Consumer Decision-Making Process

• Understanding consumer behavior and its influencing factors is crucial
• The consumer decision-making process involves five specific steps when making a purchase

The Consumer Decision-Making Process

• Need Recognition: A consumer identifies a need, becoming aware of the difference between their current state and a desired one
  • Internal stimuli: Personal feelings, emotions, or natural physical needs trigger the need
    • Example: Thirst leading to buying a drink
  • External stimuli: Surroundings or environment trigger the need
    • Example: Seeing a pizza ad and craving pizza, smelling bread from a bakery
• Information Search: A consumer seeks information about products from four main sources
  • Personal Sources: Recommendations from trusted people like friends and family
    • Example: A friend's iPhone recommendation
  • Commercial Sources: Information from companies or brands, such as advertisements and websites
    • Example: Browsing Apple's website for iPhone features
  • Public Sources: Media coverage, online reviews, and expert opinions
  • Example: YouTube tech reviews comparing iPhone to Samsung
  • Experiential Sources: Trying the product personally
  • Example: Testing an iPhone in an Apple store
    • This is the most direct way to verify suitability
• Evaluation of Alternatives: Consumers narrow down their options after gathering information, matching them to personal needs
  • Involves identifying possibilities, comparing based on priorities, and narrowing choices
  • Different consumers evaluate products differently, based on what they value (price, brand, performance)
  • Common criteria to compare products includes price, quality, brand reputation, product features, style, and ease of use
    • Camera quality and brand image can be deciding factors for the iPhone
    • Battery life and price can be deciding factors for Samsung
• Purchase Decision: Consumers decide which product or service to buy after evaluating alternatives
  • Two main factors influence this
    • Attitudes of Others: Opinions of friends and family
      • Example: Reconsidering a laptop purchase based on a friend's recommendation
    • Unexpected Situational Factors: Changes or events that impact the decision
      • Example: Buying a different TV due to the original choice being out of stock
  • Considerations include
    • When and where to buy
    • Last-minute influences
• Post-Purchase Behavior: Consumers evaluate their satisfaction after buying a product, comparing expectations to the product's actual performance
  • Two possible outcomes
    • Satisfaction (Positive Outcome): The product meets or exceeds expectations
      • This leads to happiness, repeat purchases, and recommendations
        • Example: Feeling happy after experiencing a smartphone with great battery life and camera
    • Dissatisfaction (Negative Outcome): The product doesn't meet expectations
      • This leads to regret, returns, complaints, and negative reviews
        • Example: Feeling unhappy with uncomfortable headphones that have poor sound quality
  • Cognitive Dissonance (Buyer's Remorse): Uncertainty after an expensive purchase
    • Causes unease about the decision
      • Example: Worrying about spending too much on a laptop after buying it
  • Companies can help reduce cognitive dissonance through
  • Reassuring marketing
  • After-sales service
  • Easy returns

Characteristics Affecting Consumer Behavior

• Shape decision making, influencing what, why, and how consumers buy

Cultural Factors

• Broadest influence on behavior
  • Culture: Basic values, perceptions, wants, and behaviors
    • Example: Arab culture and luxurious gifts for guests
  • Subculture: Unique values within ethnic, religious, or national groups
    • Example: Muslims purchasing halal certified food
  • Social Class: Divisions based on income, education, and occupation
    • Example: Preference differences in products

Social Factors

• Influences from interactions around the consumer
  • Groups and Social Networks: Affect attitudes and behavior
  • Membership Groups: Direct affiliation
    • Example: Sports team members buying similar brands
  • Reference Groups: Standards for comparison
  • Example: Teenagers buying what influencers wear
  • Opinion Leaders: Trusted experts
  • Example: Tech YouTubers influencing decisions
  • Family: Strong influence on brand choices
    • Example: Parents influencing brand choice

Roles and Status

• Define expectations based on societal or group position
• Example: A CEO buying a luxury business suit

Personal Factors

• Relate directly to consumer traits
  • Age and Life-cycle Stage: Changing behavior through life stages
  • Example: Young singles and families buying different sized homes
  • Occupation: Influences purchases
  • Example: Doctors buying medical supplies
  • ** Economic Situation**: Affects buying choices
  • Example: Buying more economical products during recessions
  • Lifestyle: Reflects choices in spending time and money
    • Example: Fitness enthusiasts buying gym memberships
  • Personality and Self-concept: Affects purchasing preferences
  • Example: Extroverts preferring social experiences, introverts preferring home products

Psychological Factors

• Mental and emotional states
  • Motivation: Inner drive toward satisfying needs
  • Example: Feeling tired pushing buying coffee
  • Perception: How information is selected, organized, and interpreted
  • Example: Viewing Apple as premium, influencing willingness to pay
  • Learning: Shapes consumer behavior long term
  • Example: Returning to Starbucks after positive experience
  • Beliefs and Attitudes: Influence brands
    • Example: Preferring organic groceries, if believing organic to be healthier

Segmentation, Targeting, and Positioning (STP)

• Segmentation: Dividing diverse markets into smaller groups based on shared traits or behaviors

Reasons for Segmentation

• Better understanding of customer needs
• Allows tailored marketing
• Efficient use of resources

Types of Segmentation

• Geographic: Based on location (country, region, city)
  • Example: Spicy burgers only in certain countries
• Demographic: Based on age, gender, income, and occupation
  • Example: Dove creating skincare products specifically for women
• Psychographic: Based on lifestyle, values, and social class
  • Example: Nike targeting athletes valuing fitness
• Behavioral: Based on usage patterns (occasions, loyalty, benefits)
  • Example: Airlines rewarding frequent flyers

Targeting

• Evaluating and selecting a segment to serve
  • Undifferentiated (Mass Marketing): Same message to everyone
  • Example: Basic products like sugar
  • Differentiated (Segmented Marketing): Different products for diverse groups
  • Example: Toyota offering different cars for families or for off road
  • Concentrated (Niche Marketing): Focus on one specific segment
  • Example: Luxury brands like Rolex targeting wealthy customers
  • Micromarketing (Local or Individual Marketing): Personalized marketing
  • Example: Local bakery personalizing cakes

Differentiation

• Creating unique and superior products

Positioning

• How a product is viewed in customers' minds

Positioning Maps

• Show perception of brands, related to attributes like quality or price

Example: Nike

• Nike segments the market geographically (urban cities), demographically (young adults, 18-35), psychographically (active lifestyle, health-conscious), and behaviorally (regular runners)
• Nike uses Differentiated Marketing, targeting various segments with tailored running shoes (e.g., professional runners, casual fitness enthusiasts)
• Nike differentiates through innovation and superior technology (lightweight materials, better performance)
• Nike positions itself as a premium brand offering the best quality, innovative technology, and performance-driven footwear

What is a product?

• Anything that a company offers to satisfy needs or wants Includes: Goods, services, experiences, events, ideas, and places
  • Example: iPhone, Netflix subscription

Product levels

• Core Product: The main benefit
  • Example: A car fulfilling transportation
• Actual Product: The physical product (brand, design, features)
  • Example: A specific Toyota Corolla model
• Augmented Product: Additional benefits (warranties, support, delivery)
  • Example: Free car servicing after buying a Toyota

Product lines and product mixes

• Product Line: Related products sold by one brand
  • Example: Apple's iPhone models
• Product Mix: The range of products a company offers
  • Example: Apple's iPhones, MacBooks, AirPods, Watches

Services

• Intangible: Cannot be touched
  • Example: Haircuts
• Inseparable: Produced and consumed simultaneously
  • Example: The barber cuts your hair while you are present
• Variable: Quality varies
  • Example: Hotels
• Perishable: Cannot be stored
  • Example: Empty airline seats

Brands

• Identify and distinguish products

Brand Development Strategies

• Line Extension: Same brand, same category, new forms
  • Example: Diet Coke
• Brand Extension: Same brand, new category
  • Example: Nike sunglasses
• Multibrands: New brand, existing category
  • Example: Procter & Gamble detergent brands
• New Brands: New brand, new category
  • Example: Toyota creating Lexus

Strategic Pricing (Long-term)

• Based on company goals, positioning, and market strategy
  • Example: Premium iPhone pricing

Functional Pricing (Short-term)

• Focused on day-to-day needs
  • Example: Black Friday discounts

Pricing Strategies

• Market-Skimming Pricing: High initial prices
  • Example: Apple initially launching with high prices
• Market-Penetration Pricing: Low initial prices
  • Example: Netflix initially offering low prices

Price Adjustment Strategies

• Discount Pricing: Price reductions
  • Example: Sales
• Segmented Pricing: Different prices for different groups
  • Example: Movie theatres
• Psychological Pricing: Based on perception
  • Example: $9.99 pricing a product instead if $10
• Promotional Pricing: Temporary lowering
  • Example: BOGO
• Geographical: Setting prices differently in different locations
  • Example: Prices vary from small locations to big cities
• Dynamic: Prices fluctuate based on supply and demand
  • Example: Airline tickets pricing
• International: Setting prices based on international market conditions
  • Example: Apple varying prices due to economics