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Consumer Behaviour Revision Session 1

Dr.R.Satish Kumar

What is Consumer Behavior?


The behavior that consumers display in searching for, purchasing, using, evaluating, and disposing of products and services that they expect will satisfy their needs.

Need to study ?
You cannot take the consumer for granted any more Therefore a sound understanding of consumer behaviour is essential for the long run success of any marketing program

Why is this important?


Out of 11000 products launched by 77 companies, only 56% are present five years later Kuczmaski & Associates Only 8% of new product concepts offered by 112 leading companies reached the market. Out of this 83% failed to reach marketing objectives Group EFO Ltd., Marketing News, Feb 1, 1993, Pg 2

MEET THE NEW CONSUMER and smile when you do because she is your boss. It may not be the person you thought you knew. Instead of choosing from what you have to offer, she tells you what she wants. You figure it out how to give it to her.
-Fortune Editor

A new product must satisfy consumer needs, not the needs and expectations of management.

Understanding and adapting to consumer motivation and behaviour is not an option it becomes a necessity for competitive survival

Consumer sovereignty presents a formidable challenge but skilful marketing can affect both motivation and behaviour if the product or service offered is designed to meet consumer needs and expectations
A sales success occurs because demand either exists already or is latent and awaiting activation by the right marketing offering

Dominant forces shaping Consumer Research


Factors that move an economy from Production-driven to Market-driven Level of sophistication with which human behaviour is understood in psychology and other behavioural sciences

Environmental factors that affect the marketing challenge


Extent to which the supply of valid products and services exceed consumer demand Ability to communicate with customers quickly and accurately Existence of multiple avenues of distribution quickly and economically Extent to which marketers can influence to induce distributors to comply with overall marketing strategy Economic growth, both nationally and globally

Motivational Research
It seeks to learn what motivates people in making choices. The techniques are such as to delve into the conscious, subconscious and the unconscious. women dont buy cosmetics, they buy hope. women bake cakes out of the unconscious desire to give birth

The advice to footwear salesmen should be Dont sell shoes sell lovely feet
Marketers must contend with small changing segments of highly selective buyers intent on receiving genuine value at the lowest price

All managers must become astute analysts of Consumer motivation and Behaviour
Three foundations for marketing decisions Experience Intuition Research

Enhancing Consumer Value-added


Marketers have to constantly innovate after understanding their consumers to strip out costs permanently by focusing on what adds value for the customer and eliminating what doesnt.

Individualised Marketing
A very personal form of marketing that recognises, acknowledges, appreciates and serves individuals who become or are known to the marketer. Data based marketing; DM Customized marketing

Variables involved in understanding consumer behaviour


Stimulus ads, products, hungerpangs Response physical/mental reaction to the stimulus Intervening variables mood, knowledge, attitude, values, situations, etc.

The Consumer Decision-Making Process


A consumer decision model is a means of describing the processes that consumers go through before, during, and after making a purchase. A model shows the causes or antecedents of a particular behavior and each of its results or consequences.

Engel, Kollat, and Blackwell (EKB) Model


The EKB model is a multimediation model which shows both the components of decision making and the multiples relationships and interactions among the components. It identifies five distinct aspects of consumer decision making:
Input, information processing, a decision process, decision process variables, and external influences

External Influence

Input

Firms Marketing Efforts 1. Product 2. Promotion 3. Price 4. Channels of distribution

Sociocultural Environment 1. Family 2. Informal sources 3. Other noncommercial sources 4. Social class 5. Subculture and culture

Need Recognition Process Prepurchase Search Evaluation of Alternatives

Psychological Field 1. Motivation 2. Perception 3. Learning 4. Personality 5. Attitudes Experience

Output

Purchase 1. Trial 2. Repeat purchase Postpurchase Evaluation

Figure 1-1: A Model of Consumer Decision Making

Consumer Research
The process and tools used to study consumer behavior. Two perspectives:
Positivist approach Interpretivist approach

Segmentation, Targeting, and Positioning


Segmentation: process of dividing the market into subsets of consumers with common needs or characteristics Targeting: selecting one ore more of the segments to pursue Positioning: developing a distinct image for the product in the mind of the consumer

Successful Positioning
Communicating the benefits of the product, rather than its features Communicating a Unique Selling Proposition for the product

The Marketing Mix


Product Price Place Promotion

Successful Relationships

Customer Value

Customer Retention

Customer Satisfaction

Types of Customers
Loyalists: Apostles Defectors Terrorists Hostages Mercenaries

Types of Customers
Loyalists: Who keep purchasing Apostles: Whose Experiences exceed their expectations Defectors: Who feel neutral or merely satisfied and are likely to stop doing business with the company Hostages: Unhappy customers who stay with the company due to monopolistic environment or low prices and difficult to deal with because of frequent complaints Mercenaries: Very Satisfied customers but who have no real loyalty and may defect because of lower a price elsewhere or on impulse.

Customer Profitability-Focused Marketing

Tier 1: Platinum
Tier 2: Gold Tier 3: Iron Tier 4: Lead

Customer Profitability-Focused Marketing


1. Platinum tier: Heavy users who are not price sensitive and who are willing to try new offerings 2. Gold tier: Heavy users but not as profitable because they are price sensitive 3. Iron tier: Whose spending volume and profitability do not merit special treatment by the company 4. Lead tier: Cost the company money because they claim more attention than is merited by their spending, tie up company resources and spread negative word of mouth Companies should develop distinct marketing responses for each group

Societal Marketing Concept


A revision of the traditional marketing concept that suggests that marketers adhere to principles of social responsibility in the marketing of their goods and services; that is, they must endeavor to satisfy the needs and wants of their target markets in ways that preserve and enhance the well-being of consumers and society as a whole.

The Societal Marketing Concept


All companies prosper when society prospers. Companies, as well as individuals, would be better off if social responsibility was an integral component of every marketing decision. Requires all marketers adhere to principles of social responsibility.

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