Analyzing Consumer Markets and Buyer Behavior

The most important thing is to forecast where customers are

moving, and to be in front of them- Kotler on Marketing

WHY People Buy ?

Sometimes it seems that there is no reason for a purchase, but in reality there is always a reason

Model Of Buyer Behavior

Marketing Stimuli Environmental Stimuli Buyers Characteristics Buyers Decision process Buyers Choice

Product Price Place Promotion

Economic Political Technological cultural

Cultural Social Personal Psychological

Problem recognition Information search Evaluation of alternatives Purchase decision Post purchase behavior

Product Choice Brand Choice Dealer choice Purchase timing Purchase amount

Stimulus-response Model

Factors Influencing Buying Behavior

a) Cultural Factor b) Personal Factor c) Psychological Factor

Part of buyer as an individual

d) Social Factor

Group References

a) Cultural factor
1.Culture
Culture is the most basic cause of a persons wants and behavior

2.Subculture
Each culture consists of smaller sub culture that provide Its members more specific identification. Subculture includes: Nationalities Religions Racial groups Geographic regions. Many Subcultures form important Market segments.

Ad Targeted at Hindi Speaking Belt in North India

3.Social Class
Are relatively homogeneous and enduring divisions in a society which are hierarchically ordered and whose members share similar values ,interests and behavior.

Social Classes Reflect :

Income Occupation Education Area of residence

Social classes differ in Dress,Speech,recriational preferences etc.

b) Personal Factors
1.Age and Stage in Life-cycle
People choose different good and services over a lifetime. As a child their choice of products will differ from the choices they make as a youngster or as an adult.

Consumption also depends on the Family life cycle

Stages in the Family Life Cycle
1. Bachelor Stage: young and single not living at home. 2. Newly married couples: young ,no children. 3. FullNest1:youngest child under six 4. Full Nest2:Youngest child six or over. 5. Full Nest3:older married couples with dependent children

2.Occupation and Economic circumstances

Occupation also influences a persons consumption pattern. Blue collar worker buys work clothes, work shoes and lunchboxes Company President buys expensive suites, air travel, country club membership etc. Marketers try to identify the occupational group that have above-average interest in their product or service or else a company can specialize its products for certain occupational groups. E.g.: Computer software companies design different software's for Brand Manager,Engineers,Lawyers and Doctors.

Product Choice also depends on the Economic Circumstances i.e. Spendable income Saving and Assets Debt, borrowing power and attitude towards spending versus saving Therefore, Marketers of income sensitive product will have to keep a close watch on the trends in the personal income, saving and interest rates

3.Lifestyle
People from same subculture, social class and occupation may lead quite different lifestyles. A Lifestyle is the persons pattern of living in the world as expressed in activities, interest and opinions. Lifestyle portrays the whole person interacting with his or her environment. Here, Marketers try to search for relationship between their product and life style group

Psychographics is the science of measuring and Categorizing consumers lifestyles. One of the most popular psychographic segmentation system available was designed by SRI Consulting business Intelligence of USA, Known as the VALS framework Here the segmentation is based on the response to a set of questionnaires

The VALS segmentation system: An 8-part typology

Groups with High Resources 1. Actualizes 2. Fulfillers 3. Achievers 4. Experiences Groups with Lower Resources 1. Believers 2. Strivers 3. Makers 4. Strugglers
Utility Vehicle

4.Personality and self-concept

By personality we mean distinguishing psychological characteristics that lead to relatively consistent and enduring responses to environment Personality is described in terms of traits such as Self-confidence Dominance Autonomy Deference Sociality Defensiveness Adaptability Personality is a useful variable in analyzing consumer behavior.

Related to Personality is Self-Concept (self-image) Marketers try to design their product or brand image that matches with The target consumers self image. A persons Actual self-concept (how she views herself) differs from her ideal self-concept (how she would like to see herself) and that from her others-self-concept (how she thinks other see her)

Beauty, femininity, Sensuality.

c) Psychological Factors
1.Motivation
A person may have many needs at a given time. a. Biogenic needs arise from physiological states of tension. E.g.. Hunger, thirst, discomfort etc. b. Psychogenic needs arise from psychological state of tension. E.g.. Need for recognition, esteem or belonging. Need Motive (when aroused to sufficient level of intensity)

Motive is a need that pushes a person to Act

Motivation theories
Psychologists have developed various theories of Human motivation 3 of the best known theories are from:  Sigmund Freud  Abraham Maslow  Fredrick Herzberg

Freuds Theory
He assumes that the psychological forces that influences a persons behavior are largely unconscious. Often one cannot understand his or her motivation. When a person examines a particular product they will not only react to the special capability of the product but also to other less conscious cues like shape, size, color, weight etc

He suggested a technique called laddering where a persons motivation from the stated instrumental ones to the most terminal ones can be traced. Recent research shows that each product is capable of arousing unique set of motives in consumers. E.g.. Whisky can attract someone who seeks social relaxation, status and fun.

Maslow's Theory
He tries to explain Why people are driven by particular needs at particular times? Why one person spends considerable time and energy on personal safety whereas another person on attaining high opinion of others?

Herzbergs Theory
He Developed the two-factor-theory that distinguished factors influencing consumer behavior into two groups a) Dissatisfies (Factors that cause dissatisfaction) b) Satisfiers (Factors that Cause Satisfaction) He says Just eradicating dissatisfies is not enough. Satisfiers must be actively present to motivate purchase. HTs two implications 1) Seller must do their best to avoid dissatisfies [poor information manual or poor service]. 2) Manufacturers must identify major satisfiers or motivators of purchase in the market and supply them.

2.Perception
Once a person is Motivated he is ready to Act Perception is the process by which an individual selects, organize and interprets information inputs to create a meaningful picture of the world. How he acts depends on his perception of the situation. Every individual have their own perception about a person, place, situation etc. People can emerge with different perceptions of the same object because of 3 perceptual processes:  Selective Attention  Selective Distortion  Selective Retention

 Selective Attention:
Remembering all of the information is difficult, therefore most of the stimuli will be screened out. This is known as selective attention. Because of the selective attention problem marketers will have to work very hard on getting noticed by their prospective customers Marketers will have to identify what stimuli will get noticed. For instance People notice stimuli that relate to their current need.  People are likely to notice stimuli that they anticipate.  People notice stimuli whose deviation is larger as compared to normal size stimuli.

 Selective Distortion
Sometimes even the noticed stimuli may not come across the way the marketer's intend People may have the tendency to twist information into personal meanings and interpret information in a way that fits their pre-conception. The tendency to do this is called selective distortion.

 Selective Retention
People will forget much that they learn but will tend to retain information that support their attitude and beliefs. Because of selective retention we are likely to remember good points mentioned about a product we like and forget good points about competing products

3.Learning
Once a person is ready to Act he then enters the stage of learning. Learning involves changes in an individuals behavior arising from Experience. Learning is produced through the interplay of drives, stimuli, cues, responses and reinforcement. Generalizing Response (similar stimuli) Discriminating Response (recognize differences in similar stimuli)
Marketers can build demand for their product by associating it with consumers strong drive, motivating cues and providing positive reinforcement

4.Belief and Attitudes

Through doing and learning people acquire beliefs and attitudes which in turn influence buying behavior.

A Belief is a descriptive thought that a person holds about something.

Belief is based on Knowledge, opinion or faith .They may or may not carry an emotional charge. Belief make up a product or brand image and people act on the image. That is why it is very important for manufacturers to know what belief people carry about their product. Belief plays a very important role with Foreign products. Buyers hold strong belief of a product or brand based on their country of origin..

Country-of-origin studies have found the following:  The impact of country of origin varies with the type of product people want to know where the car was made but not where the lubricating oil came from.  Certain countries enjoy a reputation for certain goods Japan for Cars and electronics, U.S for soft drinks, toys,cigarrette,jeans,France for wines, perfumes and luxury goods etc.  Sometimes the country of origin perception can extend beyond certain products and generalize entire countries product American products as prestigious, Japanese product as innovative and Chinese products as cheap.

An Attitude is a persons enduring favorable or unfavorable evaluation, emotional feeling and action tendencies towards some object or idea.
People have attitudes towards almost everything: religion, politics, clothes, music, food etc. Attitude puts people in a frame of mind of liking or disliking an object. moving towards it or away from it. Because attitude economize on energy and thoughts, they are very difficult to change

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Antioxidants

Prevents liver and Alzheimer's disease.

c) Social Factors
1.Reference Groups
A person's reference groups consists of all the groups that have a direct (face-to-face) or indirect influence on the persons attitude or behavior. Groups having a direct influence on a person are called membership group. Primary groups: Family, friends, neighbors and co-workers. Secondary groups: Religious, Professional and trade Union groups. Also influenced by groups to which they do not belong Aspirational groups: Are those a person hope to join. Dissociative groups: Are those whose values or behavior a person rejects

An opinion leader is a person involved in informal product-related communication who offers advice or information about a specific product or product category. Such as which of several brands is best or how a particular product can be used. They are most likely in
an executive position with a high income, married (with kids), and have a college education

Marketers try to reach opinion leaders by identifying demographic and psychographic characteristics associated with opinion leadership, identifying media read by opinion leaders and directing messages at the opinion leader.

2.Family
Family members constitutes the most influential Primary Reference group. We can distinguish between two families in a buyers life:  Family of Orientation consist of ones parents and siblings. From Parents a person acquires an orientation towards religion, politics, economics and a sense of personal ambition, self-worth and love.

Family of procreation consists of ones spouse and children.

More direct influence on everyday buying behavior Influence on Purchase: Traditional House-hold purchase pattern In India Men Make most of purchase decision In US/UK Wife will purchase Food, Sundaries, clothing items and Husband purchase expensive products and services like vacation, house etc

Current Trends
Working women are Financially strong, that's why they are rapidly gaining a strong hold on the purchasing decision in the house. They are no more confined to only buying house hold goods but are also involved in expensive product purchase decisions.

Another Shift in buying pattern is

Great deal of money is being spend by parents dues to the strong influence by children and teens on choices of brands.

3.Roles and Statuses

A person participates in many groupsFamily, Clubs, Organizations. The persons position in each group can be defined in terms of role and status. President/CEO of a major company may own a Mercedes and wear expensive suites and Drink Chivas Regal Scotch

The Buyers decision Process

Marketers have to develop an understanding of how consumers actually make their buying decision. Marketers must identify:  Who makes the buying decision (Buying Roles)  The types of buying decisions (Buying behavior)  The Steps in buying process

5 Buying Roles people play in Buying decision

1

Decider

Influencer

Buyer

Buyer

User

Initiator

Buying Behavior
Consumer decision making varies with the type of buying Decision. It is based on the degree of buyers involvement and the degree of difference among products or Brands.
4 types of consumer buying behavior

1.Complex buying Behavior (high-involvement)

A consumer is engaged in Complex buying behavior when they are highly involved in a purchase of and expensive product (high involvement product) and are also aware of significant differences among Brands. Complex buying behavior involves 3-step process Buyer develops belief Buyer develops attitude Buyer makes a thoughtful choice

2.Dissonance-Reducing Buyer Behavior (high-involvement)

Here consumers may be highly involved in a purchase but sees little difference in brands. Here the buyer will shop around to learn what is available but may make his decision fairly quickly, perhaps responding primarily to a good price or to purchase convenience. After purchase he might experience dissonance (Lack of agreement,
consistency, or harmony, conflict ).

3.Habitual Buying Behavior (low-involvement)

Many products are bought under conditions of low involvement and absence of brand difference. Consumers have little involvement in this product category because of low cost. If they keep reaching for the same product it is out of habit and not brand loyalty. Marketers use price and sales promotion to stimulate product trial

Marketers use 4 techniques to try and convert low-involvement product to higher-involvement product 1.Linking product to some involving issues

2.Linking product to some involving personal situation

3.Design ads to trigger strong emotions related to personal values

4.Add an important feature to the product

4.Variety-seeking buying behavior (Low-Involvement)

Here consumers often do a lot of brand switching.

Marketers here Dominate shelf-space Avoid out-of-stock position Reminder advertising Low price, deals, coupons, free samples etc.

Stages of buying decision process

1.Problem Recognition
The buying process starts with need recognition. At this stage, the buyer recognizes a problem or need i.e. internal stimulus (e.g. I am hungry, we need a new sofa, I have a headache) or responds to a marketing stimulus (e.g. you pass coffee day and are attracted by the aroma of coffee and chocolate muffins).

2.Information Search
An aroused customer then needs to decide how much information (if any) is required. If the need is strong and there is a product or service that meets the need close to hand, then a purchase decision is likely to be made there and then known as heightened attention. If not, then the process of information search begins known as active information search.

A customer can obtain information from several sources:

Personal sources: Commercial sources: family, friends, neighbors etc advertising; salespeople; retailers; dealers; packaging; point-of-sale displays newspapers, radio, television, consumer organizations; specialist magazines handling, examining, using the product

Public sources:

Experiential sources:

The usefulness and influence of these sources of information will vary by product and by customer. Research suggests that customers value and respect personal sources (the influence of word of mouth) more than commercial sources (marketer-dominated sources). The challenge for the marketing team is to identify which information sources are most influential in their target markets.

Total Set
IBM Apple Dell HP Toshiba Compaq Lenovo Acer HCL Apple Dell HP Toshiba IBM Compaq Awareness Set
Consideration Set Choice Set Dell HP Toshiba Apple Compaq HP Toshiba Apple

Successive sets involved in Consumer Decision Making

3.Evaluation of alternatives
Having collected the information, the consumer clarify and evaluate the alternatives. There is, unfortunately no simple and single evaluation process used by all consumers or even by one consumer in all buying situations. The most current process of evaluation is cognitively oriented i.e. to judge the product largely on a conscious and rational basis. Consumer evaluation process  Try to satisfy a need.  Looks for certain benefits from the product.  Sees each product as a bundle of attributes with varying abilities for delivering the benefits sought to. Various considerations form the part of judgment such as product attributes, importance, weights, brand image, utility function for each attribute, and attitude etc. After evaluation of various alternatives, he takes the decision to buy.

Attributes of interest to buyers

Picture sharpness Camera speed Camera size  Price

Location Cleanliness Atmosphere Price

Color Effectiveness Germ-killing capacity Price Taste Flavor

Safety Tread Life Ride quality Grip Price

Marketing strategy to match with customers attributes

Redesigning (real repositioning) Alter the belief about the brand (psychological repositioning) Alter beliefs about the competitors brand (competitive repositioning) Alter the importance of weights Call attention to the neglected attributes Shift the buyers ideal

4.Purchase Decision
In the evaluation stage the consumer forms preferences among the brands in the choice set. The consumer may also form an intention to buy the most preferred brand. However,2 factors can intervene between purchase intention and purchase decision
Attitude of others Purchase Intention
Unanticipated situational factors

Evaluation of Alternatives

Purchase Decision

i.

Attitude of others

The extend to which another persons attitude reduces ones preferred alternatives based on two things 1.Other persons negative attitude towards the consumers preferred alternative. 2.Consumers motivation to comply with other persons wishes

ii.

Unanticipated Situational factors

A consumers decision to modify, postpone or avoid a purchase decision is heavily depend on the perceived risk.

Amount of perceived risk varies with the -amount of money at stake. -amount of attribute uncertainty. -amount of consumers self confidence. Consumers develop routines to reduce risk -decision avoidance. -information gathering from friends. -preference to international brand. -warranties.

Execution of purchase intention

A brand decision

Vendor decision (dealer)

Quantity decision (how much/how many)

Payment method decision (credit or cash)

Timing decision (when)

5.Postpurchase behavior
After buying and trying the product, the consumer will feel some level of satisfaction or dissatisfaction and level of satisfaction depends very much on the expectation and the product's perceived performance. If the product matches up to his expectations, the consumer is satisfied; if it exceeds, he is highly satisfied; and if it falls short of expectations, he is dissatisfied.

Marketer should monitor.. I. Post purchase satisfaction - disappointed, satisfied, delight II. Post purchase action - exit option, voice option. III. Post purchase use and disposal - throw it away or resale

How Consumers Use or Dispose of Products