Introduction to Consumer Behavior

Consumer Behavior Maxwell Ranasinghe B.Sc. ( Business Administration) Hons. MAAT, Attorney at Law, CPM ( New Haven- USA) MSLIM

Consumer Behavior “ Buyer behavior is the decision process and actions of people involved in buying and using a product ” (Baker )

Consumer Behavior Consumer behavior is those activities directly involved in Obtaining Consuming and Disposing of products and Services( including the decision process that precedes and follow these actions) Consumer Behavior -Engel, Blackwell & Miniard – Eight Edition 1995

Why should a marketer study consumer buyer behavior As per the marketing concept , marketer has to identify the needs and wants of the consumer and satisfy them through the supply of goods and services If the marketer has to identify the needs and wants, understanding the consumers behavior will help a lot in that process If marketer understands the consumers reaction( behavior) to marketers Marketing Mix ( 4 ps), marketer can offer the best mix that suits the consumer.

Definition of a need ( not in tute pls draw) Desired State Current State GAP = Need

Needs The Gap between the Current Status and the Desired Status is called the need. It is also called a state of deprivation When there is a need usually a consumer can do one of the following (1) Look for means of satisfying the need (2) Reduce the level of desired stat ( suppress )

Marlow's Theory of needs Hierarchy Prof. Abraham T. Maslow did research on how humans satisfy their needs He found that humans have simple to complex needs It is organized as a hierarchy ( one after the other) He says that humans may have many needs but will try to satisfy the most important need first . Then they will try to satisfy the next most important need

Physiological Needs These include the most basic needs that are vital to survival, such as the need for water, air, food and sleep. Maslow believed that these needs are the most basic and instinctive needs in the hierarchy because all needs become secondary until these physiological needs are met. Security Needs These include needs for safety and security. Security needs are important for survival, but they are not as demanding as the physiological needs. Examples of security needs include a desire for steady employment, health insurance, safe neighborhoods and shelter from the environment.

Social Needs These include needs for belonging, love and affection. Maslow considered these needs to be less basic than physiological and security needs. Relationships such as friendships, romantic attachments and families help fulfill this need for companionship and acceptance, as does involvement in social, community or religious groups. Esteem Needs After the first three needs have been satisfied, esteem needs becomes increasingly important. These include the need for things that reflect on self-esteem, personal worth, social recognition and accomplishment. Self-actualizing Needs This is the highest level of Maslow’s hierarchy of needs. Self-actualizing people are self-aware, concerned with personal growth, less concerned with the opinions of others and interested fulfilling their potential.

Consumer needs and wants Needs are fundamental – such as hunger, Wants are the means of expressing a need – such as rice and curry, bread, noodles, dosai, pittu, string hoppers etc Want will depend on the individuals culture, taste, ability, social status, availability and circumstances

Demand Demand in economic/marketing terms is not just having the need A need backed by the purchasing power is called demand. It is also called the effective demand The purchasing power includes the financial ability plus the authority to buy

Consumer and Customer Customer is the person takes the buying decision and he may consume the product too. Consumer is an individual or organization who may consume the product not necessarily involved in the buying decision. Both are important for the marketers.

Simple Model of Consumer Buying Behavior Problem Recognition Information Search Evaluation of Alternatives Purchase Decision Post Purchase Evaluation Internal Search External Search Abandon /Postpone

Problem Recognition A need may arise as an internal stimuli ( uththegena) such as hunger or an external stimuli such as seen a nice dress displayed in a showroom window. Marketers study this behavior and use different stimuli to initiate need for their products)

Information search- Depending on the nature and value of the product, information search may differ. Internal search – remembering previous experience of buying or using the product or had heard about the product from others ( searching the information from memory) External search – obtaining information from friends, newspapers, catalogues, TV or Radio ads or from internet etc.

Evaluation of alternatives After gathering information, the consumer will evaluate the alternatives in order to make a decision Items that he found will be placed in one of three categories Evoked set – Alternative products that will be a seriously considered. Inert set – alternatives that the consumer is neutral Inept set – alternatives that consumer will reject Eg. Discuss and example of a person who wants to buy a mobile phone with a camera below Rs. 12500

Pros and cons of different alternatives will be weighed. Feature, benefits, after sales service, guarantees, price etc will be analysed (If evaluation does not lead to selection of the product, buyer might abandon the purchase or postpone the purchase or may go for information search again to select a product) Finally the closest product to the sought benefits and the budgeted price will be selected. ( Intention to purchase)

Purchase Decision The purchase intention may always not result in making a purchase decision. The closeness of the sales outlet, attitude of the sales staff, product availability, availability of credit, opinion of others, situational factors may have an influence on the final buying decision

Post Purchase Evaluation Buyer will have an evaluation of the product on its actual performances while or after using. If a customers gets what he expected or more from the product customer will tell others as well as repurchase the product On the contrary, if the product does not live up to the expected level, consumer will tell others not to buy and will not repurchase the product After sales services, follow up procedures will help to adjust customer dissatisfaction

Cognitive Dissonance This is a psychological status of the buyer in the post purchase evaluation This happens when the chosen product have some drawbacks but the rejected product have some positive elements” E.g.. Although you selected phone by paying a higher price, the rejected lower priced one has better picture quality in the camera You would be asking from yourself ” Did I make the correct decision” Reinforcing advertising and after sales services may help to reduce the Cognitive dissonance.

Why consumers decision making process is important to marketers ( correct it in tute not dissonance) Marketer can influence the consumer behavior in different stages Can reduce cognitive Dissonace by way of reinforcing information Marketer can direct various communications at each stage the consumer goes through

Organisational Buyer Behavior Businesses buy products from other businesess to resell, use in their processes to add value or as consumables. It is called Business to Business Market ( B to B)

Decision Making Unit (DMU) and Organisational Buyer Behavior In an organisation, such as a company, an individual will not usually make the decision alone to buy products. Usually there is a Committee or a Team . It is called the decision Making Unit or simply DMU

In a typical DMU you could get following categories of persons Users - These are the people who really uses the product. Data Entry Operators may be using computers. Telephone Operator may be using an internal telephone exchange system. Their comments are important Influencers - They may advise as to specifications and influence the buying decision. E.g.. Computer software/hardware Manager

Buyers- Member of the DMU who negotiates with sellers. Who goes in search of quotations and physically takes the approved order and take the delivery of the goods Deciders- he is the member of the DMU that has the authority to decide what to buy and from whom to buy. It could a senior person to a member of the company’s Director Board depending of the value and risk involved with the purchase of the product Gate keepers – Any member of the DMU who could regulate information from suppliers to the other members of the DMU e.g.. Receptionist, Security Officer, Secretary

Major types of buying situations New Task purchase : buyer buys for the first time. So much of information may be required to take a decision as the supplier is new and risk is high. Marketer should strive to influence all the members of the DMU. Straight re-buy : buyer routinely orders without any modification to the order. It could be from the list of suppliers that the buyer is having. Modified re-buy : buys the product with changes in product specifications, prices, delivery or terms of credit etc.

Problem recognition Need Description Product Specification Supplier Search Proposal Solicitation Supplier Selection Order routine Specifications ( purchase) Performance review

Key characteristics of Business buying behavior Organisational buyers differ from individual buyers in many ways Fewer buyers Larger buyers Relationship Derived demand Demand inelasticity ( comparatively) Demand fluctuation Professionalism ( Team – rules A/R’s and F/R’s) Multiple Buying Influence Direct purchasing Motive of purchase

Introduction to Consumer Behavior

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Introduction to Consumer Behavior