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Friday, October 26, 2018

Principles of Marketing Notes (5th Sem): Consumer Behaviour


Unit – II: Consumer Behaviour and Marketing Process
Consumer Behaviour
Behaviour is a mirror in which everyone shows his or her image. Behaviour is the process of responding to a thing or event. Consumer behavior is to do with the activities of individual in obtaining and using the good and services. 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.
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.”
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.
Factors that influence consumer behaviour
The buyer has a selective perception & is exposed to a variety of products & information. He may ignore certain piece of information whereas actually seek out some other information whereas actively seek out some other information Therefore, marketers must fully understand both the theory & reality of consumer behaviour. A consumer’s buying behaviour is influenced by cultural, social & personal factors & they are a part of the buyer as an individual.
(1) Cultural Factors : Culture is the fundamental determination of a person’s wants & behaviour. The growing child acquires a set of values perceptions, Preferences & Behaviours through his or her family. Each culture consists of various subcultures that provide more specific identification. It includes nationalities, religions, social groups & geographic regions.
Every culture dictates its own unique patterns of social conduct. Within each religion there may be several sects & sub sects, there may be orthodox group & cosmopolitan groups. The do’s & don’ts listed out by religion & culture impacts the individual’s lifestyle & buying behaviour.
(2) Social Factors: Consumer’s behaviour is influenced by social factors such as reference groups, family, social roles & status. The buyer is living in a society, is influenced & There is a constant interaction between the individual & the groups to which he belongs. All these interactions affect him in his day to day life.
a. Reference Groups: A person’s reference groups consist of all the groups that have a direct or indirect influence on his attitude. They can be family friends, neighbours, co-worker, religious, professional & trade union groups. Reference groups expose an individual to new behaviours & lifestyles & influence attitude & self concept. Brands like Levi, Prologue & Planet M used teenage icon as brand Ambassadors for in store promotions.
b. Family: The family is the most important buying organization in society. From parents a person acquires an orientation toward religion politics & a sense of personal ambition, self worth & love. E.g. In traditional joint families, the influence of grandparents on major purchase decisions affect the lifestyles of younger generations. In urban India with the growth of nuclear families & both husband and wife working the role of women in major family decisions is prominent. Children & teenagers are being targeted by companies using the internet as an interactive device.
c. Role & Status: The person’s position in each group can be defined in terms of role & status. A role consist of all activities that a person is expected to perform. Each role carries a status. A Vice President of marketing has more status than a sales manager & a sales manager has more status than an office clerk & people choose those products that reflect & communicate their role & desired status in society.
(3) Personal Factors: The personal factors include the buyer’s age & stage in the life cycle, occupation & economic position, personality & self concept & lifestyle & values.
a. Age & Stage in the Life Cycle: People buy different products like food, cloths furniture & this is often age related. Trends like delayed marriages, children migrating to distant cities, tendency of professionals has resulted in different opportunities for marketers at different stages in consumer life cycle.
b. Occupation & Economic Position: Occupation also influences buyer’s behaviour. A blue collar worker will buy work clothes, work shoes & lunch boxes; a company president will buy dress suits, air travel & club memberships. Marketers try to identify the occupational groups & then make products according to their needs & demands. Product choice is greatly affected by economic circumstances – spendable income, savings & assets & attitude towards spending & savings.
c. Personality & Self Concept: Each person has personality characteristics that influence his / her buying behaviour. Personality means a set of distinguishing psychological traits that has to response to environmental stimuli. Personality can be a useful variable in analyzing consumer brand choice. The idea is that brands also have personalities & consumers like to choose those brands which suits or match their personality.
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)      Better Consumer: The study of consumer behaviour enables us to become a better consumer. It will help consumer to take more precise consumption related decisions.
2)      Studying the need of consumers: It helps marketers to understand consumer buying behaviour and make better marketing decisions.
3)      Market 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)      Efficient utilisation of 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)      Studying consumer’s mood: 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)      Studying Consumer’s preference: 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)   Marketing research: 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.
11)   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.
Steps in buying decision process
The marketing scholars have developed a “stage model” of the buying process. The consumer passes through 5 stages. But consumers do not always pass through all five stages in buying a product. They may skip some stages.
(1) Problem Recognition: The buying process starts when the buyer recognizes a problem or need. The need can be triggered by internal or external stimulus. With an internal stimulus, one of the person’s normal needs hunger thirst etc. become a drive or a need can be aroused by external stimuli. Marketers needs to identify the circumstances that trigger a particular need by gathering information from a number of consumers.
(2) Information Search: An aroused consumer will be inclined to search for more information. A person at times simply becomes receptive to information about a product or he may enter looking for a reading material, phoning friends, going online etc. Through gathering information, the consumer learns about competing brands & other features.
(3) Evaluation of Alternatives: The information search & comprehension (evaluation) stages represent the information processing stage. These 2 stages constitute the cognitive field of the purchase process. Cognition refers to acquisition of knowledge.
Some basic concepts help us in understanding consumer evaluation: first the consumer is trying to satisfy a need, second the consumer is looking for certain benefits & third the consumer views each product as a bundle of attributes to satisfy this need.
(4) Purchase Decision: The buyer must be convinced that the purchase of the product is the legitimate course of action. This stage stands as a barrier between a favourable attitude towards the product & actual purchase. Only if the buyer is convinced about the correctness of the purchase decision, will be proceed. At this stage, he may seek further information regarding the product or attempt to assess the information already available.
(5) Post Purchase Behaviour: The purchase leads to a specific post purchase behaviour, usually it creates some restlessness in the mind of the individual. He is not sure about the product. He may feel that the other brand would have been better. It can be defined in terms of satisfaction. If the performance of the product falls short of expectations, the consumers is disappointed, if it meets expectations, the consumer is satisfied, it is exceeds expectations, the consumer is delighted. These feelings make a difference in whether the customer buys the product again & talks favourably or unfavorably about it to others.
Marketing Segmentation
A market consists of large number of individual customers who differ in terms of their needs, preferences and buying capacity. Therefore, it becomes necessary to divide the total market into different segments or homogeneous customer groups. Such division is called market segmentation. They may have uniformity in employment patterns, educational qualifications, economic status, preferences, etc. Market segmentation enables the entrepreneur to match his marketing efforts to the requirements of the target market. Instead of wasting his efforts in trying to sell to all types of customers, a small scale unit can focus its efforts on the segment most appropriate to its market. It is defined as “The strategy of dividing the market in order to consume them”.
According to Philip Kotler, “It is the subdividing of market into homogenous subsets of consumers where any subset may be selected as a market target to be reached with distinct Marketing Mix”
According to Philip Kotler, market segmentation means "the act of dividing a market into distinct groups of buyers who might require separate products and/or marketing mixes."
According to William J. Stanton, "Market segmentation in the process of dividing the total heterogeneous market for a good or service into several segments. Each of which tends to be homogeneous in all significant aspects."
Basis of Segmentation:
Market segmentation dividing the Hetrogenous market into homogenous sub-units. Heterogeneous means mass marketing, which refers people as a people. Homogeneous means dividing the market into different sub units according to the tastes and preferences of consumers. The following factors are considered before dividing the market:
1.       Geographical Factors: On the basis of geographical factors, market may be classified as state-wise, region-wise & nation-wise. Many companies operate only in a particular area because people behave differently in different areas due to various reasons such as climate, culture, etc.
2.       Demographic Factors: This is the most widely used basis for market segmentation. Market is classified on the basis of population, using ages, income, sex, etc as indicators.
a.       Age: It is known fact that people of different ages like different products, need different things, & behave differently. Almost all companies use this factor to reach the target market. On the basis of age, market in our country is divided into children’s market, teenager’s market, adult’s market, & the market for old people. Companies use the census data to prepare marketing strategies on the basis of age.
b.      Sex: There is a variation of consumption behavior between males & females. This factor is used as a basis for segmentation for products like watches, clothes, cosmetics, leather goods, magazines, motor vehicle, etc.
c.       Family Life Cycle: This is another important factor, which influences the consumer’s behavior. E.g.: Before making purchases, a bachelor may consult his friends, a boy may ask his parents & a married man asks his wife. The study of family life cycle helps a company to prepare an effective promotional strategy.
3.       Psychological factors: In psychographic segmentation, elements like personality traits, attitude lifestyle & value system form the base. The strict norms that consumers follow with respect to good habits or dress codes are representative examples. E.g.: Mr. Donald’s changed their menu in India to adopt to consumer preference. The market for Wrist Watches provides example of segmentation. Titan watches have a wide range of sub brands such as Raga, fast track, edge etc. or instant noodle markers, fast to cook food brands such as Maggi, Top Ramen or Femina, women’s magazine is targeted for modern women.
4.       Economic Factors: On the basis of economic factors, markets have been classified in the westerns countries as follows:
a. Upper Class                   b. Upper-upper class                      c. Lower-upper class
d. Middle class                  e. Upper-middle class                    f. Lower-middle class
g. Lower class                    h. Upper-lower class                      i. Lower-lower class
In our country, it is classified as upper class (rich), middle class, & the lower class. Another classification based on income in our country is as follows:
a. Very Rich                        b. The Rich class                                                c. The Aspiration Class &
d. The Destitute.
5.       Behavior Factors: This is one of the most important bases used for market segmentation. Market is classified on the basis of attitude of consumers and special occasions.
a.       Occasions: Sellers can easily find out certain occasions when people buy a particular product. E.g.: Demand for clothes, greeting cards, etc increases during the festival season. Demand for transportation, hotels etc increases during the holiday seasons.
b.      Benefits: Each consumer expects to fulfill certain desire or to derive some benefits from the product he purchases. E.g.: A person may purchase clothes to save money & another to impress others. Based upon this, markets may be classified as markets for cheap price products & market for quality products etc.
c.       Attitude: On the basis of attitude of consumers, markets may be classified as enthusiastic market, indifferent market, positive market, & negative market.
Advantages / Importance / Significance of Market Segmentation:
The purpose of segmentation is to determine the differences among the purchases which may affect the choice of the market area & marketing strategies. Following are some of the benefits of marketing segmentation.
1)      Facilitates consumer-oriented marketing: Market segmentation facilitates formation of marketing-mix which is more specific and useful for achieving marketing objectives. Segment-wise approach is better and effective as compared to integrated approach for the whole market.
2)      Facilitates introduction of suitable marketing mix: Market segmentation enables a producer to understand the needs of consumers, their behavior and expectations as information is collected segment-wise in an accurate manner. Such information is purposefully usable. Decisions regarding Four Ps based on such information are always effective and beneficial to consumers and the producers.
3)      Facilitates introduction of effective product strategy: Due to market segmentation, product development is compatible with consumer needs as there is effective crystallization of the specific needs of the buyers in the target market. Market segmentation facilitates the matching of products with consumer needs. This gives satisfaction to consumers and higher sales and profit to the marketing firm.
4)      Facilitates the selection of promising markets: Market segmentation facilitates the identification of those sub-markets which can be served best with limited resources by the firm. A firm can concentrate efforts on most productive/ profitable segments of the total market due to segmentation technique. Thus market segmentation facilitates the selection of the most suitable market.
5)      Facilitates exploitation of better marketing opportunities: Market segmentation helps to identify promising market opportunities. It helps the marketing man to distinguish one customer group from another within a given market. This enables him to decide his target market. It also enables the marketer to utilize the available marketing resources effectively as the exact target group is identified at the initial stage only.
6)      Facilitates selection of proper marketing programme: Market segmentation helps the marketing man to develop his marketing mix programme on a reliable base as adequate information about the needs of consumers in the target market is available. The buyers are introduced to marketing programme which is as per their needs and expectations.
7)      Provides proper direction to marketing efforts: Market segmentation is rightly described as the strategy of "dividing the markets in order to conquer them". Due to segmentation, a firm can avoid the markets which are unprofitable and irrelevant for its marketing purpose and concentrate on certain promising segments only. Thus due to market segmentation, marketing efforts are given one clear direction for achieving marketing objectives.
8)      Facilitates effective advertising: Advertising media can be more effectively used because only the media that reach the segments can be employed. It makes advertising result oriented.
9)      Provides special benefits to small firms: Market segmentation offers special benefits to small firms. The resources available with them are limited as they are comparatively new in the market. Such firms can select only suitable market segment and concentrate all efforts within that segment only for better marketing performance. Such firms can compete even with large firms by offering personal services to customers within the segment selected.
10)   Facilitates optimum use of resources: Market segmentation facilitates efficient use of available resources. It enables a marketing firm to use its marketing resources in the most efficient manner in the selected target market. The marketing firm selects the most promising market segment and concentrates all attention on that segment only. This offers best results to the firm in terms of sale, profit and consumer support as compared to the results available from spending such resources on the total market.
In conclusion, it can be said that market segmentation offers benefits not only to marketing firms but also to customers. The marketing job will be conducted efficiently and the available resources will be utilised in a better mariner. These advantages also suggest the importance of market segmentation and make a case in its favour.

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