Course: MBA III Semester, Subject Name: Consumer behavior Unit No.

: 02
Topic: MODELS OF CONSUMER BEHAVIOR

Modelsof ConsumerBehaviour
A consumer`s behaviour varies owing to the many factors that influence consumer
behaviour.Consumer Behaviour Models have been developed to substantiate the various factors that
influence consumer behavior and their decision making process.

ThetenConsumerBehaviourmodelsexplainedbeloware:

 PavlovianModel
 EconomicModel
 Input,Process,OutputModel
 PsychologicalModel
 HowarthShethModel
 SociologicalModel
 FamilyDecisionmakingmodel
 Engel-Blackwell-KollatModel
 IndustrialBuyingModel
 NicosiaModel

PAVLOVIANMODEL
Ivan Pavlov, a famous Psychologist, devised this consumer behaviour model and the model
isnamedafterhim.IvanPavlovconductedexperimentstodeterminethechangein
behaviourwiththehelpofDogs.Heconditionedthedog`smindtoreceiveapieceofmeat every time a bell
is rung and measured the extent of change in behaviour on the basis of levels of saliva secretion in
dogs.

Learning was defined as the changes in behavior which are developed through practice and
personal experience. The learning process consisted of Drive, Drives and Reinforcement. While a
drive refers to a strong internal stimuli which demands an action, drives areinborn psychological
needs arisingout of thirst, physical pleasures, hunger and painthatcreateastimuli
thatgivesoutatriggeringandnon-triggeringcues.Thetriggering (activate the decision process) and
non-triggering cues (Only influence the decision process) help to create a response (purchase or do
not purchase) which gets reinforced overtimeinaconditional
pattern.PavlovianModelispurelybasedonpsychologyandhas been widely accepted around the world.

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 Course: MBA III Semester, Subject Name: Consumer behavior Unit No.: 02
Topic: MODELS OF CONSUMER BEHAVIOR

ECONOMICMODEL
According to Economic model of consumer behaviour, consumers try to maximize the utility from
products on the basis of law of diminishing marginal utility. The desire of
consumerstoobtainmaximumgainsbyspendingaminimumamount actsasthecorefor the derivation of
this model.

The economic model assumes that there is close similarity between the behaviour of
buyersandthatahomogenousbuyingpatternisexhibitedinthemarket.Themodelis based on Income
effect, Substitution effect and Price effect.

 IncomeEffectsubstantiatesthatwhenapersonearnsmoreincome,hewillhave more money to

spend and so he will purchase more.
 SubstitutionEffect substantiatesthefactthatifasubstituteproductisavailableata cheaper cost,
then the product in question will be less preferred or less utilized by people.
 PriceEffectsuggeststhatwhenthepriceofaproductisless,consumerstendto purchase more
quantity of that product.

INPUT,PROCESS,OUTPUTMODEL
The input, process, output Model focuses on the product that is being marketed, the environmental
forcesandfamilybackgroundoftheconsumer.Factorsthatactasinputs and outputs in this model are:

Inputs are the marketing efforts in terms of product, price, place, promotion taken by an
organizationandtheenvironmental forcessuchasfamily, referencegroups,culture,socialclass etc. that
influence the decision making process of a consumer. These factors which act asinputstrigger the
consumer to identify his needs andensure thatthe consumer gets the intention to purchase products
after careful evaluation of the factors.

Processisconcernedwiththe purchaseprocess.Aconsumergoesthroughvarioussteps like need

recognition, awareness, evaluation and purchase in order to make a buying decision.While a satisfied
customer acts as the brand ambassador exerting influence on future purchases, a dis-satisfied
customer acts as a negative reference point spoiling the marketing efforts of the company to promote
the product.

Outputsrefertotheconsumer’sresponsetothemarketingeffortsoftheorganization. Some responses that

consumers display are regarding:

 Buyingdecision
 ChoiceofProduct
 ChoiceofBrand
 ChoiceofDealer orStore
 Purchasetimingand amount
 PostPurchase behaviour

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 Course: MBA III Semester, Subject Name: Consumer behavior Unit No.: 02
Topic: MODELS OF CONSUMER BEHAVIOR

PSYCHOLOGICALMODEL
The Psychological Model is based on the famous psychologist A.H. Maslow’s theory of
HierarchyofNeeds.Thepsychological modeldividestheneedsintoPsychological Needs, Safety and
Security Needs, Social Needs, Ego Needs and Self Actualization Needs. This division of needs is
termed as Hierarchy of Needs.

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Topic: MODELS OF CONSUMER BEHAVIOR
According to this model, the behaviour of consumers gets motivated by their needs and consumer
needs never ceases to exist but arise one after another with passing time. A
consumeractsaccordingtothestrongestneedataparticulartime,hestrivestosatisfythe basic needs first and
then moves on to a higher level of needs and tries to satisfy them.
Thisprocesscontinuestillhereachesthehighestlevelinthehierarchyofneeds.

HOWARTHSHETHMODEL
Howarth Sheth Model substantiates the complexity involved in consumer behavior and
takesintoconsiderationvariousfactorslikeattitudesofconsumer,their perceptionlevels and learning
capacity that influence consumer behaviour. This model is based on four variables that are:

 Inputs Parameters
 Constructsthatarerelatedtoperceptionandlearning
 Output Parameters
 Variablesthatareexternalorexogenousinnature.

InputParameters

As per Howarth Sheth Model, inputs are provided by three types of Stimuli namely,
SignificativeStimuli,SymbolicStimuliandSocialStimulithatareessentialtomakea purchase decision.

WhileaSignificativeStimuli referstothetangibleproductcharacteristicslikeuniqueness, quality, stock

availability, price and service effectiveness, a Symbolic Stimuli refers to perception of an
individual about a particular product characteristic. Social Stimuli takes into consideration all
factors that belong to the societal group to which a consumer belongs. Some factors related to
Social Stimuli are reference groups, family and background and consumer`s financial status in the
society.

PerceptualandLearningConstructs

Constructs or Psychological variables like Motivation, Attitude, Learning and Perception influence
the decision making process of a consumer. When a consumer receives a stimuli and interprets it,
the interpretation is influenced by two factors that are stimulus
ambiguityandperceptualbias.Astimulusambiguityoccurswhenaconsumercannotfully interpret a
stimuli while a perceptual bias occurs when an individual manipulates the stimuliaccording to
hisneedsand experience. These two factorsinfluence a consumer to evaluate a product or brand as
good or bad and develop the confidence to purchase it.

OutputParameters

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Topic: MODELS OF CONSUMER BEHAVIOR
Output in Howarth Sheth Model refers to the final purchase decision and satisfaction or
dissatisfactionlevelsofaconsumeraftermakingapurchase.Highsatisfactionresultsin elevated brand
performance while dissatisfaction leads to lower brand performance.

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Topic: MODELS OF CONSUMER BEHAVIOR
ExternalorExogenousvariables

External or Exogenous variables refer to the indirect influence exerted on the decision
makingprocessofconsumersbyfactorssuchasfinancial status,social class,necessityto purchase and
personality traits of individuals.

Allfourfactorsaredependentoneachotherandinfluencethedecisionmakingprocessof a consumer.

ANOTHERWRITER’sEXPLANATIONOFHOWARD-SHETHMODEL

Thismodelsuggeststhreelevelsofdecisionmaking:

(i) Thefirstleveldescribestheextensiveproblemsolving.Atthislevel theconsumerdoes not have any

basic information or knowledge about the brand and he does not have any preferences for
anyproduct. In thissituation, the consumer will seekinformation about all the different brands in
the market before purchasing.

(ii) The second level is limited problem solving. This situation exists for consumers who have
little knowledge about the market, or partial knowledge about what they want to
purchase.Inordertoarriveatabrandpreferencesomecomparativebrandinformationis sought.

(iii) Thethirdlevelisa habitual responsebehavior.Inthislevel theconsumerknowsvery well about the

different brands and he can differentiate between the different
characteristicsofeachproduct,andhealreadydecidestopurchasea particularproduct. According to the
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 Course: MBA III Semester, Subject Name: Consumer behavior Unit No.: 02
Topic: MODELS OF CONSUMER BEHAVIOR
Howard-Sheth model there are four major sets of variables; namely:

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 Course: MBA III Semester, Subject Name: Consumer behavior Unit No.: 02
Topic: MODELS OF CONSUMER BEHAVIOR
(a) Inputs– These input variables consist of three distinct types of stimuli(information sources) in
the consumer’s environment. The marketer in the form of product or brand information furnishes
physical brand characteristics (significant stimuli) and verbal or visual product characteristics
(symbolic stimuli). The third type is provided by the
consumer’ssocialenvironment(family,referencegroup,andsocialclass).Allthreetypes of stimuli
provide inputs concerning the product class or specific brands to the specific consumer.

(b) Perceptual and Learning Constructs– The central part of the model deals with the
psychological variablesinvolvedwhentheconsumeriscontemplatingadecision.Someof
thevariablesareperceptualinnature,andareconcernedwithhowtheconsumerreceives and understands
the information from the input stimuli and other parts of the model. For example, stimulus
ambiguity happened when the consumer does not understand the message fromthe environment.

(c) Outputs- The outputs are theresultsof the perceptual andlearning variables and how
theconsumerswillresponsetothesevariables(attention,brandcomprehension,attitudes, and intention).

(d) Exogenous(External)variables-Exogenousvariablesarenotdirectlypartofthe decision-

making process. However, some relevant exogenous variables include the importance of the
purchase, consumer personality traits, religion, and time pressure.

TheDecisionMaking Process,whichHoward-ShethModel triestoexplain,takesplace at three Inputs

stages: Significance, Symbolic and Social stimuli. In both significant and symbolic stimuli, the
model emphasizes on material aspects such as price and quality.
Thesestimuli arenotapplicableineverysociety.Whileinsocial stimulithemodel doesnot mention the
basis of decision-making in this stimulus, such as what influence the family decision? Thismay differ
fromone societytoanother. Finally,no direct relation was drawn

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Topic: MODELS OF CONSUMER BEHAVIOR
ontheroleofreligionininfluencingtheconsumer’sdecision-makingprocesses.Religion was considered
as external factor with no real influence on consumer, which give the model obvious weakness in
anticipation the consumer decision.

SOCIOLOGICALMODEL
The Sociological Model of Consumer Behavior is closely related to the society and the versatile
groups involved in the same. These groups can be classified into Primary and secondary ones.
Primary groups consist of close acquaintances, friends, relatives and family members. Secondary
group consists of any member in the society, his personality type and requirements based on the
same. Sociological Model focuses mainly on the
lifestyleandrelatedproductrequirementsofconsumersinthesocietyinaholisticmanner.

FAMILYDECISIONMAKINGMODEL
The role everymember of a family playsin the purchase decision isunique.There are six
typesofmembersinafamilystructurewhoexertinfluenceoverthepurchasingdecisionof the others in the
family. They are:

1. TheUser
2. TheInfluencer
3. ThePreparer
4. TheGatekeeper
5. TheBuyer
6. TheDecider

The User is the person in the family who plans to use the product being purchased. The user
maybea singlepersoninthefamilyor thewholefamily.Forinstance,ifthepurchase decision pertains to a
car or television, it may be used by all family members. When a purchase decision pertains to
buying a mobile phone or a laptop, it may be for a single person in the family.

The Influencer is the person who keeps the family members updated about products and
servicesnewtothemarket.Heconvincesthemtogoinforthesame.Hisinfluenceplaysa crucial role in the
ultimate decision taken by the family members

The Preparer isthe person who gives a product its final shape in which it is actually going
tobeusedbytheusersinthefamily.Rawvegetablesusedforcookingfoodisanexample for the Preparer
role where one who cooks is involved in the process.

The Gatekeeper is a personinthe family who influences the family members to goin for

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Topic: MODELS OF CONSUMER BEHAVIOR
productswhichtheyfeel willbeuseful tothem.Theysafeguardthegatesdisallowingany productor
serviceinformation that they dislikefromreachingtheir family members. They

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 Course: MBA III Semester, Subject Name: Consumer behavior Unit No.: 02
Topic: MODELS OF CONSUMER BEHAVIOR
helpthefamilyindecisionmakingbyfilteringinformationorproductattributestomakea purchase decision.

TheBuyeristhepersonwhoactuallybuystheproduct.Irrespectiveofthedifferentkinds of influences
exerted by other member of the family, the person playing the role of the Buyer makes the final
purchase of the product or service

The Decider is the person in the family who has the money power to buy a product or
servicechosenforpurchase.Familymembersplayingthisrolehaveanupperhandinthe purchase decision.

FamilyDecisionmakingModel thustakesintoaccountthemanyrolesplayedbymembers of a family and

their influence in decision making pertaining to purchase of products and services.

ENGEL-BLACKWELL-KOLLATMODEL
Engel-Blackwell-KollatModelisbaseduponfourkeycomponentsnamelyInformation
processing(IP), Central Control Unit(CCU), Decision Makingprocessandinfluences exerted
by the environment.

InformationProcessing(IP)isdependentonmanyfactorswhichactasstimulibothfroma marketing and

non-marketing perspective, it consists of four components that are
exposure,attention,comprehensionandretention.InformationProcessingfocusesonthe message to
which the consumer is constantly exposed (exposure). When the message instantly grabs the
attention of the consumer (attention), the next logical step for himis to comprehend about the same
in the rational manner (comprehension).When all of the activities happen in the perfect manner the
message is retained in the memory of the consumer (retention).

CentralControlUnit(CCU)isbasedonfourfactorsthatarepsychologicalinnature.

 Previousexperienceoftheconsumersandtheiracquaintancesaboutthe product
 Criteriabasedonwhichaconsumerevaluatesaproduct
 Changingmindsetsofconsumersand
 Personalityoftheconsumerbasedonwhichheorshetakesthepurchase decision.

Aconsumerprocessesandinterpretsall theinformationonthebasisoftheabovefour factors.

The Decision process consists of recognizing the problem, internal and external information
search, evaluating the alternatives available and finally purchasing the product. This component
deals with the post purchase satisfaction levels as well as dissatisfactionlevelswhichplayacrucial
roleinthefuture decisionmakingprocessofthe consumers.

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Topic: MODELS OF CONSUMER BEHAVIOR
TheEnvironmentalinfluencesconsistsofallthosefactorsthatmayfavourordis-favour the purchase
decision like:

 Incomelevelof consumers
 Financialstatusandsocialclassinthe society
 FamilyInfluencesandothersocietalfactorsetc.

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 Course: MBA III Semester, Subject Name: Consumer behavior Unit No.: 02
Topic: MODELS OF CONSUMER BEHAVIOR

ENGEL,BLACKWELL,MINIARDMODEL(OPENSYSTEM
)
This model was created to describe the increasing, fast-growing body of knowledge
concerningconsumerbehavior.Thismodel,likeinothermodels,hasgonethroughmany revisions
toimprove its descriptive ability ofthe basic relationships between components and sub-
components, this model consists also of four stages;

Firststage:decision-processstagesThecentral focusofthemodelisonfivebasic decision-

process stages:

Problemrecognition,searchforalternatives,alternateevaluation(duringwhichbeliefsmay lead to the

formation of attitudes, which in turn may result in a purchase intention) purchase, and outcomes.
But it is not necessary for every consumer to go through all these stages; it depends on whether it is
an extended or a routine problem-solving behavior.

Second stage:Information input At this stage the consumer gets information from
marketingandnon-marketingsources,whichalsoinfluencetheproblemrecognitionstage ofthedecision-
makingprocess.Iftheconsumer stilldoesnotarrivetoaspecificdecision, the search for external
information will be activated in order to arrive to a choice or in some cases if the consumer
experience dissonance because the selected alternative is less satisfactory than expected.

Third stage:information processing This stage consists of the consumer’s exposure,

attention,perception,acceptance,andretentionofincominginformation.Theconsumer must first be
exposed to the message, allocate space for this information, interpret the stimuli, and retain the
message by transferring the input to long-term memory.

Fourthstage:variablesinfluencingthedecisionprocessThisstageconsistsofindividual and
environmental influences that affect all five stages of the decision process. Individual
characteristicsinclude motives, values,lifestyle, and personality;the social influencesare culture,
reference groups, and family. Situational influences, such as a consumer’s financial condition, also
influence the decision process.

This model incorporates many items, which influence consumer decision-making such as
values,lifestyle,personalityandculture.Themodel didnotshow whatfactorsshapethese items, and why
different types of personality can produce different decision-making? How will we apply these
values to cope with different personalities? Religion can explain some behavioral
characteristicsoftheconsumer,andthiswillleadtobetterunderstandingofthe model and will give more
comprehensive view on decision-making.

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Topic: MODELS OF CONSUMER BEHAVIOR

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 Course: MBA III Semester, Subject Name: Consumer behavior Unit No.: 02
Topic: MODELS OF CONSUMER BEHAVIOR

INDUSTRIALBUYINGMODEL
Industrial Buying Model deals with the cumbersome process involved in making purchase
decisionsinatypicalindustrial setup.The decisionmakingprocessrelatedtopurchasein an Industrial
setup involves many Departments that are concerned with the same in a direct or indirect manner.
This model highlights three crucial characteristics involved in purchase decisions by Industries.

 Individualswhohailfromdifferentbackgrounds,possessingvaryingpsychological outlook are

involved in the decision making process
 Jointdecision makingisinevitablein an Industrial setup
 Decisionspertainingtoapurchasemayleadtoopinionclashesbetweenconcerned departments or
individuals before an amicable solution is found

Individuals in decision making capacities may be from various departments in an organization.

Some Departments concerned are Research and Development Department, Quality Control
Department, Finance Department, Manufacturing Department and
TechnicalSupportDepartmentamongstthe manyothers.Thecommitteethatisformedfor making
purchase related decision may comprise individuals who

 Havedifferentperceptions
 Hailfromvaryingbackgrounds
 Havedifferingsatisfactionlevelsrelatedtopastexperience
 Obtaininformationfromdifferent sources
 Searchexperiencethatistotallydependentontheirskills

The purchasedecisioninan Industrial setupis dependent on many factors.These factors may be

specifically related to products or to the organization that manufactures the concerned products.
The product specific factors are the kind of purchase done by consumers, probable risks involved in
choosing a particular alternative and the pressure pertaining to the timely delivery of product. The
Organization Specific factors focus on
solvingproblemsthatariseduetothepurchasedecisionfromtimetotime,thepersuasion and bargaining
issues connected with the same and other factors pertaining to situations that may arise every now
and then.

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 Course: MBA III Semester, Subject Name: Consumer behavior Unit No.: 02
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NICOSIAMODEL
Nicosia Model deals with the level of exposure a consumer gets with respect to the
purchasedecision.Thismodelisbasedonfourfieldssuchthattheoutputofonefieldacts as the input of
second field and so on.

TheFirstfield dividedintotwosubfieldsnamely:

Sub-fieldoneconsistsof:

 ProductAttributes
 Firm`sAttributes

Whilesubfieldtwoconsistsof:

 Pre-dispositionorexistingattitudeofaconsumertowardsthe product
 Theattributesexhibitedbytheorganizationwhoseproductsaretobepurchased.

TheSecondFieldconsistsofconsumerresearchandevaluation.

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Topic: MODELS OF CONSUMER BEHAVIOR
TheThirdFieldis concernedwith thebuying decisionof theconsumer.

TheFourthFieldisconcernedwiththepostpurchasebehavior,useofproduct,itsstorage and consumption.

The consumer who is satisfied with a product or service tends to stock
theproductforregularorfutureusageanddevelopsapositiveattitude.Onthecontrary,a

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dis-satisfiedcustomertendstodevelopanegativeattitudetowardstheproductorthe business house.

The feedback from Fourth Field acts as input for field one. Feedback from field four
compelsafirmtochangetheproductattributeswhichinturnactasinputforfieldtwo.A change in product
attributes bring a change in consumers perception about the product
andhencemayaffecthisbuyingdecisionandsubsequentlyhispostpurchasebehavior.

ANOTHERWRITER’sEXPLANATIONOFNICOSIAMODEL(CONFLICTMODEL)

NICOSIAMODEL(CONFLICTMODEL)
This model focuses on the relationship between the firm andconsumers. The firm communicates
with consumers through its marketing messages (advertising), and the
consumersreacttothesemessagesbypurchasingresponse.Lookingtothemodel wewill find that the firm
and the consumer are connected with each other, the firm tries to influence the consumer and the
consumer is influencing the firm by his decision. The Nicosia model is divided into four major
fields:

Field 1:The consumer attitude based on the firms’ messages. The first field is divided into two
subfields. The first subfield deals with the firm’s marketing environment and communication
efforts that affect consumer attitudes, the competitive environment, and characteristics of target
market. Subfield two specifies the consumer characteristics e.g.,
experience,personality,andhowheperceivesthepromotionalideatowardtheproductin this stage the
consumer forms his attitude toward the firm’s product based on his interpretation of the message.

Field2:searchandevaluationTheconsumerwillstarttosearchforotherfirm’sbrand and evaluate

thefirm’s brand incomparison withalternate brands. In this casethe firm motivates the consumer to
purchase its brands.

Field3:TheactofthepurchaseTheresultofmotivationwill arisebyconvincingthe consumer to purchase

the firm products from a specific retailer.

Field4:FeedbackThismodel analysesthefeedbackofboththefirmandtheconsumer after purchasing

the product. The firm will benefit fromits sales data as a feedback, and the consumer will usehis
experience with theproductaffects theindividualsattitude and predisposition’s concerning future
messages from the firm.

TheNicosiamodel offersnodetail explanationoftheinternalfactors,whichmayaffectthe personality of

the consumer, and how the consumer develops his attitude toward the product. For example, the
consumer may find the firm’s message very interesting, but virtually he cannot buy the firm’s
brand because it contains something prohibited
accordingtohisbeliefs.Apparentlyitisveryessentialtoincludesuchfactorsinthemodel, which give more

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Topic: MODELS OF CONSUMER BEHAVIOR
interpretation about the attributes affecting the decision process.

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CONSUMERBEHAVIOURININDIA
Indianconsumerdurablesmarketisbroadlysegregatedintourbanandruralmarkets,and is attracting
marketers from across the world. The sector comprises of a huge middle
class,relativelylargeaffluentclassandasmall economicallydisadvantagedclass.Global corporations
view India as one of the key markets from where future growth is likely to emerge. The growth in
India’s consumer market would be primarily driven by a favorable population composition and
increasing disposable incomes.

PercapitaGDPofIndiaisexpectedtoreachUS$3,273.85in2023fromUS$1,983in 2012. The

maximumconsumer spendingislikely to occur in food,housing, consumer durables, and
transport and communication sectors.

MarketSize

 Thegrowingpurchasingpowerandrising influenceofthesocialmediahaveenabledIndian
consumers to splurge on goodthings. Import ofelectronic goods reached US$ 53 billion in
FY18.
 Indian appliance and consumer electronics (ACE) market reached Rs 2.05 trillion (US$
31.48billion) in2017.Indiaisoneofthelargest growingelectronicsmarket intheworld. Indian
electronics market is expected to grow at 41 per cent CAGR between 2017-20 to reach
US$ 400 billion.
 TelevisionindustryinIndia isestimatedto havereachedRs740billion(US$10.59billion) in
CY2018 and projected to reach Rs 955 billion (US$ 13.66 billion) in CY2021.
 As of FY18, washing machine, refrigerator and air conditioner market in India were
estimatedaroundRs7,000crore(US$1.09billion),Rs19,500crore(US$3.03billion)and Rs
20,000 crore (US$ 3.1 billion), respectively.
 India’s smartphone market grew by14.5 per cent year-on-year with a shipment of142.3
millionunitsin2018.India isexpectedto have829millionsmartphoneusersby2022.In 2019,
India is expected to manufacture around 302 million handsets.

Investments

AccordingtotheDepartmentforPromotionofIndustryandInternalTrade,duringApril 2000 – June

2019, FDI inflows into the electronics sector stood at US$ 2.45 billion.

FollowingaresomerecentinvestmentsanddevelopmentsintheIndianconsumer market sector.

 InNovember2019,Nokiaentered inpartnershipwithFlipkarttoenterconsumer durables

market in India and plan to launch smart TVs.
 InOctober2019,AppleInc.entered inagreement withMakerMaxitymall,co-ownedby
Reliance Industries to open its first company-owned iconic outlet in India.
 InAugust2019,VoltasBeko launchedIndia’sfirstfivestarwashingmachine.
 InJuly2019,VoltasLimitedenteredinto partnershipwithEnergyEfficiencyServices
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Limited (EESL) to manufacture and sell 5-star rated Inverter Air Conditioners.

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 InApril2019, TCLElectronicannounceditsentryintohomeappliances marketinIndia.
 XiaomibecametheIndia’slargest brandnetworkintheofflinemarket,havingpresencein over
790 cities in the country.
 BoschHomeAppliancestoinvestUS$111.96milliontoexpandinIndia.
 NumberofTVhouseholdsand viewersinIndiareached197million835 million,
respectively in 2018.
 Accordingtotheretailchainsand brands,thereis9-12percent increase inthesalesof
consumer electronics in Diwali season in October 2019.
 Thesmartphoneshipment witnesseda year-on-yeargrowthof9.3percentinJuly-
September 2019 with 46.6 million unit shipped.
 Consumerdurables loans inIndia increased by68.8percenttoRs5,445crore(US$780
million) in September 2019.
 IntexTechnologieswillinvest aroundRs60crore(US$9.27million) in2018 intechnology
softwareandInternetofThings(IoT)startupsinIndia inordertocreateanecosystemforits
consumer appliances and mobile devices.
 Micromaxplanstoinvest US$89.25millionby2020fortransforming itselfinto aconsumer
electronics company.
 HaierannouncedaninvestmentofRs3,000crore(US$415.80million)as it aimsatwo-fold
increase in its revenue by 2020.

GovernmentInitiatives

 NationalPolicyonElectronicsPolicywaspassed bythe MinistryofElectronics&

Information Technology in February 2019.
 AnewConsumerProtectionBillhasbeenapprovedbytheUnionCabinet, Governmentof India
that will make the existing laws more effective with a broader scope.
 The mobile phone industry in India expects that the Government of India’s boost to
productionofbatterychargerswillresult insetting upof365factories, therebygenerating
800,000 jobs by 2025.
 The Union Cabinet has approved incentives up to Rs 10,000 crore (US$ 1.47 billion) for
investors byamending the M-SIPS scheme, in order to further incentivise investments in
electronicssector,createemployment opportunitiesandreducedependenceonimportsby
2020.
 The Government ofIndia has allowed 100 per cent Foreign Direct Investment (FDI) under
the automatic routeinElectronics Systems Design&Manufacturing sector. FDI into single
brandretailhasbeenincreased from51percentto100percent;thegovernment isplanning to hike
FDI limit in multi-brand retail to 51 per cent.

ChangingConsumerBehaviourinIndia
As India continues to evolve as an economic power in the global scenario, Consumerismis
undergoing tremendous changes in the business arena. Liberalization, Globalization and
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 Course: MBA III Semester, Subject Name: Consumer behavior Unit No.: 02
Topic: MODELS OF CONSUMER BEHAVIOR
Increasingincome and purchasingpower amongthe people of India can be attributed as the
mainreasonsfortheprevalentmarkettrendandchangingconsumerbehaviourin India.The
affluencelevelshaveexertedtremendousinfluenceovertheconsumermarketandchanging
consumer behaviour in India.

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 Course: MBA III Semester, Subject Name: Consumer behavior Unit No.: 02
Topic: MODELS OF CONSUMER BEHAVIOR

FewchangesintheIndianconsumermarketare:

 Theconsumershavebecomemoreaware,demandingandqualityconscious.
 Liberalizationandglobalizationhasincreased competitiongivingrisetoconsumer
oriented products and marketing techniques.
 Theoverallcostsarerising,pricesarefallingandprofitmarginsare decreasing.

ChangingConsumerBehaviourinIndia

ConsumerBehaviorhasgonethrough manychangesintheattitude,motivation,perception,
spendinghabits,andpostpurchasebehaviour duringthepastfewdecadesinIndia.Someof the key
factors that have contributed towards changing consumer behaviour in India are:

 RapidUrbanizationleadingtochangesinthemindsetofconsumers
 Increasingincomelevels
 Shiftinapproachtowardsfamilysystems

RapidUrbanization

In 1980`s, a typical consumer in India had very limited choices. Consumer choice was
restrictedbylowincome,supplyshortages,non-availabilityofproducts,traditionalbuying
methods, low competition, limited choice, import restrictions. Rapid urbanization in the
country is brought a huge change in the mindset of Indian population. Liberalization and
globalization in the 1990`s opened new avenues for marketing, advertising, travel and
communication which in turn helped in increasing the GDP of the country. Innovative
marketing techniques, increasing competition and product branding made the consumers
moreaware,demandingandqualityconscious.Nowconsumershavewideproductchoices at
competitive prices.

Increasingincomelevels

IncreasinghouseholdsIncomehaveincreasedthespendingcapabilitiesofpeople,making India
one of the top countries in the Consumer market segment. Now consumers do not settle for
sub-standard products but demand high quality products at competitive prices.

Consumers have access to abundant information through newspapers, T.V. and internet
which bought about a change in marketing techniques of businesses. Marketers strive to

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 Course: MBA III Semester, Subject Name: Consumer behavior Unit No.: 02
Topic: MODELS OF CONSUMER BEHAVIOR
differentiatetheirproductsandservicesthroughpricing,packaging, promotions,customer
service and branding. With radical revolution in information technology consumer
satisfaction was given more importance as consumer expectations had increased and all
consumers had multiple options to satisfy their respective needs.

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 Course: MBA III Semester, Subject Name: Consumer behavior Unit No.: 02
Topic: MODELS OF CONSUMER BEHAVIOR

Shiftinapproachtowardsfamilysystems

India has been witnessing a shift with respect to family systems and family influence on
consumer behaviour. Joint families are decreasing in number giving way to nuclear
families.Thespendratiohasincreasedbyleapsandboundsowingtotheincreasingnumber of
nuclear family systems. Lifestyle amenities get more priority amidst the younger generation
who opt for nuclear family structures. Less number of Gatekeepers and matured influencers
in such nuclear families gave rise to what was considered as ‘unnecessary spending’ by
earlier generations. The food, apparel and entertainment industries have gained
maximumowingtothetendencyoftheyounger generationtokeepupwiththelatest trends at all
points of time.

However, marketers mustkeepthefollowingpointsinmindtoeffectiveadjusttothe changing

consumer behaviour in India –

 Itisessentialtocommunicatewithcustomers.
 Allmarketingeffortsmustbedirectedtowardsthecustomer.
 Productsandservicesmustbedevelopedkeepinginmindtheneedsanddesiresof
consumers.
 Effortsmustbemadetounderstandthemindsetoftheconsumerforwhicha feedback
mechanism must be developed.
 Allstrategiesmustaimatprovidingcustomersatisfactionanddelight.

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 Course: MBA III Semester, Subject Name: Consumer behavior Unit No.: 02
Topic: MODELS OF CONSUMER BEHAVIOR

DifferencebetweenCONSUMERBUYINGBehaviorand
ORGANIZATIONAL BUYING Behavior

Robinson, Faris & Wind states that when understanding the Industrial Buying Behavior a
permanent process of problem solving and decision – making must be takeninto
consideration.All membersina businesswho become involvedinsucha buying process are
centered to specify group – These processes and group members may vary when purchasing
different kinds of products and services.

An important part of the marketing process is to understand why a Customer or Buyer

makes a purchase. Without such an understanding, business finds it hard to respond to the
customer’s needs and wants. Marketing theory traditionally splits analysis of buyer or
customer behavior into TWO broad group of analysis – Consumer Buying and Industrial
Buying.

ConsumerBuying

The study of how and why people purchase goods and services is termed as Consumer
Buying.

The term covers the decision making processes from those that precede the purchase of
goods and services to the final experience of using the product or services.

Models of Consumer Buying Behavior draw together the various influences on the process
of the buying decision. They attempt to understand the proverbial “Black box” (Buyer’s
mind) of what happens within the consumer between his/herexposure to marketing stimuli
and the actual decision to purchase.

ConsumerBuyingProcess

(i) Recognitionofneed

(ii) InformationSearch

(iii) EvaluationofAlternatives

(iv) Purchasedecision
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 Course: MBA III Semester, Subject Name: Consumer behavior Unit No.: 02
Topic: MODELS OF CONSUMER BEHAVIOR
(v) PostPurchaseBehavior

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 Course: MBA III Semester, Subject Name: Consumer behavior Unit No.: 02
Topic: MODELS OF CONSUMER BEHAVIOR

INDUSTRIALBUYING

Industrial purchasing stands for more than half of the whole economic activity in
Industrialized countries. Hardly any consumer has the buying authority as organization and
any given end product is made up by many industrial purchase that is important to
understand how industries perform buying activities.

Industrial buying behavior is in essence the arrangement of how Industrial Organizations

purchase goods and services. This area is essential for the understanding of the consumer
needs and must be taken into consideration for successful suppliers.

IndustrialBuyingProcess

(i) ProblemRecognition

(ii) Generalneeddescription

(iii) Productspecification

(iv) Suppliersearch

(v) Proposalsolicitation

(vi) Supplierselection

(vii) Orderroutinespecification

(viii) Performancereview

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 Course: MBA III Semester, Subject Name: Consumer behavior Unit No.: 02
Topic: MODELS OF CONSUMER BEHAVIOR

1. NeedRecognition
Organizational buying process starts from need recognition. In an organization, a certain
person recognizes need of certain goods and after buying the needed goods, need is
fulfilled. Needs inorganizationcanbe recognized intwo ways. They are: external stimuli and
internal stimuli. If a company decides to produce new goods, it is internal stimuli. It needs
to buy new goods and equipment. Similarly, when a buyer observes trade exhibition, s/he
may make his/her idea to buy new goods. Such idea is external stimuli, because this idea is
made from outer environment and materials should be purchased for this.

2. NeedDescription
After the need is recognized, the buyers should describe need. This task is completed in the
second stage of organizational buying process. While describing need, features of needed
goods and needed quantity should be described. If the goods have standard, this task
becomes easy; if otherwise, it becomescomplicated. Help of engineers, users and
consultants should be takenfor complex goods.

3. ProductSpecification
The task of preparing specific description of goods is the third stage of organizational
buying process. In this stage, description performance of goods is prepared to solve the
problems. Technician’s help should be taken for this task. In this stage, the value of goods is
analyzed.

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 Course: MBA III Semester, Subject Name: Consumer behavior Unit No.: 02
Topic: MODELS OF CONSUMER BEHAVIOR
4. SupplierSearch
At this stage of organizational buying process, the buyer searches proper suppliers or
sellers. Buyer prepares a list of suppliers to select good and proper suppliers. This listis
prepared by looking at trade directory, searching inInternet, asking other companies for
suggestions etc. If the goods to be bought are new, complicated and costly, it needs long
time to search suppliers.

5. ProposalSolicitation
Proposal solicitation is the fifth stage of organizational buying process. At thisstage, buyer
calls best suppliers for submitting proposal. As the reaction, some send catalog or sellers to
the organization. If the product is costly and complicated, the buyer demands detailed
proposal, and if the product is technical, business organization calls for presenting the
product itself.

6. SupplierSelection
Atthesixthstage oforganizational buying process,buyersassessthe proposal and select one or
more suppliers. For selecting the suppliers, a list is prepared and rating is made onthe basis
of their attribute and importance. Thenthe best supplier is selected. Analysis of the suppliers
is done in the following ways.

Rating
Supplierattribute Verypoor Poor Fair Good Excellen
(1) (2) (3) (4) t (5)

Pricecompetitiveness x

Productquality,reliability x
Serviceandrepaircapabilities x

On-timedelivery x
Qualityofsalesrepresentatives x

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 Course: MBA III Semester, Subject Name: Consumer behavior Unit No.: 02
Topic: MODELS OF CONSUMER BEHAVIOR
Overallresponsivenessto
customer needs
x

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 Course: MBA III Semester, Subject Name: Consumer behavior Unit No.: 02
Topic: MODELS OF CONSUMER BEHAVIOR

OverallreputationAverage Score
= 4.29
X

7. OrderRoutineSpecification

Afterthebestsuppliershavebeenselected,thebuyerpreparesfinal order.Inthis order, all the

matters such as attribute of goods, quantity, specification, time for supply, warranty, method
of payment, service after sale etc. should be clearly mentioned.

8. PerformanceReview

This is the last process of organizational buying. At this stage, the buyer reviews suppliers’
performance. This type of review helps to take decision whether to
continuerelationwiththesupplierorchangeorendtherelation.Ifthe performance of the supplier
is satisfactory, the relation can be continued; if it is somewhat defective, if partial correction
is made and the relation is maintained. But if the performance is disagreeable, it is broken.

Buying situations
Stagesofthebuyingprocess
New Modified Straight
task rebuy rebuy

1.Problemrecognition Yes Maybe No

2.Generalneeddescription Yes Maybe No

3.Productspecification Yes Yes Yes

4.Suppliersearch Yes Maybe No

5.Proposalsolicitation Yes Maybe No

6.Supplierselection Yes Maybe No

7.Order-routinespecification Yes Maybe No

8.Performancereview Yes Yes Yes

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 Course: MBA III Semester, Subject Name: Consumer behavior Unit No.: 02
Topic: MODELS OF CONSUMER BEHAVIOR
DIFFERENCES

Bases ConsumerBuyingBehavior OrganizationalBuyingBehavior

The individual consumers buy goods The organizations buy goods and
and services for ultimate use or satisfy services for their business needs. The
Purposeof
their needs. The buying purpose of buying purpose of them is to earnprofit
Buying suchconsumers is not to earnprofit by by using and reselling the goods and
reselling the goods and services. services.
Organizational buying is done in large
quantities. There are several reasons
why organizations must buy the goods
Althoughconsumers buyvarious kinds
they need in bulk. In the first place,
of goods, the quantity of goodsremains
they use large quantities of each item
Quantity small. They buy only the necessary
and must maintain inventories at alevel
quantity of goods, which they need for
high enough that they will notrun out
regular use.
of stock. Secondly, it ischeaper and
more efficient to make large-volume
purchases.
Organizational purchasing is a rational
Consumer buying takes decision by
process because the purchasing
consumers themselves. Sometimesthey
Purchase behavior of organizations is guided by
can consult with family members and
Decision objective factors having to do with
friends. They need not fulfill any
production and distribution. It takes
formality like organizational buying.
long time than consumer buying.
Organizational purchase criteria are
specifically defined. Organizational
Most of the consumers may not have
buyers usually have fewer brands to
adequate knowledge and information
choose from than do individuals, and
Market aboutmarketsituation,availablegoods
their purchases must be evaluated on
Knowledge and services, etc. The educated
the basis of criteria that are specific to
customers may be aware and have
the overall needs of the organization.
knowledge about market and goods.
The organizational buyers have full
knowledge of market and suppliers.
Consumersbuy many goods touse to Organizational buyers buy limited
Typesof Goods
satisfy personal or family needs. goods to use to conduct business.

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 Course: MBA III Semester, Subject Name: Consumer behavior Unit No.: 02
Topic: MODELS OF CONSUMER BEHAVIOR
Many individuals are involved in the
buying process. Within large
organizations, rarely is one individual
Consumer buying behavior is effected solely responsible for the purchase of
Effect by age, occupation, income level, products for the purchase of products
education, gender etc. of consumers. or services. Instead, many individuals
and departments may be involved and
departments may be involved in the
buying process.

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 Course: MBA III Semester, Subject Name: Consumer behavior Unit No.: 02
Topic: MODELS OF CONSUMER BEHAVIOR

Bases ConsumerBuyingBehavior OrganizationalBuyingBehavior

The consumer buying process is very
Buyers and sellers in theorganizational
simple. No need to fulfill any
Buying Process market must maintain extensive
formality. There is also no need to
contact.
maintainextensivecontactwithsellers.

 Consumerproductsare:-eatableproducts,usableproductsetc.
 Industrialproductsare :-rawmaterials,fabricationpartsandmaterials,
installation, accessories, equipments etc.

From the above , we conclude that without industrial buying production cannot be done. If
the production is not done then consumer will not be able to get their wantedand
neededthings. Iftheywill not getthethings,theywill notdothebuying,

i.e.consumerbuyingwillnotbedone.

Thus wecansaythatwithoutIndustrial buying,ConsumerBuying cannotbedone. As

Industrialists always try to fulfill the needs of consumers.

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 Course: MBA III Semester, Subject Name: Consumer behavior Unit No.: 02
Topic: MODELS OF CONSUMER BEHAVIOR
NATUREANDFACTORSAFFECTINGINDUSTRIALBUYING

Industrial buying behavior is the pattern of actions by a company involved in

manufacturing,processingandother heavyindustry.Manyofthesecompaniesare required to
make regular purchases as a means of supplying their businesses.

Althougheachcompany—andeachindustry—will havebuyingbehavioraffected by its own set

of factors, there are several main variables that can affect industrial buying as a whole.

1. Demand

Perhaps the main driver of industrial buying is demand. The amount of buying that an
industrial concern will do is directly depended on the amount of business that
thecompanycanexpectinthe nearfuture.Generally,ifacompanyexpects higher
demand,thenitwill stockuponrawmaterialsasameansof ensuringthatitwill be able to meet
consumer demand and maximize revenue.

2. Price

Buying patterns are also affected by the price of the materials the companies are
purchasing.Whenpricesarehigherorthe companyexpectsadecreaseinthe near future, the
company may choose to hold off making purchases, so as to save money. This can involve
some difficult decision making. For example, a company that usesfuel
intheproductionofitsproductsmayattemptto guessthe directionof oil prices.

3. Economy

In addition to current demand and the current prices for a product, industrial companies
may look to the economy as an indication of the future availability of materials relative to
the consumer demand for them. If the economy is trending
upward,thecompanymaypurchasemore basedontheexpectationof afuturerise
insales,whileadownwardtrendingeconomymaypushittotheoppositecourseof action.

4. TechnologicalChanges

In addition, industrial companies are heavily influenced by changes in technology that

affectboththeprovisionofgoodsand theirownrequirements.Forexample,if purchasing a piece

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 Course: MBA III Semester, Subject Name: Consumer behavior Unit No.: 02
Topic: MODELS OF CONSUMER BEHAVIOR
of technology means that a raw material becomes cheaper to use, thenthe company may
choose to invest inthe new technology. Similarly, the

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 Course: MBA III Semester, Subject Name: Consumer behavior Unit No.: 02
Topic: MODELS OF CONSUMER BEHAVIOR
acquisitionofnewtechnologywill oftenchange thecompany’sbuying habits,asthe technology
will have different raw material requirements to run.

5. Political/LegalFactors

Government influence on the Industrial marketing environment. From the time of

Jawaharlal Nehru to the time of Mr. Atal Behari Vajapayee there has been major influence
of the Government inthe industry to protect the Indianindustries’ foreign
investmentorforthatmatter,foreignparticipationofanykind has notbeenallowed in the areas of
defence, steel, drugs, fertilisers, machine tools etc.

More encouragement was given to small scale and cottage industry. Even the bankswere
nationalised,themultinationalswhichwerepresentinIndiatill about 1980s were engaged in
commerce, trade and finance or export of tea. Indian Government felt that in areas where
adequate Indian skills and capital are available, there was no need for foreign collaboration.

Infact,in1977Coca-ColawasaskedtowindupoperationsinIndia,andIBMwas
todiluteequitytostay.Some companieslikeAlkali Chemicals,Dunlop,Goodyear and Asbestos
Cement were allowed to remain as they were operating in non- priority areas. Today the
Government having realised the importance has liberalised in many areas.

Still controls the industries do not contribute to an extent the effective and fair functioning
of the economy. The Government acts as a regulatory agency inimport and export matters.
It controls the tax and interest rates. It provides economic stabilisationthroughcontrol
ofinflation.Itisenvironmentallyandsociallyconscious.
Itpassesrules,regulationsandlawsfromtimetotimetoensurethatgeneral public interest is not
compromised.

The Government has placed a large number of drugs with dubious justification under the
scanner. Doubts persist about safety of a host of drugs including CISAPRIDE, the drug for
night heart burn, and PPA, an ingredient in certain paediatric preparations. The review of
iron preparations containing zinc, amino
acidsandvitaminsdecisioncouldbeofgraveconcerntomanyleadingMNCsas these drugs are
high margin products.

The Government can also change the marketing environment by making changes
toitsproceduresforexampleMr.Chandra BabuNaidu,Ex-ChiefMinisterofAndhra Pradesh, has
decided to experiment with online procurement in four of its government departments.

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 Course: BBA I Semester, Subject Name: Indian Knowledge System Unit No.: 01
Topic: Introduction

Department E-purchase
AndhraPradeshTechnologyServices AllITrelatedprocurementfortheState
(APTS) Government
AndhraPradeshStateRoadTransport Spares,Oil,Lubricants,busbodybuilding
Corporations servicesandofficeproducts
Alltendersofvalue morethanRs1crore,
CommissionerateofTenders projects relating to irrigation, roads and
building
Drugs,Allcivilandmedicarerelated
AndhraPradeshHousingInfrastructure
productsandservices

TheimpactofthisdecisionisthattheindustriessupplyingtotheGovernmentare hoping to supply must

gear up for IT invasionand must be able to bid and make tendersthroughacomputer.
Themarketingstrategieswill havetobeadjustedto accommodate these changes.

SinceGovernmenttranscends alllevelsoftheindustrial environment,itiscapable of influencing and

being influenced by environmental elements at all levels. Thus industrial marketers must keep
careful watch pending regulations to ensure that their respective business plans will meet the
government’s approval. Industrial marketers must be constantly in touch with the laws,
regulations and sanctions of the Government.

REFERENCE&CREDITS
1. VariouseducationalWebsites.

2. https://indiafreenotes.com/
3. https://bbamantra.com/bba-notes/

Session: 2024-25 ; Name of the Subject Teacher: Mr. Rajendra Pal Page 1