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Consumer Buying Behavior
Consumer Markets and
Consumer Buying Behavior Consumer behavior is the actions a person takes in
purchasing and using products and services,
including the mental and social processes that
precede and follow these actions
Consumer Buying Behavior refers to the buying behavior of final
consumers
individuals & households who buy goods and services for
personal consumption.
Prof. P.V. Balakrishnan All these consumers make up the consumer market.
The central question for marketers is:
“How do consumers respond to various marketing efforts the
company might use?”
1 CB-2
Value of Customers Lifetime Customer Value
1. Transaction basis
1. Focuses firms’ efforts on retaining most valuable asset
a) Views each individual interaction as unique (Customers)
b) Calculate value of transaction
2. Increases efforts towards long-term goals
Determine margin on goods sold
Assess costs involved with customer acquisition 3. Primary risk is overestimation of retention rates
Margin – Acquisition costs 4. Four things are needed to successfully utilize LCV
2. Lifetime Customer Value a) Unique customer identification Cumulative Customer Profit
$
a) Views each customer as an asset or a series of interactions b) Customer purchase history
b) Calculate value of customer c) Customer communication data
Determine acquisition and response rates d) Accurate cost information
Compute relevant costs
1 2 3 4 5
Use acquisition and retention rates to compute lifetime customer
value Year
CB-3 CB-4
Model of Buyer Behavior Factors Influencing Consumer Behavior
Marketing and Buyer’s Black Box Buyer Responses Cultural
Other Stimuli Social
Social Personal
Personal
Marketing Buyer Characteristics Product Choice Age and Psycho-
Psycho-
Culture Reference Age and logical
Product Buyer Decision Process Brand Choice Culture Reference life-cycle
life-cycle logical
groups
groups
Price Dealer Choice Occupation
Occupation Motivation
Motivation
Place Economic Perception
Perception Buyer
Buyer
Sub-
Sub- Economic
Promotion culture Family
Family situation
situation Learning
culture Learning
Other Purchase Timing Lifestyle
Lifestyle Beliefs and
Beliefs and
Economic Roles Attitudes
Attitudes
Purchase Amount Social Roles Personality
Personality
Technological Social and
and and
and
class
class status self-concept
Political status self-concept
Cultural
CB-5 CB-6
Factors Affecting Consumer Behavior: Factors Affecting Consumer Behavior:
Culture Culture
Culture is the Most Basic Cause of a Person's Culture is the Set of Values, Perceptions, Wants &
Wants and Behavior. Behavior Learned by a Member of Society from
Family.
Subculture
Social Class
• Group of people with shared
value systems based on • Society’s relatively
common life experiences. permanent & ordered
• Hispanic Consumers divisions whose members
• African American Consumers
share similar values,
interests, and behaviors.
• Asian American Consumers
• Mature Consumers
• Measured by: Occupation,
Income, Education, Wealth
and Other Variables.
CB-7 CB-8
Factors Affecting Consumer Behavior: Factors Affecting Consumer Behavior:
Social Personal
Cars are often seen as a status symbol, and
marketers choose which element to present in
their advertising.
Compare this ad to the one on the next slide.
Click to continue
Personal Influences
Groups
Groups Family Buying Influence
Children can exert a
•Membership
strong influence on
•Membership
family buying decisions.
Johnson & Johnson reminds
customer’s of its commitment
to the American Family.
•Reference
•Reference What other companies use
children to influence
family buying decisions?
Click or pre ss spa cebar to return
Age and Life Economic Personality &
Cycle Stage Occupation Situation Self-Concept
Family (most important)
Family (most important)
•Husband, wife, kids
•Husband, wife, kids Social Factors
Social Factors
•Influencer, buyer, user
•Influencer, buyer, user Lifestyle Identification
Lifestyle Identification
Roles and Status
Roles and Status Activities
Activities Interests
Interests Opinions
Opinions
CB-9 CB-10
SRI Values and Lifestyles (VALS)
Lifestyle
Innovators
Innovators High Innovation
High Resources
Lifestyle is a mode of living that is
Lifestyle is a mode of living that is
identified by how people spend their
identified by how people spend their
time and resources, what they consider
time and resources, what they consider Thinkers
Thinkers Achievers
Achievers Experiencers
Experiencers
important in their environment, and
important in their environment, and
what they think of themselves and the
what they think of themselves and the
Believers
Believers Strivers
Strivers Makers
Makers
world around them.
world around them.
Survivors
Survivors
Low Resources Low Innovation
CB-11 CB-12
Factors Affecting Consumer Behavior:
Psychological Maslow’s Hierarchy of Needs
Motivation Self
Actualization
(Self-development)
Esteem Needs
Psychological (self-esteem)
Factors
Beliefs and Affecting Perception Social Needs
Attitudes (sense of belonging, love)
Buyers
Choices
Safety Needs
(security, protection)
Physiological Needs
Learning (hunger, thirst)
CB-13 CB-14
Attitude Beliefs
An attitude is “a learned predisposition to
An attitude is “a learned predisposition to Beliefs are a consumers subjective
Beliefs are a consumers subjective
respond to an object or class of objects
respond to an object or class of objects perception of how well a product or
perception of how well a product or
in a consistently favorable or
in a consistently favorable or brand performs on different attributes.
brand performs on different attributes.
unfavorable way.”
unfavorable way.”
CB-15 CB-16
Characteristics of
Attitudes and Preference
Valence Attitudes: Multi-attribute Model
Favorable / Neutral / Unfavorable
Positive / Indifferent / Negative Evaluation of Overall Intention
Brand
Product Brand to Behavior
Beliefs
Intensity Attributes Evaluations Buy
Strongly held versus weakly held
Very important to not at all important (ei) (bi) (Ao) (BI) (B)
Social
Confidence Attribute Brand Specific Norm
Importance Evaluations
Level of certainty
Ao = Σ biei + SN
CB-17
Measuring Attitudes Measuring Attitudes
How important is each of the following attributes Evaluate AOL on each of the following attributes?
associated with ISPs?
Excellent Poor
Very Not at all
Entertainment Value
Important Important
Educational Value
Entertainment Value
Ease of Site Navigation
Educational Value
Ease of Site Navigation
Coding 2 1 0 -1 -2
Coding 5 4 3 2 1
CB-19 CB-20
Measuring Attitudes Measuring Attitudes
• How important is each of the following attributes associated with ISPs?
Very Not at all Attribute AOL Roadrunner
Important Important Importance (ei)
Entertainment Value
Educational Value Ease of Site 5 X 0 =0 2 = 10
Ease of Site Navigation Navigation
Entertainment 4 X 2 =8 0 =0
• Evaluate AOL on each of the following attributes?
Excellent Poor
Value
Entertainment Value Educational 3 X 2 =6 0 =0
Educational Value
Value
Ease of Site Navigation
Overall Rating 14 10
• Evaluate Roadrunner on each of the following attributes?
Excellent Poor
Entertainment Value
Educational Value
Ease of Site Navigation
CB-21 CB-22
Measuring Attitudes Factors Influencing Attitude-Behavior Relationship
0 5 10
Ease of Site Navigation Evaluation of Overall Intention
Brand
Entertainment Value Product Brand to Behavior
Beliefs
Attributes Evaluations Buy
Educational Value
(ei) (bi) (Ao) (BI) (B)
= AOL Social
= Roadrunner Norm
Attitudes Intentions Behavior
CB-23
Simultaneous Attribute
Strategies Importance-Performance Grid
Ao = Σ biei + SN Attribute
Importance
Our
Performance
Competitor’s
Performance
Simultaneous
Result
Neglected
Poor Poor Opportunity
Strategies to stimulate interest: Competitive
High Good Disadvantage
Redesign the product Competitive
Good Poor Advantage
Alter beliefs about the brand Head-to-Head
Good Competition
Alter beliefs about competitors’ brands Null
Poor Poor Opportunity
Alter the importance weights False
Low Good Alarm
Call attention to neglected attributes False
Good Poor Advantage
False
Good Competition
Balakrishnan
Types of Buying Decision Behavior Buyer Decision Process
High Low Purchase
Involvement Involvement
Significant 1. Complex 3. Variety- Decision
differences Buying Seeking
between Behavior Behavior Evaluation Postpurchase
brands
Few 2. Dissonance- 4. Habitual of Alternatives Behavior
differences Reducing Buying Buying
between Behavior Behavior Information
brands
Search
Need
Recognition
CB-29 CB-31
Buyer Decision Process
Step 1. Need Recognition
Evoked Set
Buyer
Recognizes Needs Arising
An evoked set is the group of brands that
An evoked set is the group of brands that State Where the From:
a consumer would consider acceptable
a consumer would consider acceptable Buyer’s Needs a
from among all the brands of the are Fulfilled and Problem Internal Stimuli –
from among all the brands of the
product class of which he or she is the Buyer is or a
product class of which he or she is Hunger
Satisfied. Need.
aware.
aware.
External Stimuli-
Friends
CB-32 CB-33
The Buyer Decision Process The Buyer Decision Process
Step 2. Information Search Step 3. Evaluation of Alternatives
Consumer May Use Careful
Consumer May Use Careful
•Family, friends, neighbors Calculations & Logical Thinking
Calculations & Logical Thinking
Personal Sources
Personal Sources •Most effective source of
information Consumers May Buy on Impulse and
Consumers May Buy on Impulse and
•Advertising, salespeople
Rely on Intuition
Rely on Intuition
Commercial Sources
Commercial Sources •Receives most information
from these sources Consumers May Make Buying Decisions
Consumers May Make Buying Decisions
on Their Own.
on Their Own.
Public Sources •Mass Media
Public Sources •Consumer-rating groups Consumers May Make Buying Decisions
Consumers May Make Buying Decisions
Only After Consulting Others..
Only After Consulting Others
•Handling the product
Experiential Sources
Experiential Sources •Examining the product
•Using the product Marketers Must Study Buyers to Find Out
How They Evaluate Brand Alternatives
CB-34 CB-35
The Buyer Decision Process The Buyer Decision Process
Step 4. Purchase Decision Step 5. Postpurchase Behavior
Purchase Intention
Purchase Intention
Desire to buy the most preferred brand Satisfied Customer!
Desire to buy the most preferred brand
Cognitive Dissonance
Cognitive Dissonance
Attitudes Unexpected
Consumer’s
of Others Situational
Expectations of Product’s Performance.
Factors
Product’s Perceived
Performance.
Purchase Decision Dissatisfied Customer
Purchase Decision
CB-37 CB-38
Post Consumption Behavior: Complaint Response Behavior
How Customers Dispose of Products
63% of customers with a loss between $1 and
$5 did not complain
Not buy again.
54% Problem unresolved
Not buy again.
30% Problem resolved
Not buy again.
DON’T LET IT ARISE!
CB-40
Pentice-Hall
A Conceptual Model Of Service Quality
Loyalty: Retaining Customers
Word-of-Mouth
Past Experience
Customer retention = higher profits Communication
s
Personal Needs
5% retention rate increases profit by 25-95% Expected
Services
In e-apparel, repeat customers spend twice as Gap 5
much in months 24-30 CUSTOMER Perceived Service
Loyal Customers provide valuable referrals
Referred customers cost lot less to acquire PROVIDER Gap 1
Service Delivery
Gap 4 External
Communications
to Customers
E-bay spends less then $10 to get each new customer Gap 3
Referred customers use less support Service Quality
Specifications
Gap 2
Management Perceptions
of Customer Expectations
Source: Zeithaml, Parasuraman, and Berry (1990), Delivering Quality Service: Balancing Customer Perceptions and Expectations, The
CB-45 Free Press, New York, New York. CB-47
Five Critical Gaps Satisfaction – Loyalty Link
1. Service provider does not know what the
customer expects;
2. Wrong service-quality standards are set;
3. Service quality standards are not met;
4. What is delivered does not equal what was
promised;
5. Gaps 1-4 leads to service that does not equal
expectations.
Ref: Jones & Sasser, HBR, 1995
CB-48 CB-49
Stages in the Adoption Process Adopter Categories
Awareness: Consumer is aware of
Awareness: Consumer is aware of
product, but lacks information.
Percentage of Adopters
product, but lacks information. Early Majority Late Majority
Interest: Consumer seeks
Interest: Consumer seeks
Innovators
Information about new product.
Information about new product. Early
34% 34% Laggards
Adopters
Evaluation: Consumer considers
Evaluation: Consumer considers
trying new product.
trying new product. 13.5% 16%
Trial: Consumer tries new 2.5% Time of Adoption
Early Late
product on a small scale.
Adoption: Consumer decides
to make regular use of product.
CB-50 CB-51
ACCORD:
Adopter Categorization for New Products Influence (of Product Characteristics) on Rate of Adoption
Divisibility
Everett Rogers(1950s) surveyed a Divisibility
Can the innovation
Can the innovation
large sample of people to find out their be used on aapilot test/
be used on pilot test/
trial basis?
trial basis?
Risk
Risk
adoption process for new products. Do consumers perceive
Do consumers perceive Relative Advantage
Relative Advantage
the innovation as risky?
the innovation as risky? Is the innovation
Is the innovation
Based on this survey, he came up with the Economic, psycho-social?
Economic, psycho-social? superior to existing
superior to existing
products?
classification: products?
2.5% Innovators
13.5% Early Adopters Compatibility
Compatibility
Observability
Observability Does the innovation
Does the innovation
34% Early Majority Can results be easily
Can results be easily fit the values and
fit the values and
Observed or communicated
Observed or communicated experience of the
34% Late Majority experience of the
to others?
to others? Complexity target market?
Complexity target market?
16% Laggards Is the innovation
Is the innovation
difficult to
difficult to
understand or use?
understand or use?
CB-53
Balakrishnan
Review of Concepts
Define the consumer market and construct a
simple model of consumer buyer behavior.
Name the four major factors that influence
consumer buyer behavior.
List and understand the stages in the buyer
decision process.
Describe the adoption and diffusion process for
new products.
CB-57
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