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C.P.PATEL & F.H.SHAH COMMERCE COLLEGE

(MANAGED BY SARDAR PATEL EDUCATION TRUST) BCA, BBA (ITM) & PGDCA PROGRAMME BBA (ITM) SEM -VII (Consumer Behaviour- I) UNIT: 1 Understanding Consumer Behaviour Unit -1 Understanding Consumer Behaviour Sr. No. Topics 1. Introduction 2. Development of marketing concept 3 Need for understanding consumer Behaviour 4. Factors influencing consumer Behaviour 5. Consumer decision making 6. Model of consumer Behaviour Reference books: (Schiffman, L.G. and Kanuk, L.L., Consumer Behavior, Eight Edition, 2004, Prentice Hall, India.)

1. Introduction to Consumer Behaviour

The term consumer behaviour is defined as the behaviour that consumer display in searching for, purchasing using, evaluating and disposing of products and services that they expect will satisfy their needs. Consumer behaviour focuses on how individuals make decisions to spend their available resources (time, money, effort) on consumption-related items that includes what they buy, why they buy, when they buy it, where they buy it, how often they buy it, how often they use it, how they evaluate it after the purchase and the impact of such evaluations on future purchases, and how they dispose of it. Consumer Behavior 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 behavior; - it continues through prepurchase activity to the post purchase experience; - it includes the stages of evaluating, acquiring, using and disposing of goods and services. Two different kinds of consuming entities: the personal consumer and the organizational consumer. Personal Consumer Buys goods and services for his or her own use, for the use of the household or as a gift for a friend. The products are bought for final use by individuals, who are referred to as end users or ultimate consumers. Organizational Consumer Includes profit and non-profit businesses, government agencies (local, state, national) and institutional (e.g. schools, hospitals, and prisons), all of which buy products, equipment, and services in order to run their organizations.

2. Development of the marketing concept

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The field of consumer behaviour is rooted in the marketing concept, a business orientation that evolved in the 1950s through several alternative approaches toward doing business referred to respectively: The Production Concept. The Product Concept. The Selling Concept. The Marketing Concept. The Societal Marketing Concept.

1) The production concept: The production concept assumes that consumers are mostly interested in product availability at low prices; its implicit marketing objectives are cheap, efficient product and intensive distribution. It makes sense when consumer are more interested in buying whats available rather than wait for what they really want. The main objective is to expand the market. 2) The product concept: The product concept assumes that consumers will buy the product that offers them the highest quality, the best performance, and the most features. It ensures the company to improve the quality of its product and add new features. T he product concept often leads to marketing myopia that is focusing on the product rather than the customer needs. 3) The selling concept: The assumption of the selling concept is that consumers are unlikely to buy the product unless they are aggressively persuaded to do so mostly through hard sell approach. The problem in this concept is that it fails to satisfy a customer. Promotion can be done through advertisement, sales promotion and public relation. Today the selling concept is utilize be marketers of unsought products that is which people are not willing to buy it (such as life insurance). 4) The marketing concept: It started in 1950s when some marketers realized we can sell more products by determining what consumer would buy. Consumer need and wants became the firms primary focus. The marketers should make product what it can sell, instead of what it has made. Consumer satisfaction was the main point in this concept. 5) The societal marketing concept: According to this concept that product should be developed which benefits the society. Doing marketing in such a way that it helps you in increasing your production & also giving benefits to society. The organization should determine the needs, wants and interest of target markets and deliver the desired satisfaction more effectively and efficiently then do competitors in a way that
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maintains or improves the customers and societys well being. Apart from this environment protection should be given importance. Implementing the marketing concept: To identify unsatisfied consumer need, companies had to engage in extensive marketing research. The marketing concept underscored the importance of consumer research. The strategic tools that are used to implement the marketing concept include segmentation, targeting, positioning and the marketing mix

3. Need for understanding consumer behavoiur

An understanding of consumer behavior is necessary for long term success and survival of a firm. It is viewed as the edifice of the marketing concept, an important orientation in marketing management. According to the marketing concept, the marketer should be able to determine needs and wants of the target segment and provide product and service offerings more effectively and efficiently than competitors. It is essentially a customer-centered philosophy, which aims at understanding customer needs and wants, providing the right product and service, and deriving customer satisfaction; make what you can sell rather than sell what you make. An understanding of the study of consumer behavior helps formulate appropriate marketing strategies for a firm keeping in view the consumer and his environment. It has a number of applications; the main application bases are as follows: 1. Analyze the environment The knowledge of consumer behavior 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 (through a study of consumer individual determinants and other environmental influences). The threats could be fought by developing and implementing appropriate marketing strategies to best fit the environment. 2. Segmentation, targeting and positioning: The study of consumer behavior may be applied to segment the market, select the target market and position the product or service offering. Identifying the target segment, understanding their needs, providing the right product and service offering and communicating about the offering all of these help a marketer succeed in the long term and ensure his survival and success in a changing environment.. a) Segment the market: The marketer needs to identify distinct customer groups with needs and wants, classify them on basis of descriptive characteristics and behavioral dimensions. The descriptive characteristics may take forms of age, gender, income, occupation, education, family

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size, family life cycle, gender, lifestyle, personality, religion, generation, geography, nationality, and social class. The behavioral dimensions take forms of benefits, uses, use occasion, usage rates, and loyalty status. b) Select target market: The marketer then selects one or more markets to enter. The segment(s) that should be targeted should be viable; there should be a fit between the market attractiveness and the companys objectives and resources. The marketer would be able to assess the viability of a segment on the basis of the following criteria, viz., measurability, substantialability, accessibility, differentiability, and actionability. c) Position the product offering in the mind of the customers: The marketers should be able to communicate the distinct and/or unique product characteristics. 3. Designing the Marketing Strategy: There exists interrelatedness between the Consumer, the Environment and the Marketing strategy. a) Consumer: The consumer has his needs and wants as well as product preferences; Thus, there exists an interplay of Cognition (knowledge about products and alternatives), Affect (feelings of favorableness and unfavorableness) and Behavior (action: buy or not to buy). b) Environment: This refers to forces in the environment, which make the environment complex and dynamic. c) Marketing strategies: This implies setting up of goals and then achieving them through the design of an appropriate marketing mix. The knowledge of consumer behavior can be applied to develop a best fit between consumer needs and wants, the environment in which the firm ope rates; and, the firms goals and objectives. 4. Designing the Marketing Mix: 4 Ps The study of consumer behavior may be applied to design the 4 Ps. a) Product: The term product includes both tangible products and intangible services. The issues to address consist of name (brand), size, shape, features, labeling, packaging, accessories and supplementary products, terms of sale and services, after sales etc. b) Price: This includes the pricing of the product offering. The major components include, form of payment, terms and conditions of payment, discounts, price sensitivity, differential prices and customer reaction, imagery (price increase and customer reaction, price decrease and customer reaction). c) Place and Distribution: This includes the marketing channel, and comprises decisions regarding choice of channel (direct or indirect), location, accessibility and availability of product offering, wholesaling, retailing, logistics etc.
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d) Promotion: This includes marketing communication, and the major issues comprise decisions on communication/promotion mix, the message and media strategy (the content, appeal and context). 5. Application in Governmental and Non-profit Organizations and Social Marketing: The knowledge of consumer behavior finds relevance even in Governmental and Non-profit Organizations and Social Marketing. Governmental and Non-profit Organizations have the society as its customers and need to understand them so as to be able to serve them better. Social marketing involves propagation of ideas; attempts at such circulation and spread of ideas for moral and social upliftment can be more successful if there is a proper understanding of the these consumers (i.e., the public and society) -The subject of Consumer Behavior is viewed as the edifice of the marketing concept, an important orientation in marketing management. The knowledge of Consumer Behavior helps the marketer understand and predict the consumption patterns and consumption behaviors of people. It helps them gain insights as to why a consumer behaves differently to another consumer; as well as, why a consumer behaves differently in different times and buying situations. The study helps them understand the internal (individual determinants) and external (environmental factors) forces that impel people to act out different consumption patterns and behaviors. The study helps the marketer in: a) Analyzing the environment: identifying opportunities and fighting threats b) Segmenting, targeting and positioning c) Designing the marketing-mix d) Designing the marketing strategy e) Governmental and Non-profit Organization and Social Marketing

4. Consumer Decision Making Process

The most important environment in which firms operate is their customer environment because the basic belief of marketing oriented company that the customer is the centre around which the business revolves. Therefore, marketing people need to understand the processes that their customers go through when making decision. 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

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behaviour to know the level of satisfaction. The process is explained below with the help of diagram.

Consumer Decision Making Process

Problem Recognition Information Search

Cultural, Social, Individual and Psychological Factors affect all steps

Evaluation of Alternatives
Purchase

Postpurchase Behavior

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, forms the order of priority. 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. Now a days 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.

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b. Factors like company, brand image, country, distribution network and after-sales service also become critical in evaluation. c. Marketers should understand the importance of these factors to consumers of these factors to 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 Behaviour This behavior of consumer is more important as for 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 user of other brands to their brands. Different promotional-mix elements can help marketers to retain his customers as well as to attract new customers.

4. Factors influence consumer behavior.

Consumer behaviour is an attempt to understand & predict human actions in the buying role. It has assumed growing importance under market-oriented or customer oriented marketing planning & management. Consumer behaviour is defined as all psychological, social & physical behaviour of potential customers as they become aware of, evaluate, purchase, consume, & tell others about product & services.

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1. Cultural factors Cultural factors exert the broadest and deepest influence on consumer behavior. The roles played by the buyers culture, sub culture and social class are particularly important. a. Culture- Culture is the most fundamental determinant of a persons wants and behavior. The growing child acquires a set of values, perceptions, preferences, and behavior through his or her family or other key institutions. b. Sub-culture- Sub-culture includes nationalities, religions, racial groups, and geographical regions. Many sub-cultures make up important market segments, and marketers often design marketing programs tailored to their needs. c. Social class- Social classes are relatively homogenous and enduring divisions in a society, which are hierarchically ordered and whose members share similar values, interests, and behavior. Social classes do not reflect income alone but also other indicators such as occupation, education, and area of residence. 2. Social factors a. Reference groups- A Persons reference groups consist of all the groups that have a direct or indirect influence on the persons attitudes or behavior. Groups having direct influence on a person are called membership groups. b. Family- The family is the most important consumer buying organization in society, and has been researched extensively. Family members constitute the most influential primary reference group. c. Role and statuses- A persons position in each group that he participates throughou t his life family, clubs, and organizations can be defined in terms of role and status. A role consist of
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activities that a person is expected to perform. Each role carries a status. Marketers are aware of the status symbol potential of products and brands. 3. Personal factors A buyers decisions are also influenced by personal characteristics. These include the buyers age & stage in the life cycle, occupation, economic circumstances, lifestyle, personality & self concept.
a.

Age & stage in the life cycle- People buy different goods & services over their lifetime. They eat baby food in the early years, most foods in the growing & mature years & special diets in the later years. Peoples taste in clothes, furniture & recreation is also age related. Occupation- A persons occupation also influences his or her consumption pattern. Marketers try to identify the occupational groups that have above average interest in their products and services. A company can even specialize its products for certain occupational groups. Economic circumstances- Product choices are greatly affected by ones economic circumstances. Economic stability consist of their spend able income (its level, stability and time pattern), saving and assets (including the percentage that is liquid), debts , borrowing power, attitude toward spending versus saving.

b.

c.

d.

Lifestyle- People coming from the same subculture, social class & occupation may lead quite different lifestyles. A persons lifestyles the persons pattern of living in the world as expressed in the persons activities, interests & opinions.

e.

Personality and self-concept- Each person has a distinct personality that influences his or her buying behavior. By personality, we mean a persons distinguishing psychological characteristics that lead to relatively consistent and enduring responses to his or her environment. Personality can be a useful variable in analyzing consumer behavior, provided that personality type can be classified accurately and that strong correlations exist between certain personality types and product or brand choices.

4. Psychological factors A persons buying choices are influenced by four major psychological factors -motivations, perception, learning, beliefs and attitudes.
a.

Motivation- A person has many needs at any given time. A need becomes motive when it is aroused to a sufficient level of intensity. Motivational researchers hold that each product is capable of arousing a unique set of motive in consumers. Learning- When people act they learn. Learning involves changes in an individuals behavior arising from experience. Learning theory teaches marketers that they can build up demand

b.

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for a product by associating it with strong drives, using motivating cues and providing positive reinforcement.
c.

Perception- Perception is the process by which an individual selects, organizes, & interprets information inputs to create a meaningful picture of the world. A motivated person is ready to act. How the motivated person actually acts is influenced by his or her perception of the situation.

d.

Beliefs & attitudes- A belief is a descriptive thought that a person holds about something. Through doing & learning, people acquire beliefs & attitudes. These in turn influence their buying behavior. Particularly important to global marketers is the fact that buyers often hold distinct disbeliefs about brands or products based on their country of origin. An attitude is persons enduring favorable or unfavorable evaluations, emotional feelings, and action tendencies towards some object or idea. People have attitude toward almost everything: religion, politics, clothes, music, food, and so on. Attitude put them into a frame of mind of liking or disliking an object moving toward or away from it.

5. A simplied model of consumer decision-making

The process of consumer decision-making can be viewed as three distinct but interlocking stages: the input stage, the process stage and the output stage. These stages are depicted in the simplied model of consumer decision-making in Figure 1-1. The input stage inuences the consumers recognition of a product need and consists of two major sources of information: the rms marketing efforts (the product itself, its price, its promotion and where it is sold) and the external sociological inuences on the consumer (family, friends, neighbours, other informal and non-commercial sources, social class and cultural and sub cultural memberships). The cumulative impact of each rms marketing efforts, the inuences of family, friends and neighbours, and society s existing code of behaviour, are all inputs that are likely to affect what consumers purchase and how they use what they buy. The process stage of the model focuses on how consumers make decisions. The psychological factors inherent in each individual (motivation, perception, learning, personality and attitudes) affect how the external inputs from the input stage inuences the consumers recognition of a need, pre-purchase search for information and evaluation of alternatives. The experience gained through evaluation of alternatives, in turn, affects the consumers existing psychological attributes. The output stage of the consumer decision-making model consists of two closely related post-decision activities: purchase behaviour and post-purchase evaluation. Purchase
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behaviour for a low-cost, non-durable product (e.g. a new shampoo) may be inuenced by a manufacturers extensive sales promotion (e.g. price cuts) and may actually be a trial purchase; if the consumer is satised, he or she may repeat the pur chase. The trial is the exploratory phase of purchase behaviour in which the consumer evaluates the product through direct use. A repeat purchase usually signies product adoption.

For a relatively durable product such as a laptop (relatively durable because of the rapid rate of obsolescence), the purchase is more likely to signify adoption. Marketing to

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consumers has one overarching goal which consumers choose to buy your product instead of alternative products offered by your competitors.

6. Changing pattern of Indian consumer

The Indian consumer market has never had it better. Higher disposable incomes, the development of modern urban lifestyles and an increase in consumer awareness have affected buyer behaviour in cities, towns and even rural areas. According to a 2007 report by McKinsey & Co., India is set to grow into the fifth largest consumer market in the world by 2025. Three major emerging segments were identified: Kids, the Youth (including the young working singles) and the Urban Indian Woman. These segments have shown a tremendous increase in influencing and driving purchase decisions and hence are huge drivers of change in the consumer market. The attitude of Indian consumers has undergone a major transformation over the last few years. consumerism is the emergence of the rural market for several basic consumer goods. The Indian middle class has provided a big boost to the consumer culture during the recent past and it is hoped that their buying behaviour will continue to change in the coming future. Factors Responsible for Change Rising disposable income and increasing western influence. Average Indian consumer today is richer, ambitious, more knowledgeable and profile-conscious. More and more women focusing on career instead of home-making. A more dynamic lifestyle leading to reliance on easy-to-use products like ready-to-eat food, home delivery, etc. Due to fast growth of the services sector per capita income of people of India is also increasing. The number of middle class is increasing due to another fact that people are fast shifting from agriculture to the services and industry sector where growth prospects are reasonably high as compared to the agriculture sector which is showing slow growth. The consumption pattern of a country depends on liberalization of economic policies, buying habits of the younger generation, financial independence at a young age, ncrease in number of nuclear families and increase in media exposure of the people. The tastes and preferences of the current generation are changing rapidly. Different segments of Indian market : The Socialites : Socialites belong to the upper class. They prefer to shop in specialty stores, go to clubs on weekends, and spend a good amount on luxury goods. They are always looking for something different. The conservatives :-

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The Conservatives belong to the middle class. The conservative segment is the reflection of the true Indian culture. They are traditional in their outlook, cautious in their approach towards purchase; spend more time with family than in partying and focus more on savings than spending. The working women:The working woman segment is the one, which has seen a tremendous growth in the late nineties. This segment has opened the floodgates for the Indian retailers. Working women have their own mind in decision to purchase the products that appeal to them. Youth segments:The rise of generation next has been written about with unbridled optimism and enthusiasm, based on the coming of age of liberalization children. They are global in their worldwide view and have been exposed to enormous information unlike their parents, raised amidst a consumption-friendly and consumption encouraging social discourse. The new Indian consumer market structure:There are five types of consumer groups based on what they consume and created a framework: The Rich: - The rich who have most of the luxury goods like cars, PCs, air conditioners and are generally the consumers of premium products. The Consuming Class: - Consumers which have 70 percent of the utility durables like two wheeler, refrigerators, washing machines and the bulk of regular FMCGs. The Climbers: - Consumers which have at least one major durable in their homes either a mixer or a sewing machine or perhaps a television set. They are main consumer of population segment consumer goods. The Aspirants: - Consumers who are just entering consumption and have the very basics .Goods like a watch, a bicycle, a radio, or a table fan. The Destitute: - Consumers who own and consume practically nothing, living as they do from hand to mouth. Changing Indian Consumer India has shown tremendous growth in the last two decades. Happy times for Indian consumer as disposable income have increased considerably over the years.The Indian consumers of today are unique in the following aspects: 1) Indian consumers have become value sensitive and are not much price sensitive as was the case earlier. If they feel that a particular product offers them more value and its price is high, even then they are willing to buy the product.
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2) The Indian consumers strictly follow their culture, tradition and values, as a result of which foreign companies were forced to give an Indian touch to them in order to succeed in India. McDonalds, MTV, Pepsi, Star TV, Coca Cola India and many more had to indianise themselves to flourish in India. 3) The Indian consumer of today gives preference to features of a product rather than its brand name. The trend that higher segment consumers only buy the top brands has also come to an end. 4) Even after liberalization Indian companies and brands are doing very well. It is clearly evident from the fact that despite many foreign brands being sold in India, Raymond is still Indias largest textile company and Haldiram is doing well despite the presence of McDonalds and Pizza Hut. 5) The consumers today are not confined to a single brand and prefer change rather than sticking to the same brand. Not often do we see any home with cars of the same brand or household products of the same brand. 6) The use of credit card for shopping is a new emerging trend in India. Also consumers are availing credit or loan from banks and other financial institutions to fulfil their needs and wants. 7) The Indian consumers have shown another major change in their buying behaviour. They just dont want availability of products; they also want bet ter experience, services and ambience. This has led to the growth of shopping malls where a shopping, entertainment and better facility is all available under one roof. 8) The rural Indian consumers are also showing signs of change. They have all the modern amenities at their home and their standard of living is fast improving. The rural households have earned huge money due to price rise in real estate. They are also shifting towards industrial and services sector; hence their purchasing power is increasing. 9) There is a stiff competition in the Indian market today. Customers are the ultimate beneficiary of the fierce competition in the market. Competition has reduced prices to a great extent and has forced the manufacturer to maintain product quality to sustain in the highly competitive market. 10) The current urban middle and upper class Indian consumer buying behaviour to a large extent has western influence. There is an increase in positive attitude towards western trends. The Indian consumer has become much more open-minded and experimental in his/her perspective. 11) The environmental awareness in India has started affecting marketing of products based upon their eco-friendliness. Has the Indian Consumer Changed? Examples
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Eating Out In urban India, families that do not eat out are considered old-fashioned and conservative. Most popular-multi-cuisine restaurants offering Indian fare, along with a form of Chinese and Western fast food. Pizza and cheese, with Indian flavors and spice.

Health & Fitness Indians are paying more attention to their health and striving for better fitness levels. For example, joining gyms or clubs. Rapid rise in sale of fruit juices, cool drinks, etc.

Metro-sexual Male Male grooming a growing business in India and its annually growing rate is 15% Currently, usage is restricted to the young, urban upper income male.

Women Empowerment More women entering the workforce. There is increased use of cosmetics. Due to increasing time pressures, Convenience gains value products like easy to cook food, home delivery, wide choices in shops, etc. are increasing

Teen With increased awareness through television and advertising, teens are an important influence on family decision-making in urban India. Gadgets or products that they want newly launched chocolate bar, instant noodles and breakfast cereals.mobile phones, the TV remote, DVD player and computer

Marriage Earlier, arranged marriages used to happen with elders consent. Many people nowadays rely on individual choice and judgment. Examples: matrimonial sites proliferateshaadi.com, bharatmatrimony.com

Luxury India is experiencing a rise in incomes and higher consumption patterns. Demand for luxury products is also on the rise.

Digitalization Young people in urban areas are increasingly using the Internet.Online banking for service payments and even for buying company shares. Success of social networking websites... Avail Online booking of tickets for movies, trains and airlines.

Credit Earlier, people avoided buying things (non-essential) on credit/loan. Easy availability of credit. Rise in number of home and vehicle (Two, four wheelers) loans

Snacking
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Snacks and chocolates of wide variety available Lays, Kurkure, Perk, Cadbury Dairy Milk chocolates, Britannia biscuits, etc Movies and Serials Earlier, Movies made in Bollywood (Emotions, Action, Drama) were a craze. In India, women are mostly housewivesidle time at home..Hence, the debut of serials targeting this segment was launched by BalajiTelefilms (EktaKapoor). Western Influences Opening of Indian economy, mass and social media exposure and increase in overseas travelling. Acceptance of western clothing, especially in urban India..Gifting Cards, Pub culture

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Disclaimer: The study material is compiled by Ashok Gaur. The basic objective of this material is to supplement teaching and discussion in the classroom in the subject. Students are required to go for extra reading in the subject through Library books recommended by Sardar Patel University, Vallabh Vidyanagar.

QUESTION BANK (Use Ready Made QB provided by Department/ University (For Semester Programs) Use probable questions (For Yearly Programs, Also refer latest question papers from library))
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