Sunday, March 19, 2017

Introduction to Consumer Behaviour

Unit – 1: Introduction to Consumer Behaviour

Meaning of Consumer and Consumer Behaviour
Consumer: Any individual who purchases goods and services from the market for his/her end-use is called a consumer. In simpler words a consumer is one who consumes goods and services available in the market. In other words, consumer is an ultimate user of a product or service.
According to International Dictionary of Management, “consumers are purchasers of goods and services for immediate use and consumption”.
Consumer Behaviour (CB): Human being differs from one to another. It is not easy to predict the human behaviour. Human being differs in their taste, needs, wants and preferences. But one constant thing is that we all are consumers. CB is a vast and complex subject. Understanding CB and “knowing consumers’ are not that simple.
Consumer behaviour explains the reasons and logic that underlie purchasing decisions and consumption patterns; it explains the processes through which buyers make decisions. Consumer Behaviour may be defined as “the interplay of forces that takes place during a consumption process, within a consumers’ self and his environment. This interaction takes place between three elements viz. knowledge, affect and behaviour; it continues through pre-purchase activity to the post purchase experience; it includes the stages of evaluating, acquiring, using and disposing of goods and services”. The “consumer” includes both personal consumers and business/industrial/organizational consumers.

Definitions of CB
In the words of Kotler, ”Consumer   behaviour   is   the   study   of   how   people   buy,   what they buy, when they buy and why they buy.”

In the words of Solomon,” Consumer behaviour is the study of the processes involved when individuals or groups select, purchase, use, or dispose of products, services, ideas, or experiences to satisfy needs and desires”
In the words of Professor Bearden and Associates, ”Consumer behaviour is the mental and emotional process and the physical activities of people who purchase and use goods and services to satisfy needs and wants.”
By analysing the above definition, it reveals that the study includes within its purview, the interplay between cognition, affect and behaviour that goes on within a consumer during the consumption process: selecting, using and disposing off goods and services.

Nature/Characteristics of consumer behavior are:
a)      Consumer behavior is the part of human behavior. This cannot be separated. Human behavior decides what to buy, when to buy etc. This is unpredictable in nature. Based on the past behavioral pattern one can at least estimate like the past he might behave.
b)      Learning the consumer is difficult and complex as it involves the study of human beings. Each individual behaves differently when he is placed at different situations. Every day is a lesson from each and every individual while we learn the consumer behavior. Today one may purchase a product because of its smell, tomorrow it may vary and he will purchase another due to some another reason.
c)       Consumer behavior is dynamic. A consumer’s behavior is always changing in nature. The taste and preference of the people vary. According to that consumers behave differently. As the modern world changes the consumer’s behaving pattern also changes.
d)      Consumer behavior is influenced by psychological, social and physical factors. A consumer may be loyal with a product due to its status values. Another may stick with a product due to its economy in price. Understanding these factors by a marketer is crucial before placing the product to the consumers.
e)      Study of consumer behavior is crucial for marketers. Before producing a product or launching a product, he has to go through a clear analysis of the consumer behavior. If the people or prospects reject the product, he has to modify it.
f)       Consumer behavior is a continuous process as it involves the process starts before the buying and continuing after purchasing. Before buying there will be high confusions and expectations about the product. After buying it, if the buyer is satisfied with the product he shows a positive behavior, otherwise negative.
Importance of Consumer Behaviour
The consumer is the focus of marketing efforts. The modern concept spells out the real significance of buyer’s Behaviour. The modern marketing management tries to solve the basic problems of consumers in the area of consumption. To survive in the market, a firm has to be constantly innovating and understand the latest consumer needs and tastes. It will be extremely useful in exploiting marketing opportunities and in meeting the challenges that the Indian market offers. It is important for the marketers to understand the buyer behaviour due to the following reasons.
1. Analyze the environment: The knowledge of consumer behaviour can be applied to help identify opportunities and fight threats. The opportunities could be in terms of newer customers, newer markets, unfulfilled needs and wants. The threats could be fought by developing and implementing appropriate marketing strategies to best fit the environment.
2. Take better marketing decisions: It helps marketers to understand consumer buying behaviour and make better marketing decisions.
3. Future Prediction: The size of the consumer market is constantly expanding and their preferences were also changing and becoming highly diversified. So without studying it, marketers cannot predict the future of their business. 
4. Economic Stability: It is significant for regulating consumption of goods and thereby maintaining economic stability.
5. Effective utilisation of marketing resources: It is useful in developing ways for the more efficient utilisation of resources of marketing. It also helps in solving marketing management problems in more effective manner.
6. Consumers Preference: Today consumers give more importance on environment friendly products. They are concerned about health, hygiene and fitness. They prefer natural products. Hence detailed study on upcoming groups of consumers is essential for any firm.
7. Consumer Protection: The growth of consumer protection movement has created an urgent need to understand how consumers make their consumption and buying decision.
8. Formulation of production policy: Consumers’ tastes and preferences are ever changing. Study of consumer behaviour gives information regarding colour, design, size etc. which consumers want. In short, consumer behaviour helps in formulating of production policy.
9. Market segmentation: For effective market segmentation and target marketing, it is essential to have an understanding of consumers and their behaviour. 
10. Positivists: Marketing managers regarded consumer behaviour discipline as an applied marketing science, if they could predict consumer behaviour, they could influence it. This approach has come to be known as positivism and the consumer researcher who are primarily concerned with predicting consumer behaviour are known as positivists.
As the marketing research began to study the buying behaviour of consumers, they soon realized that many consumers rebelled at using the identical products everyone else used, for example in case of purchase of house, interiors, car, and dress material etc. people prefers unique products. Consumer preferred differential products that they felt reflected their own special needs, personalities and lifestyles.

Factors affecting consumer behaviour
The study of consumer behaviour indicates how individuals, groups, and organisations select, buy, use of dispose goods, services, ideas or experiences to satisfy their needs and desires. The various factors influencing buyer behaviour are as following:
I. Marketing Factors: Each element of the market mix – product, pricing, promotion and place (distribution) – has the potential to affect the buying process at various stages.
A. Product: The uniqueness of the product, the physical appearance and packaging can influence buying decision of a consumer.
B. Pricing: Pricing strategy does affect buying behaviour of consumers. Marketers must consider the price sensitivity of the target customers while fixing prices.
C. Promotion: The various elements of promotion such as advertising, publicity, public relations, personal selling, and sales promotion affect buying behaviour of consumers. Marketers select the promotion mix after considering the nature of customers.
D. Place: The channels of distribution, and the place of distribution affects buying behaviour of consumers. Marketers make an attempt to select the right channel and distribute the products at the right place.

II. Personal Factors: The personal factors of a consumer may affect the buying decisions. The personal factors include:
A. Age Factor: The age factor greatly influences the buying behaviour. For instance, teenagers may prefer trendy clothes, whereas, office- executives may prefer sober and formal clothing.
B. Gender: The consumer behaviour varies across gender. For instance, girls may prefer certain feminine colours such as pink, purple, peach, whereas, boys may go for blue, black, brown, and so on.
C. Education: Highly educated persons may spend on books, personal care products, and so on. But a person with low or no education may spend less on personal grooming products, general reading books, and so on.
D. Income Level: Normally, higher the income level, higher is the level of spending and viceversa. But this may not be always the case in developing countries, especially in the rural areas.
E. Status’ in the Society: Persons enjoying higher status in the society do spend a good amount of money on luxury items such as luxury cars, luxury watches, premium brands of clothing, jewellery, perfumes, etc.
F. Other Personal Factors: The other personal factors such as personality, lifestyle, family size, etc., influence consumer behaviour.

Ill. Psychological Factors: An individual’s buying decisions are further influenced by psychological factors: perception, motivation, learning and attitudes. These factors are what consumers use to interact with their world. They are the tools consumers use to recognize their feelings, gather and analyze information, formulate thoughts and opinions and take action.
A. Perception: Perception is the process of selecting, organizing and interpreting information inputs to produce meaning. A person receives information through the senses: sight, taste, hearing, smell and touch. How and what consumers perceive strongly affect their behaviour toward products, prices, package designs, salespeople, stores, advertisements and manufacturers.
B. Motivation: Motivation involves the positive or negative needs, goals and desires that impel a person to or away from certain actions, objects or situations. By identifying and appealing to people’s motives – the reasons for behaviour – a firm can produce positive motivation. Each person has distinct motives for purchases, and these change by situation and over time. Consumers often combine economic and emotional motives when making purchases.
C. Learning: Learning consists of changes in a person’s behaviour that are caused by information and experience. Variations in behaviour that result from psychological conditions such as hunger, fatigue, physical growth, or deterioration are not considered learning. Learning refers to the effects of direct and indirect experiences on future behaviour. Consumers learn about products directly by experiencing them.
D. Attitudes: Attitude is a predisposition to feel or act in a given manner towards a specific person, group, object, institution or idea. Customer attitudes, understanding and awareness of the product are intimately related. A preference for a particular brand indicates the customer’s attitude towards it.

IV. Situational Influences: Major situational influences include the physical surroundings, social surroundings, time, the nature of the task, and monetary moods and conditions.
A. Physical Surroundings: The physical surroundings at the place of purchase affects buying behaviour. For instance, when a customer is shopping in a store, the features that affects buying behaviour would include the location of the store, the decor, the layout of the store, the noise level, the way merchandise is displayed, and so on.
B. Social Surroundings: The social surroundings of a situation involve the other people with the customer that can influence buying decision at the point of purchase. For instance, a bargain hunter shopping with an impatient friend may do quick purchases, and may not haggle over the price, so as to please the impatient friend.
C. Time Factor: Customers may make different decisions based on when they purchase – the hour of the day, the day of the week, or the season of the year. For instance, a consumer who has received a pay cheque on a particular day may shop more items, than at the end of the month when he is short of funds.
D. Task: A customer may make a different buying decision depending upon the task to be performed by the product. For instance, if the product is meant as a gift rather than for personal use, then the customer may buy a different brand/product depending upon to whom the gift is purchased.
E. Momentary Conditions: The moods and condition of the customer at the time of purchase may also affect the buying decision. A customer who is very happy would make a different buying decision, as compared to when he is not in a happy mood

V. Social Factors: The social factors such as reference groups, family, and social and status affect the buying behaviour:
A. Reference Groups: A reference group is a small group of people such as colleagues at work place, club members, friends circle, neighbours, family members, and so on.
B. Family: The family is the main reference group that may influence the consumer behaviour. Nowadays, children are well informed about goods and services through media or friend circles, and other sources. Therefore, they influence considerably in buying decisions both FMCG products and durables.
C. Roles and Status: A person performs certain roles in a particular group such as family, club, organisation, and so on. For instance, a person may perform the role of senior executive in a firm and another person may perform the role of a junior executive. The senior executive may enjoy higher status in the organisation, as compared to junior executive. People may purchase the products that conform to their roles and status, especially in the case of branded clothes, luxury watches, luxury cars, and so on.

VI. Cultural Factors: Culture includes race and religion, tradition, caste, moral values, etc. Culture also include subcultures such sub-caste, religious Sects, language, etc.
A. Culture: It influences consumer behaviour to a great extent. Cultural values and elements are passed from one generation to another through family, educational institutions, religious bodies, social environment, etc. Cultural diversity influences food habits, clothing, customs and traditions, etc. For instance, consuming alcohol and meat in certain religious communities is not restricted, but in certain communities, consumption of alcohol and meat is prohibited.
B. Sub-Culture: Each culture consists of smaller sub-cultures that provide specific identity to its members. Subcultures include sub-caste, religious sects (Roman Catholics, Syrian Catholics, Protestant Christians, etc), geographic regions (South Indians, North Indians), language (Marathi, Malayali, Tamilian, Guajarati) etc. The behaviour of people belong to various sub-cultures is different. Therefore, marketers may adopt multicultural marketing approach, i.e., designing and marketing goods and services that cater to the tastes and preferences of consumers belonging to different sub-cultures.

Economic Factors and Its Impact on Consumer Behaviour
Economic Factors: Consumer behaviour is influenced largely by economic factors. Economic factors that influence consumer behaviour are:
a) Personal Income,
b) Family income,
c) Income expectations,
d) Savings,
e) Liquid assets of the Consumer,
f) Consumer credit,
g) Other economic factors.

a) Personal Income: The personal income of a person is determinant of his buying behaviour. The gross personal income of a person consists of disposable income and discretionary income. The disposable personal income refers to the actual income (i.e. money balance) remaining at the disposal of a person after deducting taxes and compulsorily deductible items from the gross income. An increase in the disposable income leads to an increase in the expenditure on various items. A fall in the disposable income, on the other hand, leads to a fall in the expenditure on various items.
The discretionary personal income refers to the balance remaining after meeting basic necessaries of life. This income is available for the purchase of shopping goods, durable goods and luxuries. An increase in the discretionary income leads to an increase in the expenditure on shopping goods, luxuries etc. which improves the standard of living of a person.

b) Family income: Family income refers to the aggregate income of all the members of a family. Family income influences the buying behaviour of the family. The surplus family income, remaining after the expenditure on the basic needs of the family, is made available for buying shopping goods, durables and luxuries.

c) Income Expectations: Income expectations are one of the important determinants of the buying behaviour of an individual. If he expects any increase in his income, he is tempted to spend more on shopping goods, durable goods and luxuries. On the other hand, if he expects any fall in his future income, he will curtail his expenditure on comforts and luxuries and restrict his expenditure to bare necessities.

d) Savings: Savings also influence the buying behaviour of an individual. A change in the amount of savings leads to a change in the expenditure of an individual. If a person decides to save more out of his present income, he will spend less on comforts and luxuries.

e) Liquid assets: Liquid assets refer to those assets, which can be converted into cash quickly without any loss. Liquid assets include cash in hand, bank balance, marketable securities etc If an individual has more liquid assets, he goes in for buying comforts and luxuries. On the other hand, if he has less liquid assets, he cannot spend more on buying comforts and luxuries.

f) Consumer credit: Consumer credit refers to the credit facility available to the consumers desirous of purchasing durable comforts and luxuries. It is made available by the sellers, either directly or indirectl—É through banks and other financial institutions. Hire purchase, installment purchase, direct bank loans etc are the ways by which credit is made available to the consumers.
Consumer credit influences consumer behaviour. If more consumer credit is available on liberal terms, expenditure on comforts and luxuries increases, as it induces consumers to purchase these goods, and raise their living standard.
g) Other economic factor: Other economic factors like business cycles, inflation, etc. also influence the consumer behaviour.

Consumers Decision Making Process
Marketers are interested in consumers’ purchase behaviours, i.e., the decision making process. The consumers’ decision making is a choice amongst various alternatives that address problematic issues like:
- What to buy;
- Where to buy;
- When to buy;
- How to buy;
- How much to buy.
Consumer decision making involves a continuous flow of interactions among environmental factors, cognitive and affective processes and behavioural actions. Consumer’s decisions are based on knowledge, affect and behaviour related to the marketing mix. The consumer decision making process involves series of related and sequential stages of activities. The process begins with the discovery and recognition of an unsatisfied need or want. It becomes a drive. Consumer begins search for information. This search gives rise to various alternatives and finally the purchase decision is made. Then buyer evaluates the post purchase behavior to know the level of satisfaction.

Stages in Consumer Decision Making Process: There are five stages in the consumer decision making process. These are
1. Need Recognition: When a person has an unsatisfied need, the buying process begins to satisfy the needs. The need may be activated by internal or external factors. The intensity of the want will indicate the speed with which a person will move to fulfill the want. On the basis of need and its urgency, the order of priority is decided. Marketers should provide required information of selling points.

2. Information Search: Identified needs can be satisfied only when desired product is known and also easily available. Different products are available in the market, but consumer must know which product or brand gives him maximum satisfaction. And the person has to search out for relevant information of the product, brand or location. Consumers can use many sources e.g., neighbors, friends and family. Marketers also provide relevant information through advertisements, retailers, dealers, packaging and sales promotion, and window displaying. Mass media like news papers, radio, and television provide information. Nowadays internet has become an important and reliable source of information. Marketers are expected to provide latest, reliable and adequate information.

3. Evaluation of Alternatives: This is a critical stage in the process of buying. Following are important elements in the process of alternatives evaluation
a. A product is viewed as a bundle of attributes. These attributes or features are used for evaluating products or brands. For example, in washing machine consumer considers price, capacity, technology, quality, model and size.
b. Factors like company, brand image, country, and distribution network and after-sales service also become critical in evaluation.
c. Marketers should understand the importance of these factors with regards to the consumers while manufacturing and marketing their products.

4. Purchase Decision: Outcome of the evaluation develops likes and dislikes about alternative products or brands in consumers. This attitude towards the brand influences a decision as to buy or not to buy. Thus the prospective buyer heads towards final selection. In addition to all the above factors, situational factors like finance options, dealer terms, falling prices etc., are also considered.

5. Post- Purchase Behavior: Post-purchase behavior of consumer is more important as far as marketer is concerned. Consumer gets brand preference only when that brand lives up to his expectation. This brand preference naturally repeats sales of marketer. A satisfied buyer is a silent advertisement. But, if the used brand does not yield desired satisfaction, negative feeling will occur and that will lead to the formation of negative attitude towards brand. This phenomenon is called cognitive dissonance. Marketers try to use this phenomenon to attract users of other brands to their brands. Different promotional-mix elements can help marketers to retain his customers as well as to attract new customers.

Various participants of Consumer buying process
1. Agitator: The person who raises the idea of buying at the beginning is called Agitator.
2. Consumer: The person who uses the product or services is called consumer.
3. Influential: It is a person or group of persons advice greatly affect the purchasing decision.
4. The owner of the money: The person who owns the money and he has absolute freedom to say "no, We can not afford this expense."
5. The buyer: The person who buys and pays money to get the product, in the areas of commercial transactions between companies, these are people who were checking contracts and examining the possibility of dealing with the long-term supplier.
6. Stakeholder: The person or persons who do not have any influence on the purchase decision. But they want to purchase to take place.

Levels of Consumer Decision Making
The consumer decision making process is complex with varying degree. All purchase decisions do not require extensive effort. On continuum of effort ranging from very high to very low, it can be distinguished into three specific levels of consumer decision making:
1 Extensive Problem Solving (EPS)
2. Limited Problem Solving (LPS)
3. Routine Problem Solving (RPS)

1. Extensive Problem Solving (EPS): When consumers buy a new or unfamiliar product it usually involves the need to obtain substantial information and a long time to choose. They must form the concept of a new product category and determine the criteria to be used in choosing the product or brand.

2. Limited Problem Solving (LPS): Sometimes consumers are familiar with both product category and various brands in that category, but they have not fully established brand preferences. They search for additional information which helps them to discriminate among various brands.

3. Routine Problem Solving (RPS): When consumers have already purchased a product or brand, they require little or no information to choose the product. Consumers involve in habitual and automatic purchases.

Meaning of Consumer Involvement:
Consumer involvement is defined as a state of mind that motivates consumers to identify with product/service offerings, their consumption patterns and consumption behaviour. Involvement creates within consumers an urge to look for and think about the product/service category and the varying options before making decisions on brand preferences and the final act of purchase. It is the amount of physical and mental effort that a consumer puts into a purchase decision. It creates within a person a level of relevance or personal importance to the product/service offering and this leads to an urge within the former to collect and interpret information for present/future decision making and use. Involvement affects the consumer decision process and the sub processes of information search, information processing, and information transmission.

Causes of Consumer Involvement: The factors that influences consumer involvement include personal, product and situational.
1) Personal Factors: Self-concept, needs, and values are the three personal factors that influence the extent of consumer involvement in a product or service. The more product image, the value symbolism inherent in it and the needs it serves are fitting together with the consumer self- image, values and needs, the more likely the consumer is to feel involved in it. Celebrities for example share a certain self-image, certain values, and certain needs. They tend to use products and services that reflect their life style. They get highly involved in purchasing prestigious products like designer wear, imported cars, health care products etc.
2) Product Factors: The consumer involvement grows as the level of perceived risk in the purchase of a good or service increases. It is likely that consumers will feel more involved in the purchase of their house than in the purchase of tooth paste, because it is a much riskier purchase.
Product differentiation affects involvement. The involvement increases as the number of alternatives that they have to choose from, increases. The pleasure one gets by using a product or service can also influence involvement. Some products are a greater source of pleasure to the consumer than others. Tea and coffee have a high level of hedonic (pleasure) value compared to, say household cleaners. Hence the involvement is high.
Involvement increases when a product gains public attention. Any product that is socially visible or that is consumed in public, demands high involvement. For example, involvement in the purchase of car is more than the purchase of household items.
3) Situational Factors: The situation in which the product is bought or used can generate emotional involvement. The reason for purchase or purchase occasion affects involvement. For example, buying a pair of socks for oneself is far less involved than buying a gift for a close friend.
Social pressure can significantly increase involvement. One is likely to be more self conscious about the products and brands one looks at when shopping with friends than when shopping alone.
The need to make a fast decision also influences involvement. A consumer who needs a new refrigerator and sees a ‘one- day- only sale’ at an appliances retailer does not have the time to shop around and compare different brands and prices. The eminence of the decision heightens involvement. The involvement is high when the decision is irrevocable, for example when the retailer does not accept return or exchange on the sale items.
Thus involvement may be from outside the individual, as with situational involvement or from with in the individual as with enduring involvement. It can be induced by a host of personal-product-and situation related factors, many of which can be controlled by the marketer. It affects the ways in which consumers see, process, and send information to others.

Types of Involvement: The two types of involvement are:
1) Situational Involvement: Situational involvement is temporary and refers to emotional feelings of a consumer, experiences in a particular situation when one thinks of a specific product.
2) Enduring Involvement: Enduring involvement is persistent over time and refers to feelings experienced toward a product category across different situations. For example, holiday- makers renting a resort for their trip are highly involved in their choice, but their involvement is temporary. Whereas involvement of a person whose hobby is bike racing endures overtime and affects his responses in any situation related to pre-purchase, purchase and post-purchase of sport bikes. It is observed that involvement is triggered by special situation in the case of holiday makers, but in the second case, it comes from, and is a part of the consumer.
The contrast between situational and enduring involvement is important. When marketers measure involvement they examine the extent to which it can be induced by the product or selling situation. After noticing the type of involvement they are facing, marketers work to control products or selling situations.

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