IMDR/PGDM1/Basic Mktg/Lecnote/GD2005

Understanding Consumers
Background: For as long as there has been exchange of goods and services between buyers and sellers, the ultimate success of all economic activity has depended upon producing goods and services that buyers consider suitable. Even in the most primitive societies, attempts to produce and sell goods and services for which buyers have no possible use would have met with utter failure. Consumer choice has traditionally involved 2 major decisions Whether or not to buy From whom to buy Marketing thinking today has changed with the realization that the firm revolves around the needs of the consumer. It is estimated that on an average a consumer has the choice to Not buy 40% of the products that are available Among the remaining 60% the consumer has the freedom to choose from several alt. producers. Freedom of consumer choice is relative rather than absolute. It is greatly determined by the affluence of the society and the consumers in question. There is little concern for consumer needs when the production capability in an economy is poorly developed and the consumers have to simply take what ever they get. (compare India and US) Context: We have defined Marketing as the process of understanding consumer needs and wants and creating and providing products as solutions to those needs and wants. Also that every business aims to create value for all its stakeholders and these stakeholders together with competitors form the environment in which the business operates. The consumer is first among equals as far as the stakeholders are concerned for s/he is the reason the business exists. Definition: Consumer behaviour studies how individuals, groups and organizations, select, buy, use and dispose of goods, services, ideas or experiences to satisfy their needs and desires. Key psychological processes: Certain key psychological processes influence behaviour of consumers. They are: motives, perception, learning, memory, beliefs and attitudes. A motive is a need that assumes urgency, is uppermost in the consumers mind or is aroused to a level of intensity through external stimuli (eg. advertisements, etc) and/or internal stimuli (eg. hunger). Three of the best known theories of motivation come from Abraham Maslow (hierarchy of needs), Sigmund Freud and Frederick Herzberg. Freuds theory suggests that apart from stated capabilities of a product, other stimuli for inducing motive may be design, size, shape, name, colour, material of a product. (eg. buying a car) 1

Herzbergs theory states that there may be two factors that motivate consumers to buy: absence of dissatisfiers and presence of satisfiers. Perception is the process by which we select, organize and interpret information to take decisions. Consumers are exposed to information from marketers and the environment. It is impossible to assimilate all of this. Therefore consumers select the information they want to pay attention to. This is the process of selective attention. Typically consumers are likely to notice something related to a current need, something they anticipate and something that is a deviation from normal. Further this information must be comprehended and accepted in the manner intended by the marketer. This is easier said than done. Consumers are likely to distort information on the basis of preconceived notions and /or experience with product and brand. This is selective distortion. Consumers may not be able to comprehend and/or accept some information related to the product leading to selective retention. Consumers retain that which conforms to already held beliefs and attitudes. Through the processes of perception, consumers respond to stimuli that convert a need to a motive. Consumers adjust their behaviour on the basis of past experiences of purchase and/or consumption. This is learning. The processes of perception, stimuli, responses and reinforcement lead to learning. Two polular approaches to learning used in marketing activities are classical conditioning (stimulus, response theory) and operant (instrumental) conditioning. The processes of comprehension and acceptance that lead to retention of information are learnt responses. Therefore learning influences perceptions. It is important that product related information must be recalled or remembered by the consumer at the time of making a purchase decision. Psychologists believe that consumers memorise information through the process of associations. Ex. What comes to your mind when the word NOKIA is mentioned? Marketers can help consumers to encode information into memory and give the right cues for retrieval. Based on experience and learning consumers form beliefs and attitudes about products. Beliefs are in the nature of descriptive thoughts about a products and brand. Attitudes are positive or negative evaluations, emotional feelings and action tendencies towards a product or brand. Consumer behaviour looks at a persons consumption system in totality, in terms of the various roles s/he plays and the cultural, social and personal influences on these. 1. Cultural factors: Culture Social class

2. Social factors: Reference groups Family Roles 3. Personal factors: Age Occupation Economic circumstances Lifestyle Personality and self concept Finally, the decision to buy (or not to buy) is a combination of the influence of all the above-mentioned factors on all those involved in the decision making process. The buying process involves the following stages: 1. Problem recognition 2. Information search 3. Evaluation of alternatives 4. Purchase decision 5. Post purchase behaviour ***********************************************************************