buy over and over, without thinking to change their routine or switch the brand of an item. Groceries, hair care products and grade of gasoline are minor repurchases because they are items that are regularly purchased and needed on a daily basis. These routine purchases are decisions that you've made once and since they worked well for you the first time, there is no need to change or make a new decision.

Major New Purchases

Major new repurchases typically require the most consumer decision making. The decision is very important to consumers; however, they have no information to assist them in it. Consumers must make a decision based on research they conduct or reviews they may have heard from another person. There is a decision-making process involved with these types of decisions. The first step is listing the need for the product, and then researching information regarding that need. Consumers must then decide if there are alternatives and if those alternatives would be a better choice. Purchasing the product is the next step. Finally, consumers evaluate the product to ensure they chose the right product. Major Repurchases

Major repurchases are major products consumers have already purchased in the past. If consumers purchased a car from a particular dealer in the past, then they feel comfortable and content making the purchase again from the same dealer. These decisions are important because consumers feel confident making the decision and that it will not lead them into a long, drawn-out decision-making process. *Types of Consumer Purchasing Decisions

Reference/s: http://www.egyankosh.ac.in/bitstream/123456789/35418/1/Unit-1.pdf http://www.omtexclasses.com/2011/07/nature-of-consumer-behavior.html http://en.wikipedia.org/wiki/Consumer_Behaviour http://www.bordbiavantage.ie/marketingbusiness/marketing/marketresearch/pages/decisionprocesses .aspx