UNIT -1

Consumer Behaviour

Who is a Consumer?

Any individual who purchases goods and services from the market for his/her end-
use is called a consumer.

In simpler words a consumer is one who consumes goods and services available in
the market.

Example - Tom might purchase a tricycle for his son or Mike might buy a shirt for
himself. In the above examples, both Tom and Mike are consumers.

What is Consumer Interest?

Every customer shows inclination towards particular products and services.

Consumer interest is nothing but willingness of consumers to purchase products and
services as per their taste, need and of course pocket.

Let us go through the following example:

Both Maria and Sandra went to the nearby shopping mall to buy dresses for
themselves. The store manager showed them the best dresses available with him.
Maria immediately purchased two dresses but Sandra returned home empty handed.
The dresses were little too expensive for Sandra and she preferred simple and
subtle designs as compared to designer wears available at the store.

In the above example Sandra and Maria had similar requirements but there was a
huge difference in their taste, mind set and ability to spend.

What is Consumer Behaviour?

Consumer Behaviour is a branch which deals with the various stages a
consumer goes through before purchasing products or services for his end
use.

Why do you think an individual buys a product?

• Need
• Social Status
• Gifting Purpose
Why do you think an individual does not buy a product?

• No requirement
• Income/Budget/Financial constraints
• Taste
When do you think consumers purchase products?

• Festive season
• Birthday
• Anniversary
• Marriage or other special occasions
There are infact several factors which influence buying decision of a consumer
ranging from psychological, social, economic and so on.

The study of consumer behaviour explains as to:

• Why and why not a consumer buys a product?

• When a consumer buys a product?
• How a consumer buys a product?
During Christmas, the buying tendencies of consumers increase as compared to
other months. In the same way during Valentines week, individuals are often seen
purchasing gifts for their partners. Fluctuations in the financial markets and recession
decrease the buying capacity of individuals.

In a layman’s language consumer behaviour deals with the buying behaviour of

individuals.

The main catalyst which triggers the buying decision of an individual is need for a
particular product/service. Consumers purchase products and services as and
when need arises.

According to Belch and Belch, whenever need arises; a consumer searches for
several information which would help him in his purchase.

Following are the sources of information:

• Personal Sources
• Commercial Sources
• Public Sources
• Personal Experience
Perception also plays an important role in influencing the buying decision of
consumers.

Buying decisions of consumers also depend on the following factors:

• Messages, advertisements, promotional materials, a consumer goes through

also called selective exposure.
• Not all promotional materials and advertisements excite a consumer. A
consumer does not pay attention to everything he sees. He is interested in only
what he wants to see. Such behaviour is called selective attention.
• Consumer interpretation refers to how an individual perceives a particular
message.
• A consumer would certainly buy something which appeals him the most. He
would remember the most relevant and meaningful message also called
as selective retention. He would obviously not remember something which
has nothing to do with his need.
Nature of consumer behaviour
Consumer behavior refers to the actions and decisions made by individuals and
households when purchasing goods and services. Understanding consumer
behavior is crucial for businesses because it allows them to develop effective
marketing strategies and products that meet the needs and preferences of their
target audience. The nature of consumer behavior is multidisciplinary and involves
various factors that influence the decision-making process of consumers. These
factors include cultural, social, personal, and psychological factors. Cultural factors
refer to the values, beliefs, and customs that influence the behavior of individuals in
a particular society. Social factors include family, friends, and other social networks
that influence consumer behavior. Personal factors include age, gender, income, and
lifestyle, while psychological factors refer to the attitudes, beliefs, and perceptions of
individuals.
Cultural Factors
Cultural factors are the values, beliefs, and customs that influence the behavior of
individuals in a particular society. Cultural factors can include things like language,
religion, social norms, and even cuisine. For example, in some cultures, it may be
customary to purchase gold jewelry as a symbol of wealth and status. In other
cultures, the use of certain products may be restricted or prohibited due to religious
beliefs.
Social Factors
Social factors include family, friends, and other social networks that influence
consumer behavior. People often make purchasing decisions based on the opinions
and recommendations of those around them. For example, a person may choose to
purchase a product based on a recommendation from a friend or family member.
Personal Factors
Personal factors refer to characteristics that are unique to an individual, such as age,
gender, income, and lifestyle. These factors can influence a person’s purchasing
decisions in various ways. For example, younger consumers may be more likely to
purchase trendy or fashionable products, while older consumers may prioritize
durability and quality.
Psychological Factors
Psychological factors refer to the attitudes, beliefs, and perceptions of individuals.
These factors can include things like motivation, personality, and perception of risk.
For example, a person may choose to purchase a particular product because they
believe it will make them feel happier or more confident.
Overall, the nature of consumer behavior is complex and influenced by various
factors. Understanding these factors can help businesses develop effective
marketing strategies and products that meet the needs and preferences of their
target audience.
Scope of consumer behaviour
Consumer behavior is a crucial aspect of marketing that involves understanding the
needs, preferences, and decision-making processes of consumers. The scope of
consumer behavior is broad and encompasses various aspects of marketing, such
as product development, pricing, promotion, and distribution.
Product Development
By understanding consumer behavior, businesses can develop products that meet
the needs and preferences of their target customers. This includes identifying the
features and benefits that are most important to customers and designing products
that align with these preferences. Consumer behavior research can also help
businesses identify gaps in the market and opportunities for innovation.
Pricing
Effective pricing strategies require an understanding of consumer behavior. By
analyzing consumer behavior data, businesses can identify the price points that are
most likely to be accepted by their target audience. This includes considering factors
like consumer demographics, purchasing habits, and perceptions of value.
Promotion
Advertising and promotion techniques are developed based on the behaviour of the
target audience. By analysing consumer behaviour data, businesses can identify the
most effective communication channels and messaging strategies for their products.
This includes considering factors like consumer demographics, media consumption
habits, and purchasing behaviour.
Distribution
Identifying the best distribution channels for their products is another key aspect of
consumer behaviour. By analysing consumer behaviour data, businesses can
identify the most effective distribution channels for their target audience. This
includes considering factors like consumer purchasing habits, geographic location,
and online behaviour.
Overall, the scope of consumer behaviour is broad and includes various aspects of
marketing. By understanding consumer behaviour, businesses can develop effective
strategies that meet the needs and preferences of their target audience, which can
lead to increased sales and profitability.
Importance of consumer behaviour
Consumer behaviour is an important aspect of marketing that helps businesses
understand their target customers. By studying consumer behaviour, businesses can
identify what motivates customers to buy their products or services, which can help
them, develop effective marketing strategies. There are several reasons why
consumer behaviour is important for businesses:
Understanding Customer Needs
One of the primary reasons why consumer behaviour is important is because it helps
businesses understand the needs and preferences of their target customers. By
analysing consumer behaviour data, businesses can identify the features and
benefits that are most important to customers, which can inform product
development and marketing strategies.
Developing Effective Marketing Strategies
Effective marketing strategies require an understanding of consumer behaviour. By
analysing consumer behaviour data, businesses can identify the most effective
communication channels and messaging strategies for their target audience. This
can help businesses develop advertising and promotion techniques that resonate
with their target audience, leading to increased sales and profitability.
Identifying Opportunities for Growth
Analysing consumer behaviour data can also help businesses identify opportunities
for growth. By identifying gaps in the market and understanding consumer needs
and preferences, businesses can develop innovative products and services that
meet the needs of their target audience. This can help businesses stay ahead of
their competitors and increase their market share.
Enhancing Customer Satisfaction
By understanding consumer behaviour, businesses can also enhance customer
satisfaction. By identifying the features and benefits that are most important to
customers, businesses can develop products and services that meet their needs and
preferences. This can lead to increased customer loyalty and positive word-of-
mouth, which can help businesses attract new customers and increase their
customer base.
Applications of consumer behaviour
Analysing market opportunity
Consumer behavior study help in identifying the unfulfilled needs and wants of
consumers. This requires examining the friends and conditions operating in the
Marketplace, consumer’s lifestyle, income levels, and energy influences. This may
reveal unsatisfied needs and wants. Mosquito repellents have been marketed in
response to a genuine and unfulfilled consumer need.

Selecting the target market

Review of market opportunities often helps in identifying district consumer segments
with very distinct and unique wants and needs. Identifying these groups, behaves
and how they make purchase decisions enable the marketer to design and market
products or services particularly suited to their wants and needs. For example,
please sleep revealed that many existing and potential shampoo users did not want
to buy shampoo fax price at rate 60 for more and would rather prefer a low price
package containing enough quantity for one or two washers. This finding LED
companies to introduce the shampoos sachet, which become a good seller.

Marketing-mix decisions
Once unsatisfied needs and wants are identified, the marketer has to determine the
right mix of product, price, distribution, and promotion. Where too, consumer
behavior study is very helpful in finding answers to too many perplexing questions.
The factors of marketing mix decisions are: i) product ii) price iii) promotion iv)
distribution

Use in social and non-profits marketing

Consumer behaviour studies are useful to design marketing strategies by social,
governmental, and not for profit organizations to make their programs more effective
such as family planning, awareness about AIDS.

CONSUMERS AS AN INDIVIDUALS

Not all consumers are alike – the marketplace is composed of many different
peoples with different backgrounds, countries of origin, interests, needs and wants,
and perceptions. Needs of consumers are different. Diversity in the marketplace calls
 for classification or segmentation of the market. Market segmentation is an attractive,
viable, and potentially highly profitable strategy for marketers.

Market segmentation is the process of dividing a market into distinct subsets of

consumers with common needs or characteristics and selecting one or more
segments to target with a distinct marketing mix. In the past, companies would mass
market their product i.e. offer the same product and marketing mix to all consumers.
With the widespread acceptance of market segmentation, companies now have
specific products for identified segments e.g. Colgate Max white, Colgate Vedshakti

Market segmentation requires a large enough population with sufficient money to

spend (general affluence) and sufficient diversity to lend itself to partitioning the
market into sizeable segments on the basis of demographic, psychological or other
strategic variables. Media choice is dependent on the segments targeted by the
company. Product range optimization can be executed based on the segmentation.
This also helps create a unique and differentiated proposition for key segments.

If all consumers were alike – if they all had the same needs, wants and desires, and
the same background, education and experience – mass (undifferentiated)
marketing would be a logical strategy. Its primary advantage is that it costs less: only
one advertising campaign is needed, only one marketing strategy is developed, and
usually only one standardised product is offered. When trying to sell the same
product to every prospective customer with a single proposition/ communication, the
marketer ends up portraying its product as a means for satisfying a common or
generic need. As a result, the product often ends up appealing to no one.

Different customers have different needs. By segmenting the market and choosing
target markets, companies can differentiate their products to provide the benefits that
the segments desire. Once a marketer has identified their segment, they can
choose media that is targeted to that segment for their advertising.

Segmentation strategy allows marketers to avoid head-on competition in the

marketplace by differentiating their offerings, not only on the basis of price but also
through styling, packaging, promotional appeal, method of distribution and superior
service.

Market segmentation is just the first step in a three-phase marketing strategy. After
segmenting the market into homogeneous clusters, the marketer then must select
one or more segments to target. The third step is positioning the product so that it is
perceived by the consumers in each target segment as satisfying their needs better
than other competitive offerings.

There are five criteria for effective targeting. A market segment should be:

1. Identifiable: marketer must be able to see or find the characteristic they have chosen
for segmentation
2. Sufficient (in terms of size): It must be large enough to be profitable to the marketer
3. Stable or growing: the consumers are not “fickle” and likely to change very quickly
4. Accessible (reachable) in terms of both media and cost, and
5. Congruent with the firm’s objectives and resources.
Customer is the focal point of every business or service organization.

Past and present information about customers is critical for targeting and developing
products and services, identifying trends and predicting the future customer base
and their needs.

It is the three elements of customer, product and order/transaction that are critical to
every organization and without which they are blind and without a cohesive data
architecture.

An enterprise-wide view of customer needs to incorporate two distinct and different

types of customers:

• Individual Customer
• Legal Entity Customer

Each of these types of customers have different attributes, characteristics, data and
marketing objectives.

The Individual Customer data model focuses upon the 'human' or individual
customer.

Individual customers have a broad range of characteristics that are well-suited to

being quantified by data. This data can be applied discretely or combined to provide
a broader view of the individual customer attributes, characteristics, activities and
relationships over time via analytic techniques.

Social Class Demographics

Lifestyle Group Psychographics

Family Life Cycle Income

Activities/Interests/Opinions Financial Profile

Household Education

Whether applying profiling, cross tabulation or linear regression techniques these

analytics depend upon accurate, consistent and clearly-defined data.

The planning, structuring and accumulation of this data requires data models that
reflect industry best practices, incorporate real-world/third party data and a
knowledge of how the business and industry use and interpret data.
This is the where data models are critical for understanding 'individual customer'. It is
the best-practice data model that provides the representation or 'picture' of that data,
its relationships and structure.

In practice developing a comprehensive view of customer requires the integration of

existing/legacy data, third-party data and new dimensions of customer previously not
considered or implemented.

CONSUMER NEEDS & MOTIVATION

Motivation is produced by a state of tension, by having a need which is

unfulfilled. Consumers want to fulfill these needs and reduce the state of
tension. For example, when you are very hungry, you are extremely motivated to
find food. Perhaps when you need a new pair of pants, you are a bit less motivated
to fulfill this need as compared to your need for food. In the case of needing pants, it
is important for marketers to help increase your motivation and/or specify your need
for their products – perhaps Diesel Jeans.

Motivation is the driving force within individuals that impels them to action. The
starting point of this process is the urge/drive to fulfil a need. Needs are the essence
of the marketing concept. Marketers do not necessarily create needs but make

consumers aware of needs.

 This model highlights the motivation process. We can see that the “drive” toward
behaviour will often end in the fulfilment of the need. The processes and effects of
previous learning tie strongly into choices made when the behaviour is defined.

Types of needs

• Innate Needs

Physiological (or biogenic) needs that are considered primary needs or motives e.g.
food, water, air

• Acquired / Psychogenic Needs

Learned in response to our culture or environment. Are generally psychological and

considered secondary needs. These may include needs for self-esteem, prestige,
affection, power and learning..

The example of the need for food compared to a new pair of jeans can be further
described by understanding types of needs. The need for food is more of an innate
need and is considered a primary need. The need for a pair of jeans would be
considered acquired. The need for clothing could be considered primary, but the
need specifically for a pair of jeans is acquired, especially when they are a certain
brand or designer jean.

Needs may have a positive or negative direction. There are in fact some products
we are NOT drawn to. For example, when people shop for funeral services, this is
not something they are usually drawn to but rather must pursue and purchase.

Goals:

The sought-after results of motivated behaviour is a goal. Generic goals are general
categories of goals that consumers see as a way to fulfill their needs e.g. goal to
complete Master’s programme

Product-specific goals are specifically branded products or services that consumers

select as their goals e.g. to complete Master’s programme from IIMs.

Continuing with our example of jeans, we can understand the types of goals that
exist. When a consumer states they want a pair of jeans, they have stated a generic
goal. When they announce they really want a pair of Calvin Klein jeans, then they
have stated product-specific goals.

Selection of goals:

The goals selected by an individual depend on their:

• Personal experiences
 The goals selected by individuals depend on their personal experiences, physical
capacity, prevailing cultural norms and values, and the goal’s accessibility in the
physical and social environment.

• Physical capacity
• Prevailing cultural norms and values
• Goal’s accessibility in the physical and social environment

Consumers have many possible goals when making decisions. They are strongly
influenced by their experiences, personality, and others’ opinions and input. When
choosing goals, they have to keep in mind what is socially acceptable and what they
can physically attain.

Personal Factors affecting Consumer Behaviour

Consumer Behaviour helps us understand the buying tendencies and spending

patterns of consumers. Not all individuals would prefer to buy similar products.

Consumer behaviour deals with as to why and why not an individual purchases
particular products and services.

Personal Factors play an important role in affecting consumer buying behaviour.

1. Occupation

The occupation of an individual plays a significant role in influencing

his/her buying decision. An individual’s nature of job has a direct influence on
the products and brands he picks for himself/herself.

Tim was working with an organization as Chief Executive Officer while Jack,
Tim’s friend now a retired professor went to a nearby school as a part time
faculty. Tim always looked for premium brands which would go with his
designation whereas Jack preferred brands which were not very expensive. Tim
was really conscious about the clothes he wore, the perfume he used, the watch
he wore whereas Jack never really bothered about all this.

That is the importance of one’s designation. As a CEO of an organization, it was

really essential for Tim to wear something really elegant and unique for others to
look up to him. A CEO or for that matter a senior professional can never afford to
wear cheap labels and local brands to work.

An individual’s designation and his nature of work influence his buying decisions.
You would never find a low level worker purchasing business suits, ties for
himself. An individual working on the shop floor can’t afford to wear premium
brands everyday to work.
 College goers and students would prefer casuals as compared to professionals
who would be more interested in buying formal shirts and trousers.

2. Age

Age and human lifecycle also influence the buying behaviour of

consumers. Teenagers would be more interested in buying bright and loud
colours as compared to a middle aged or elderly individual who would prefer
decent and subtle designs.

A bachelor would prefer spending lavishly on items like beer, bikes, music,
clothes, parties, clubs and so on. A young single would hardly be interested in
buying a house, property, insurance policies, gold etc. An individual who has a
family, on the other hand would be more interested in buying something which
would benefit his family and make their future secure.

3. Economic Condition

The buying tendency of an individual is directly proportional to his

income/earnings per month. How much an individual brings home decides
how much he spends and on which products?

Individuals with high income would buy expensive and premium products as
compared to individuals from middle and lower income group who would spend
mostly on necessary items. You would hardly find an individual from a low
income group spending money on designer clothes and watches. He would be
more interested in buying grocery items or products necessary for his survival.

4. Lifestyle

Lifestyle, a term proposed by Austrian psychologist Alfred Adler in 1929, refers

to the way an individual stays in the society. It is really important for some
people to wear branded clothes whereas some individuals are really not brand
conscious. An individual staying in a posh locality needs to maintain his status
and image. An individual’s lifestyle is something to do with his style, attitude,
perception, his social relations and immediate surroundings.

5. Personality

An individual’s personality also affects his buying behaviour. Every individual

has his/her own characteristic personality traits which reflect in his/her buying
behaviour. A fitness freak would always look for fitness equipment’s whereas a
music lover would happily spend on musical instruments, CDs, concerts, musical
shows etc.
Psychological Factors affecting Consumer Behaviour

Motivation

Perception

Learning

Beliefs and Attitude

Beliefs and attitude play an essential role in influencing the buying decision of
consumers. Individuals create a certain image of every product or service available
in the market. Every brand has an image attached to it, also called its brand image.

Consumers purchase products/services based on their opinions which they form

towards a particular product or service. A product might be really good but if the
consumer feels it is useless, he would never buy it.