UNDERSTANDING MARKET

Consumer Behavior

Session 3
The Gaps Model
 The Gaps
Customers Gap
Customers expectation not matching with
customers perception (Gap 5)
Providers Gaps
Not Knowing what Customers Expect (Gap 1)
Not Selecting Right Service Designs &
Standards (Gap 2)
Not Delivering to Service Standards (Gap 3)
Not Matching Performance to Promises (Gap 4)
 The Customer
The customer is the most important & motivating force for
any organization that wants to succeed
Customers are not interested in all products at all times,
only when they have a need that has to be satisfied
(discontinuities)
Identifying customer needs is a prerequisite for successful
Marketing
We need to continually identify inadequately developed or
insufficiently satisfied needs
Insufficiently satisfied needs might be result of dissatisfaction
with an existing service that we should take care of.
Whether corporate or personal, customer needs vary
throughout their lifetime
 An Example

Family Life Cycle & Banking Needs

Stage Financial Situation Banking Needs

Young Few Financial Burdens; Low-cost checking;

Single People recreation oriented auto loan; credit card

Full Nest I: Home purchasing peak; Mortgage; Credit card;

Youngest child Liquid assets low; Revolving Credit Line;
under 6 Many working mothers Bill Consolidation Loan

Full Nest II: Good Financial Position; Home Improvement Loans;

Older couples Many Working Mothers Equity Credit Lines;
with Dependent Money Mkt Deposit accounts
Children Investment services

Empty Nest: Significantly Monthly Income Checks on CDs

Older Couples; reduced Income Direct Deposit of Social Security
No child at home;
One/ both Retired
 Consumer Behavior
Role of Marketing is:
To Understand the INTERVENING PROCESS
that Influences Buying Decision.

Think on:
Who buys? How do they buy?
When do they buy? Where do they buy?
Why do they buy?
Consumer Behavior Model
Consumer Buying Behavior
Buying behavior of individuals and households that buy products for
personal consumption.
Stimulus Response Model
Marketing and other stimuli enter the buyers black box and produce
certain choice/purchase responses.
Marketers must figure out what is inside of the buyers black box and
how stimuli are changed to responses.

Marketing & Other Stimuli Buyers Black box Buyer Responses

Marketing Other Buyer Buyer Product Choice
Product Economic Charac- Decision Brand Choice
Price Technological teristics Process Dealer Choice
Place Political Purchase Timing
Promotion Cultural Purchase Amount

Figure: Model of Buyer Behavior

Factors Influencing Buying Behavior
A. Internal Personal Factors
Factors

B. External Reference Groups Culture

Factors Organizational Factors

C. Emotional Ego Enhancement Desire for Affiliation

Factors Risk-aversion Personal Gain/Profit
Personal Power & Influence

Profit or Economy Flexibility

D. Rational
Factors
Service Quality Speed
Protection & Security Back-up Service
Convenience Technical Skill
Reputation Perceived
 Decision Making Unit (DMU)
The customer and the decision maker is not
always the same person.

It is important to establish who are in the

Decision-making Unit (DMU)

The personal relationship with the customer is

vital and in many ways the staff member is an
integral part of the product.
Motivation & Consumer Behavior
Motivation is an internal, energizing force that
orients a persons behavior/activities to
satisfying needs

Need is the motive to behave/act

Only unsatisfied needs can influence/motivate

behavior

Human needs are arranged in a hierarchy of

importance
Maslows Hierarchy of Needs
Once a Lower-level need is Satisfied,
a Higher-level need Emerges, and
Self
Demands need to be Satisfied
actualization
Needs
Esteem Needs
Self-esteem

Belongingness & Love Needs

Friendship

Security & Safety Needs

Protection from physical harm

Physiological Needs
Hunger, thirst
 What do Customers Buy
The customer has needs which s/he attempts to
satisfy through the benefits in each product.
To achieve success in selling, it is important to sell the
benefits and match these benefits to the consumers
needs. For example, if it is a Credit Card;
Feature Benefit
It is accepted as a which means that you dont have to carry around
means of payment, large sums of cash in your wallet or purse.

Taking each feature and logically analyzing its benefits

enables a complete list of benefits to be produced
(benefit analysis)
 Benefit Analysis
Benefit analysis may help selling to consumers
of different segment with different needs
There are some standard areas of benefits that
needs to be well mentioned/explained:
Regular Benefits (available to all users) credit card offers credit
Multiple Benefits (attractive to different members in
DMU) cash management scheme is good for the co., the mgr (time), owner
(performance), employees (smart/modern)

Product v. company benefits (related to the product

itself against the banks inherent benefits) BASIC for smallInd
Competitive Benefits (differentiating the bank from
other banks)
 Customer Appeal
Benefit analysis can be further extended by appealing
the consumer and so to persuade them.
Lets continue with the same example of Credit Card:

Feature Benefit Customer Appeal

It is which means Which means in particular

accepted that you dont 1. you are paying for goods in modern way
as a have to carry
means of around large 2. You wont lose money if you are
payment, sums of cash mugged/robbed
in your wallet 3. Your cloths or accessories will not be
or purse. damaged by having large bundles of
notes lying around
 Why do Customers Buy
Identifying and analyzing this why will lead to a good
understanding of customer needs thus how to influence
them to learn more about the product and get interested.
They will be interested about our product if:
A discontinuityin lifestyle has occurred
They are at a Trigger point which calls for action
They have a set of needs which they may or may not
have resolved
Customers get influenced by some factors, so work on it:
Promotional acts (ads, branch displays, press comment, direct
mailing, telephone calls)
Word of Mouth (a friend, your employees)
Own experience (relationship)
 Market Segmentation
Dividing a market into distinct groups with distinct needs,
characteristics, or behavior who might require separate
products or marketing mixes.
Geographical segmentation
Topics Marketing mixes are
customized geographically
Demographic segmentation
Segmenting Consumer Most popular segmentation
Markets Demographics are closely related
to needs, wants and usage rates
Emerging Market Psychographic segmentation
Attractive but difficult
Segments
Leader-follower, extrovert-introvert
Requirements for Benefit segmentation
Benefit (status, convenience,
Effective Segmentation economy)
Market Segmentation (contd.)
Topics Household Banking sectors
Segmenting Consumer
Markets
Emerging Market
Segments
Requirements for
Effective Segmentation
Senior Citizens
Students
Domestic tourists
Working women
Investors community
Housewives
Defence Personnel
Young salaried people
 Market Segmentation (contd.)

Topics Measurable
Size, purchasing power,
and profile of segment
Segmenting Consumer
Accessible
Markets Can be reached and served
Segmenting Business Substantial
Large & profitable enough
Markets to serve
Requirements for Differentiable
Respond differently
Effective Segmentation Actionable
Effective programs can be
developed
 Segmentation Practices in Banks-
Their Limitations
Banks are segmenting their market for times by:
Personal, Agriculture, Small-scale industry, Traders,
Large-industry
Limitations:
1. No distinctive marketing strategies for different
segments
Most bank branches market most products in the
belief that this strategy will maximize business &
profits not attending customers view
2. Banks doest not go deep enough to the segment
Under Personal Banking there are professionals,
housewives, students, teachers: marketing all the
products to all of them can not ensure success!
 Target Marketing Strategies
Evaluating Market Selecting Target Market
Segments
Undifferentiated (mass)
Segment size and marketing

Target narrowness
growth
Segment structural Differentiated (segmented)
attractiveness marketing
Level of competition
Concentrated (niche)
Substitute products
marketing
Power of buyers
Powerful suppliers Micromarketing (local or
Company objectives individual) marketing
and resources Local marketing
Individual Marketing (one-to-
one marketing)
 Target Marketing (contd.)
Choosing a Strategy Socially Responsible
considering: Targeting
Some segments are at
Company resources
special risk:
The degree of product Children
variability Inner-city minority
consumers
Products life-cycle stage Internet shoppers
Market variability Controversy occurs
when the methods
Competitors marketing
used are questionable.
strategies
 Consumer Buying Process

Unsatisfied Pre-purchase Purchase Post

Needs Activity Decision Purchase
Search for Evaluation
Alternatives
Evaluation of
Alternatives
 Pre-purchase Activity:
1. Search for Alternatives
Use of personal source of information
Non-personal sources (mass & selective media)
Says little about experience qualities
May not be available

Higher Perceived risk than with a product

Learning is an obvious result

Customers select Attitude Develop More Learning resulted

From among virtually through Experience with use after purchase
indistinguishable
alternatives
 Pre-purchase Activity:
2. Evaluation of Alternatives
Customers judge from the evoked set (acceptable
options from a category)
Emotion & mood influences the evaluation

Most Goods Most Services

Easy to Difficult to

Legal Services

Diagnosis
Evaluate

Root Canal
Evaluate
Jewelry

Houses

Restaurant

Childcare
Clothing

Vacation

Medical
Meals

Figure: Continuum of Evaluation for Different Types of Products

 Post Purchase Evaluation
Attribution of Dissatisfaction
Services did not fulfill intended needs
Did not perform satisfactory
Were not worth price
Innovation diffusion Role of Culture
Relative advantage
Language
Compatibility
Communicability Values & Attitudes
Divisibility Manners & Customs
complexity Material Culture
Brand Loyalty Aesthetics
Cost of changing brands Educational & Social Institutions
Availability of substitutes
Perceived risk
Past experience (satisfaction)
 When the Buyer is a Business
(Corporate Buyer)
Higher Purchase Volume
Fewer Buyers
More Concentrated Location of Buyers
Direct Distribution
Rational Purchase Decisions
Organizational Buying Process

Establishing Identifying Evaluating

Identifying Selecting
Objectives & Buying Alternative
Need Supplier
specifications Alternatives Buying
Actions
 Customers Objections
Customers usually have objections and queries
before buying

Mostly if the customer has

unanswered questions in his/her mind
Seeks confirmation of reasons to buy
 Different Customer Objections
1. Fundamental Objections
Customer rejecting the product!
Most difficult to deal with
Before accepting this, be certain that it is truly a
fundamental objection by probing for his/her real
problem
Example:
I have no use for a credit card
[the customer has yet to identify the benefits of
a card, or if his/her individual needs will be
met by having a card.]
 Different Customer Objections
2. Credibility Objections
Customer is uncertain about the Banks standing in the
market!
To overcome, Prove you strength, point to the:
business levels in the market
any favorable press comments
Example:
This new solicitors package of yours is just a trick, and
no doubt in a few months you will change the interest
rate back to an ordinary deposit rate.
[recent statements of the CEO giving fresh commitment
to this, other customers find us credible.]
 Different Customer Objections
3. Loyalty Objections
Customer is long associated with the Bank,
but

To overcome:
Do not criticize the competitor

Concentrate on the positive reasons for

buying the product from you
Indicate a keenness to do business

Probe to see whether it is loyalty or inertia

 Handling Loyalty Objections
Example:
Id move my account, but I would be giving up 15
years banking relationship with this bank. I
think I should talk to them first.
[

probe the reality of the loyalty,

what chinks exist in the other relationship,
always be enthusiastic & purposeful and
set sensible objectives for each meeting,
set down markets & create positive reasons
for using your bank at some stage in the
future.
 Different Customer Objections
4. Delay Objections
Customer finds reasons to postponing
the decision to buy
To overcome:
If s/he needs more information,
Provide so
If s/he needs to consult with others in
the DMU, ask for a meeting with them
 Handling Delay Objections
Example:
The decision is not mine, I have to talk to my chairman.
[Three principal truths behind a delay objection:
1. S/he might be hiding the true reason
s/he does not feel completely at ease in talking about with
you,
s/he is unconvinced about the benefits presented
2. S/he might be declining the offer of the product
Fundamental objection
Credibility objection
3. S/he really needs to check the decision with
someone else
Offer to visit (you can talk more fully about your product)
Your involvement is like a third party
 Different Customer Objections
5. Hidden Objections
Can be extension of delay objection which is
simply not being expressed openly
To overcome:
Tease out the truth by carefully constructed
questions that force a response
Example:
Some people are shy/introvert, ask him/her to go further
by commenting on your question:
[I obviously havent satisfied all of your questions and
concerns so s/he will continue]
 Different Customer Objections
6. Price Objections
To overcome
Always prepare for the negotiations in
advance
Concentrate on exampling the benefits
and
Bring out the added value compared with
competitors
 Overcoming objections
Prepare for standard objections with confidence to get customer
impression:
you appreciate his/her problems
You are knowledgeable
You are keen to do business
Example: Credit Card
Objection Overcoming Objection
If I have a You will be surprised how quickly you master the control of
card, I will the use of the card.
run myself
into Let me explain this very simple, easy to use procedure for
enormous controlling credit card debts.
debts You will initially limit your utilization of the card by placing a
limit of Tk. 1000 until you feel comfortable with the card.