CONSUMER BEHAVIOR

An Introduction

LEARNING CONCEPTS
Definition of CB
Consumer primacy Theory and CB Research perspectives

on consumer behavior Environmental analysis Exchange processes Positioning/differentiation Organizing model of Segmentation consumer behavior

Consumer Behavior . . .
. . . is defined as the study of the buying units and the exchange processes involved in acquiring, consuming, and disposing of goods, services, experiences, and ideas.

What is the difference between:

Consumer

Customer
Client

Consumers, Customers & Clients

Consumers are for products while customers are

for brands For example, we are all consumers of cell phones, but customers of different companies/brands like Nokia, Samsung, QMobile etc. Client is a customer for whom the company makes an effort to build long-term relationship (relationship marketing) primarily used in service industries

Consumer Roles
Initiator

Influencer
Decision Maker Buyer User

Three Research Perspectives on Consumer Behavior

The Decision-Making Perspective

The Experiential Perspective

The Behavioral Influence Perspective

The Decision-Making Perspective . . .

. . . proposes that buying results from consumers perceiving that they have a problem and then they move through a series of rational steps to solve the problem
Generic Decision Model

Problem Recognition
Search Alternative Evaluation Choice Post-acquisition

Evaluation

The Experiential Perspective.

. . . proposes that in some instances buying results from the consumers need for fun, to create fantasies, obtain emotions, and feelings, relates to the concept of Hedonistic consumption

The Behavioral Influence Perspective . . .

. . . assumes that strong environmental forces propel consumers to make purchases without necessarily first developing strong feelings or beliefs about the product.

Exchange Processes and Consumer Behavior

Exchange is the

process that involves the transfer of something tangible or intangible, actual or symbolic, between two or more social actors.

Prerequisites for Exchange:

Two or more parties must be present

Each party has something of value to the other

Each party is capable of communication and delivery Each party must be free to accept or reject the other's

offer Each party must believe that it is appropriate or desirable to deal with the other

Elements of Exchange

Six Types of Resources Are Exchanged:

Goods Service Information Status

Money

Feelings

Dimensions of Exchange Relations

Four types of consumer exchange relations have been

identified:
Restricted versus Complex Exchange Internal versus External Exchange Formal versus Informal Exchange Relational versus Discrete Exchange

Relational Exchange
Current hot topic in marketing Characteristics long term reciprocal obligations non-economic rewards: market embedding - social ties between buyer

and seller increase perceived value of exchange. extensive formal and informal communication high interdependence planning
Relational exchange is also practiced between members of

marketing channel

Application Areas of Consumer Behavior

Environmental Analysis Marketing Research

Segmentation of the Market place

Product Positioning and Differentiation Marketing-Mix Development

Product Positioning . . .
. . . is influencing how consumers perceive a brands characteristics relative to those of competitive offerings
Goal is to influence demand by creating a product with specific

characteristics (i.e. brand attributes) and a clear image that differentiates it from competitors

Positioning Strategies
Attribute Positioning Positioning a brand by creating linkages between brand and key attributes and benefits. E.g., acceleration, reliability etc. for an automobile Competitive Positioning Positioning a brand in relation to competitors. E.g. Coca Cola & Pepsi Cola Away from the Competitor Positioning the brand for a relatively small, uncontested segment that is being ignored by major industry players. E.g. Pakola Psychological Positioning positioning a brand based upon dominant personality characteristic of target market. E.g. Do the Dew Category Positioning Positioning the brand as the pioneer in such a manner that the brand name becomes representative of the product category. E.g. Saniplast

Environmental Analysis . . .

. . . is the assessment of the external forces that act upon the firm and its customers, and that create threats and opportunities

The Natural Environment . . .

. . . includes the types of raw materials available, pollution, consumer fear of contracting deadly diseases, the expansion of desert regions around the globe, and various weather phenomena, such as hurricanes or drought

The Economic Environment

Set of factors involving monetary, natural, and

human resources that influence firms/consumers. Behavioral Economics: Study of economic decisions made by individual consumers and the behavioral determinants of those decisions. Major Contributions of Behavioral Economists:
Originated and documented the idea that the consumer

sector of the economy can strongly influence the course of the aggregate economy Investigated what factors influence the decision of families to buy or save

The Technological Environment

Goal is to anticipate what changes in the technological environment will occur and how these will influence the lifestyle and consumption patterns of consumers

MARKETING RESEARCH . . .

. . . is applied consumer research designed to provide management with information on factors that impact consumers acquisition, consumption, and disposition of goods, services, and ideas

Marketing-Mix Development .
. . . involves the development and coordination of activities involving the:

Product Promotion

Pricing Distribution

Promotional Mix
Advertising Personal Selling Direct Marketing Sales Promotion Publicity & Public

Relations Word-of-mouth

Price Changes
Predicting the likely impact of price changes on

consumers is an important consumer behavior area:

How will consumers react when companies raise or lower the price

of a product? Principles of perception can be applied to analyze if consumers will notice a difference in price and if so, what effect it will have on their buying behavior

Product Distribution . . .
. . . will be influenced by understanding how consumers make their purchasing decisions. For Example: For low involvement decisions (e.g., purchasing a soft drink), the company must use extensive distribution

Market Segmentation . . .
. . . involves subdividing the market place into distinct subsets of customers having similar needs and wants, each of which can be reached with a different marketing mix
For a segment to be useful it should have: 1. Measurability: Assess needs and wants through demographic, psychographic, attitude and personality measures 2. Accessibility: Customers must be reachable by marketing mix 3. Substantiality: Size and income to generate sufficient sales

Four Classifications of Segmentation Variables:

Characteristics of the Person Nature of the situation in which the product or

service may be purchased Geography Culture and Subculture adopted by the consumer

Characteristics of the Consumer

Demographic Characteristics Behavioral Segmentation: price elasticity,

benefits sought, usage rate & pattern, brand loyalty Psychographic and Personality Characteristics

Demographics is . . .
. . . the study of population changes and subcultural values of various demographic groups based on such factors as age, gender, income, education, ethnicity, geography, nationality, household size, marital status, religion, occupation, etc.

Consumer Situations . . .

. . . consist of the temporary environmental factors that form the context within which a consumer activity occurs at a particular time and place Types of situations: Social, physical, temporal, task defined

Geographic Segmentation
Can include region,

size of cities and counties, census blocks, population density, and climate Geo-demographics is the combination of geography and demographics

Culture and Subculture

Culture is the way of life followed by the people in a

society
Subculture is a subdivision of a national culture and is

based on some unifying characteristics, such as nationality, religion, ethnicity etc.