Consumer behavior

tksabarwal@gmail.com


1

Indian Consumer changes
Middle class segment bulging
Greater global exposure
Larger disposable income
Greater appetite & demand for
global products
Differentiated product & service
requirements



2

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

Marketing can not be standardized,
because of
•Cross – cultural styles.
•Fragmented markets.



4

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

Managers must analyze
consumer motivations
and behavior.



6

More successful a firm has
been in the past, are more
likely to fail. In future.
Why ??
??.


7

Because people tend to
repeat behavior for which
they have been successful
and rewarded



8

Needs and wants = Needs and
wants

Problem
specific



9

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

customer

consumers



11

Customers do not BUYS A
PRODUCT !
What do they buy??



12

Manufacturer specific
Four P’s

Four C’s
Customer specific


13

MARKET



14

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

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

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

Customer defections
customer defections
3%
1%

5%

11%

20%


60%


indifference
product
price
death
relocation
new avenues

18

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

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

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

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

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

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

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

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

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

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

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

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

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

Value Creation



32

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

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

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

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

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

Reference Group
Influences
Reference groups as
– part of the socialization
process
– setters of roles
– information sources
– normative influences
– an expression of self-value


38

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”

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

Awaren
ess
set

Evoked
Set

Choice
set

decisiion

Total
set



41

Perspective
(A mental view of a scene)
SET OF PERSPECTIVES IN
CONSUMER BEHAVIOR
MARKETER
CONSUMER
PUBLIC POLICY
MAKETERS AND CONSUMERS ARE ACTIVE ON
DAILY BASIS
MARKETING DECISIONS
CONTROLLABLE (4P’s)
Marketing mix
elements

UNCONTROLABLE (5C’s)
Customers Channels
Conditions Competitors
Company,

42

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

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

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

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

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

Short and long term memory
INTERNAL

EXTERNAL
WORLDS
WORLD

STIMULI


SENSORY
REGISTER

SHORT TERM
MEMORY(STM) OR
WORKING
MEMOTY


LONG TERM
MEMORY (ltm)

48

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) tksabarwal@gmail.com
49

Relationships between
consumer beliefs, feelings,
attitudes and intentions



50

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

Consumer beliefs
Expectations
Brand distinctiveness
Inferential beliefs
Consumer confusion



52

Consumer expectations
Expectations are beliefs about the future
Consumers’ willingness to spend is influenced by
beliefs about their financial future



53

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

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

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

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

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

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

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 tksabarwal@gmail.com
W1
weights of relative influence of
Ab +SN on Behavioral intention

60

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

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

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

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

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

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

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

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

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

Consumer behavior

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