Consumer Behavior PDF

Chapter 1 – INTRODUCTION TO THE STUDY OF CONSUMER BEHAVIOR Let us first differentiate the terms customer and consumer. While many use these terms interchageably, there is a trivial difference between customer and consumer in marketing aspects. In commerce and trade, these words are used scores of t...

Chapter 1 – INTRODUCTION TO THE STUDY OF CONSUMER BEHAVIOR Let us first differentiate the terms customer and consumer. While many use these terms interchageably, there is a trivial difference between customer and consumer in marketing aspects. In commerce and trade, these words are used scores of times in a day. Primarily, the customer is regarded as the “king” of business. Everything starts with the purchase of goods and services. They are the cause and purpose of all production and marketing activities. Without customers, business would surely fail. After the purchase of the said commodity, consumers come into the picture. Most dictionaries would define consumer as any person who purchases available goods and services for personal consumption. The consumers’ attitude, behavior, desires, and feedbacks play a significant part with respect to the marketing plans and policies of any business venture. The fact is that we are all consumers in some way or the other, no matter what our age, status, gender or ethnicity is. The consumer is the one who makes use or consumes the goods. The word consumer is usually misconstrued (misjudged) with the term customer, which speak of a person who purchases and pays for the product. Can an individual be both a customer and a consumer? YES. This happens whenever the person who purchased the said commodity used it for his own personal consumption, then the customer becomes the consumer at the same time. There are instances, however, when an individual buys a product not for his own use but perhaps for gifting purposes. In such cases, the customrer and the consumer are two separate individuals. In short, the customer is the purchaser of goods and services, while the consumer is the end-user. However, both roles can be achieved by a single individual if he purchased the said commodity for his own personal consumption. Defining Consumer Behavior I’m the one who went shopping for cosmetics in a famous department store in Makati, swatched some colors and quietly searched for the one that would match my skin tone while the beauty consultant is having a little chitchat with her colleague instead of assisting me and giving some suggestions. I’m the one who went into a half-empty coffee and pastry shop and patiently waited while the service crew seem “busy” doing everything but take my order. I’m the one who went into a laundry shop to ask about a missing shirt while the staff was busy with her cellphone while trying to pretend to listen to my inquiry. Yes, you might say, I kept my cool and was patient enough, not wanting to cause any scandal or start a confrontation. Being educated with proper manners, I did not make a big deal out of it. But do you know who else I am? I am the same person who will never come back to that store, not because of the quality of the makeup I was shopping for, or the taste of the beverage/food served at that particular cafe, or the smell of the clothes in the laundry shop-but because of the lousy service of the people working there. The funny thing is, it amuses me to see their bosses spending so much money in terms of marketing and advertising to attract people to patronize their stores’ products/services, when I was already there in the first place, and all they had to do to keep me was to give me a little assistance; show some courtesy and respect. I know that I’m just one person. But imagine how many clients did they have that had similar experience. All piled up, this could cause havoc to their respective businesses. Remember, customers are important for any business to sustain its operation and prosper. Take good care of your customers and give them the best possible treatment that they deserve. Consumer Behavior is the study of how individuals, groups, or organizations 1) select, 2) buy, 3) use, 4) or dispose the a)goods, b) services, c) ideas, or d) experiences to SATISFY NEEDS and WANTS. Consumer Behavior may be defined as the “interplay” of forces that takes place during a consumption process, within a consumer’s self and his environment. This interaction takes place between three elements: a) knowledge, b) affect, c) behavior. Consumer behavior is both a decision process and a physical activity that individuals engage in when evaluating, acquiring, using and disposing of goods and services to satisfy one’s needs and desires. This process begins with pre-purchase activity and ends with post- purchase experience. Moreover, consumer behavior rationalizes the reasons and logic that brings about purchasing decisions and consumption patterns. This subject aims to describe and enlighten the processes through which buyers make decisions. Consumer Interest Each and every one of us demonstrates preference towards certain commodities and services. However, as consumers, our interests vary. Though somewhat similar, consumers are unique in themselves; our needs and wants are varied and diverse from one another; and we have different consumption patterns and behavior. While we all want to have what we want and need in life, circumstances do not make it possible at all times. Generally speaking, we are bounded by limitations. For most part, it is always the case of what our pockets can afford. Example, Phoebe and Piper are twins who are about to attend a graduation ball. As such, both girls are excited to look for something elegant to wear for the event. They decided to go shopping together. Both of them have the same amount of cash on hand. Piper was able to buy the dress she wanted with matching pair of shoes and bag. Phoebe, on the other hand, went home empty handed. She felt that the dresses and accessories were a bit pricey and it’s not practical as she won’t be able to use it many times. She decided to look elsewhere some other time. In the given example, Phoebe and Piper had similar requirements but there was a big difference in their style, mind set and ability to spend. One is practical and the other rationalizes that it’s a special occasion and it’s not every day that she gets to splurge on good stuffs. Who do you think had a better judgment? Consumer Behavior is the process which deals with the various stages an individual goes through prior to the acquisition of certain goods and/or services. An intelligent consumer decides on the basis of the following parameters: a) what to buy?, b) when to buy?, c) where to buy?, d) how to buy?, and c) how much to spend? Scope and Application of Consumer Behavior Before deciding, a consumer should answer all or a combination of the following questions: a) What?, b) Why?, c) How?, d) When?, e) Where?, f) How much? g) How often? People normally purchase goods and services due to the following reasons:  There is a need;  Future use;  Sale;  Social status;  Gifting purposes. Though the above questions and reasons are mostly centered on the individual consumer, the scope of consumer behavior embraces not only the actual customer and his act of purchasing. In addition, let us not discount the range of roles played by various personalities and the inspiration and influence they exercised on the ultimate purchase decisions. To define the scope of consumer behavior, it is of the essence to apportion the scope in three (3) major segments; 1. The decision process; 2. The consumer determinants; 3. The external environment. As consumers, we are aware of the reasons as to why we purchase goods and services. Topping the list is the need for the said commodity or service. However, realistically speaking, we sometimes also purchase things that are not necessarily needed. If you would recall your lessons from basic economics, there is a difference between human wants and human needs. HUMAN NEEDS  Goods and services necessary to “sustain” life;  Basic needs;  Needed from birth ‘til death;  For survival;  Food – example of the most basic need of all living creatures. HUMAN WANTS  Goods and services that are not necessarily needed for survival but are nonetheless sought to improve the quality of living;  Aside from comfort, they are sometimes associated with status symbol, luxury, and prestige. Examples: Cars and jewelries. A NEED is something that you’ve got to have. A WANT is something you would like to have. Our needs and wants are endless. Why? Because it is just but normal for humans to wish to acquire more to improve the quality of one’s life. But contentment is another issue when it comes to consumer behavior. And since we cannot have everything in life, a wise consumer must knowhow to select a LOGICAL CHOICE from the AVAILABLE OPTIONS. When making decisions, opt for the best that fits with your goals, purpose, needs, lifestyle, values, and other parameters that may affect your way of living. Evaluation of Alternatives In life, there is always a choice. In most cases, there are number of options to choose from. We should not limit ourselves to what is just available. Learn to scout for alternatives or substitutes. When doing some assessment, consider the following; 1. Degree of importance; 2. Product attributes; 3. Brand beliefs; 4. Total product satisfaction.  People are very demanding. That’s a fact. However, despite our demands, economics would always remind us that our demands for commodities are dependent on its price tag. Recall the Law of Demand in Basic Economics. The Law of Demand affirms that, if all other aspects stay equal and constant (C...... P......), the higher the price of a commodity, the less people will demand that good. Simply put, the higher the price, the lower is the quantity demanded. The amount of a good that buyers procure at a higher cost is less. Consequently, people will logically forestall buying a product that will compel them to omit the consumption of other significant stuffs. Common sense and simple observation are consistent with the downward sloping of the demand curve. People ordinarily buy more of a given product at low price than they would at a high price. The plain fact that businesses have “Sales” is a concrete evidence of their belief in the Law of Demand. “Lower prices are needed to motivate people to buy.” Driving Forces of Consumer Needs 1. Time; 2. Changed circumstances; 3. Product acquisition; 4. Product consumption; 5. Individual differences; 6. Market influences. Need Recognition People normally recognize the need to purchase additional goods/services based on the following:  When the consumer is running out of a commodity;  When the current commodity is not satisfying the need;  When another commodity seems superior to the one currently being used. Consumer Behavior & Factors that Influence Demand 1. Income. An increase in allowance (if you’re a student) or increase in salary (if you are an employee) triggers an increase in one’s purchasing power. This is a normal occurrence as people now has the means to buy more of what he needs (and wants). Unfortunately, it is very rare to hear that in such cases an increase in income results in higher savings. Example. You love drinking coffee. You used to drink 3 in 1 instant coffee. With the increase increase in allowance or income, would you:  a. Put the extra allowance or income as part of savings, or b. Run to Starbucks and order Cappuccino? Realistically speaking, most people would go for option B. Reasons may vary. You can afford it. Besides, you can’t bring that extra money when you die-so go ahead and sip a good cup of coffee at Starbucks. Then again, maybe you prefer Seattle’s Best. 2. Climatic/Seasonal Condition. Consumers would naturally purchase commodities based on what is needed at a particular frame. Notice the increase in sales of airconditioning units, swimsuits, and halo-halo during the SUMMER months. Similarly, some of these items are put on sale during the c___ months just to make some sales. Also, there is demand for candles during All SAINT DAY; lanterns and puto bumbong during CHRISTMAS season; polka dots, round fruits and fireworks during NEW YEAR; flowers and chocolates during Valentines-these are just some examples of seasonal demands. 3. Price of Related Goods. a. Complementary Goods – goods purchased along with. Example: Coffee and Sugar. People normally drink coffee with sugar. If you are the type who cannot drink coffee without sugar, then you would have to lessen the consumption of your favorite morning drink if there is price increase in sugar. b. Substitute Goods – goods purchased instead of. Example: Coffee and Tea. If the price of coffee increases, then you would have to look for an alternative drink which is probably tea and be contented with its so-called healthier benefits despite the difference in taste. 4. Price Expectations. To buy more of a product in case there is an expected price increase of the said good. Example: For those who have cars, an announced price increase in gasoline would make you go to the nearest gasoline station without delay for a full tank. After all, who wants to pay more? 5. Tastes and Preference of Consumers. Fashion changes prompted by advertising. What is “In or Uso” is what consumers would want to have. Example: Mini skirt. Most ladies, especially the teens, are fashion-conscious. They want to look slim and sexy. There are those who can carry the outfit and really look gorgeous in it. But there are also a bunch who look like “trying hard.” What would be your reaction if you see a 70-year old grandma who weighs 150-pounds in a pair of studded leather mini skirt? I wonder... In reality, there are number of factors which influence the buying decision of a consumer ranging from psychological, social, economic, and many others. The study of consumer behavior explains as to:  Why and why not a consumer buys a product?  When a consumer buys a product?  How and how often a consumer buys a product? To simplify, consumer behavior, in layman’s language, deals with the buying behavior of individuals based on his purchasing and consumption experience. The core channel which prompts the buying decision of a person is the need for a certain commodity. When there is a need, there is demand. Applications of Consumer Behavior 1. Analyzing Market Opportunities. Studying consumer behavior helps identify unfulfilled needs and wants of the buying public. Studies conducted may reveal unsatisfied needs and wants. A good business can tap into these groups and use it as opportunities to offer something that would entice the crowd. 2. Selecting Target Market. Periodic re-assessment of market opportunities time and again helps in identifying certain consumer segments with very distinct and unique wants and needs. Observing how these groups behave and how they make purchase decisions may help marketers in designing products and services that are tailored-fit for these specific groups. Example: Many people cannot afford to buy commodities in big quantities due to budget constraint. Good thing most basic goods such as coffee, milk, shampoo, cooking oil, condiments, and many others come in sachets making it possible for many to purchase such items. 3. Marketing-Mix Decisions. The study of consumer behavior does not end with the identification of target market. The marketer has to further determine the right marketing mix for their respective business to earn and benefit as well. Also, consumer behavior study is very useful in discovering reactions and remedies to many challenging matters. The factors of marketing mix decisions are also known as the four Ps of marketing. 4. Use in Social and Non-Profit Marketing. This is done to design marketing strategies to make their programs more effective and increase awareness that would benefit the society in general. Examples are family planning and environmental advocacies. Why Study consumer behavior? The main purpose for the study of consumer behavior is to better understand human actions and reactions in the best possible manner. For Business Management: Companies study the behaviors of consumers constantly for their benefits;   to assist in the development of marketing and societal concepts;  to stay in business by attracting and retaining customers;  to benefit from understanding consumer problems;  to analyze market opportunities;  to aid marketing mix decisions that involves product, price, promotion, and distribution;  to establish competitive advantage;  to foster ethics in marketing. Consumers “evolve” with time, exposure, learning, and experience. They should not be taken for granted. Understanding of consumer behavior is a prerequisite for sustained success in any business and marketing programs. The study of Consumer Behavior covers: 1. Consumers as Individuals; 2. Consumers as Decision Makers; 3. Consumers in the Market Place; 4. Consumers and Cultures; 5. Consumers and Sub-Cultures. Importance of Studying Consumer Behavior The study of consumer behavior has its own share of significance. Otherwise, why waste time, money, and effort to scrutinize the needs and wants of the people? Is it just because businesses want to earn more? Is it really just for the money? Below are some collected reasons to justify the importance of studying consumer behavior: 1. Production Policies. Policies are very important to earn and maintain the trust of consumers. Consumer behavior is not just limited to taste and preference. Business enterprise must consider also the habits, culture, and traditions of its patrons. A good example is the non-inclusion of pork meat due to religious restrictions. Production policies must adhere to specifications with integrity. Of course, production policies may differ when they are catering to a different set of consumers. 2. Price Policies. Most buyers are conscious of the price tag. People tend to compare prices vis-a-vis alternatives or substitutes. Prices should be competitive and regulated to benefit both the consumers and the business sector.  3. Decision concerning channels of distribution. A firm’s distribution objectives will eventually be favorably linked. Rate of charge has to be traded off alongside speed of delivery and intensity. Notice the difference in price of similar products sold in a 24- hour convenience store as compared to those sold in supermarkets. Which one sells cheaper? Other prospects draw in “parallel” distribution. In today’s day and age, many products and services are made available through conventional channels (physical outlet stores) and via the internet – thus increasing the distribution channels and option availability. 4. Sales Promotion Decisions. Sales motivates people to buy more. Our brains are “wired” on sales being associated with paying less leading to bigger savings. Promotional campaigns awaken our desire to rush to the mall and avail of big discounts. It is a win-win scenario for both consumers and the enterprise. 5. Developing Marketing Opportunities. Understanding consumer needs, expectations, glitches, and other issues are beneficial for marketers to design and offer something “new” to satisfy its target market. This could serve as a challenge for marketers and see it as an opportunity to create something that would address most concerns. 6. Swift Launch of New Products. Due to technological advancement, innovation and creation of new products has become more extensive and widespread than ever. Take the case of mobile phones. We see them launch new models almost every year. And many of us have more than one cellphone at hand because we tend to buy more than what we actually need. Many want to have the “latest” and not be outdated. So what do we do with so much gadgets? 7. Implementing the “Marketing Concept.” The marketing concept is the philosophy that businesses should first and foremost analyze the needs of their market and then make decisions to deliver the desired customer satisfaction and delight – better than their competition. Evolution of Consumer Behavior Consumers draws its concepts from:  Psychology  Sociology  Marketing  Economics  Anthropology. Orientations on the Evolution of Consumer Behavior  Selling Orientation  Marketing Orientation  Manufacturing Orientation  Comprehensive Consumer Orientation. In a Nutshell Consumer Behavior has many dimensions. Its many facets are characterized by different needs which can be unique in its own ways. Even the patterns of consumption vary from one consumer to another. Understanding therefore, these many components, is extremely valuable and it work both ways. For the marketers, appropriate products are produced – and the consumers get what they need. The cycle continues and business flourishes and both parties, seller and buyer, began to know each other better. This is symbiosis (mutualism; cooperative relationship). Chapter 2 – MOTIVATION, ABILITY, AND OPPORTUNITY Consumer Motivation and Its Effects Motivation comes from the Latin word “movere” which means “to move.” Motivation is what moves people. It is defined as “an inner state of arousal,” with the aroused energy directed to achieving a goal. The motivated consumer is energized, ready, and willing to engage in a goal-relevant activity. For example, if you learn that a much-anticipated electronic game will be released next Tuesday, you may be motivated to be ready to buy and download early that morning. Consumers can be motivated to engage in behaviors, make decisions, or process information, and this motivation can be seen in the context of acquiring, using, or disposing of an offering. High-Effort Behavior One outcome of motivation is behavior that takes considerable effort. For example, if you are motivated to buy a good car, you will research vehicles online, look at ads, visit dealerships, and so on. Likewise, if you are motivated to lose weight, you will buy low-fat foods, eat smaller portions, and exercise. Motivation not only drives behaviors consistent with a goal but also creates a willingness to expend time and energy engaging in these behaviors. Thus, someone motivated to buy a smartphone may earn extra money for it, drive through a storm to reach the store, and then wait in line to buy it. Note, however, that consumers try to match anticipated and actual effort. If they believe their anticipated effort will be too much – if it is too much trouble to wait online, for instance – they will simplify the decision (by ordering online or waiting until the next day). Conversely, if consumers think an important decision will be too simple, they will complicate it with extra effort. High-Effort Information Processing and Decision Making Motivation also affects how we process information and make decisions. When consumers are highly motivated to achieve a goal, they are more likely to pay careful attention to it, think about it, attempt to understand or comprehend goal-relevant information, evaluate that information critically, and try to remember it for later use. This takes a lot of effort. For example, if you are motivated to buy a new piano keyboard, you might scour websites looking for a sale. If someone mentions an online retailer that has keyboard sales from time to time, you might subscribe to that retailer’s promotional e-mails. However, when consumers have low motivation, they devote little effort to processing information and making decisions. For example, your motivation to purchase the best paper clips on the market is likely to be low. You would devote little attention to learning about the characteristics of paperclips, and you would not stop to think about what it would be like to use various types of paperclips (colored or uncolored, aluminum or steel, small or large). You may use decision-making shortcuts, such as deciding to buy the cheapest brand or the same brand you bought the last time. This is, in fact, how consumers tend to buy common grocery products. Most research on consumer behavior has focused on consumers’ motivation to process information accurately, as just described. Recent research has focused on a different type of motivation involved in information processing that is called motivated reasoning. When consumers engage in motivated reasoning, they process information in a biased way so that they can obtain the particular conclusion they want to reach. For example, if your goal is to lose weight, and you see an ad for a diet product, you might process the ad in a biased way to convince yourself that the product will work for you. If we want to believe that we are not vulnerable to the ill effects of smoking, we may be more likely to smoke if we are aware of smoking cessation products that are touted as “remedies.” Because remedies exist to help stop smoking, we can use motivated reasoning to convince ourselves that smoking is not so bad after all. As another example, because we want to think about good things that can happen to us rather than bad things, we may underestimate the likelihood of facing problems such as becoming ill – and fail to take preventive steps to avoid doing so. We may be particularly prone to motivated reasoning when our self-esteem is at stake or when we desperately hope to achieve a particular goal (like weight loss) or avoid a negative outcome (like becoming ill). Motivated reasoning is a developing field, and most of the discussion that follows focuses on the motivation to process information accurately. Felt Involvement A final outcome of motivation is that it evokes a psychological state in consumers called involvement. Researchers use the term felt involvement to refer to the psychological experience of the motivated consumer. Felt involvement is a self-reported arousal or interest in an offering, activity, or decision. Types of Involvement 1.Enduring involvement exists when we show interest in an offering or activity over a long period of time. Car enthusiasts are intrinsically interested in cars and exhibit enduring involvement in them. Enthusiasts engage in activities that reveal this interest (e.g., going to car shows, visiting car websites, and going to dealerships). 2.Situational (temporary) Involvement is a temporary interest in an offering, activity, or decision, often caused by situational circumstances. In most instances, consumers experience situational (temporary) involvement with an offering or activity. For example, consumers who exhibit no enduring involvement with cars may be involved in the car-buying process when they are in the market for a new car. After they buy the car, their involvement with new cars declines dramatically. 3.Cognitive involvement is the interest in thinking about and learning information pertinent to an offering, activity, or decisions. Researchers also distinguish between cognitive and affective involvement. Cognitive involvement means that the consumer is interested in thinking about and processing information related to his goal. The goal therefore includes learning about the offering. A figure-skating fan who is interested in learning all about ice- dance champions Meryl Davis and Charlie White and the technicalities of their performances would be exhibiting cognitive involvement. 4.Affective involvement is the interest in expending emotional energy and evoking deep feelings about an offering, activity, or decision. Affective involvement means that the consumer is willing to expend emotional energy in or has heightened feelings about an offering or activity. The consumer who listens to music to experience intense emotions or to relive a particular even in life is exhibiting strong affective involvement. Objects of Involvement As many of this chapter’s examples indicate, consumers may exhibit cognitive and/or affective involvement in objects. These objects can include a product or retail category such as cars or cosmetic stores or can involve experiences such as white-water rafting. You might be involved with clothing because you enjoy shopping for such products and see them as important for your self-expression. Consumers can also exhibit cognitive and/or affective involvement with a brand by being emotionally attached to it, as one might be with a particular musical band or one’s iPod. When one is emotionally attached to and involved with a brand, one views the brand as an extension of oneself and feels a great deal of passion toward the brand. Consumers can also be involved with ads that are interesting or relevant to them. In Japan, ads that emphasize interpersonal relationships, social circumstances, and nonverbal expressions generate more involvement than ads with clearly articulated and spoken messages. Consumers may also be involved with medium (like TV, newspapers, or the Internet) or with a particular article or show in which an ad is placed. The Super Bowl’s huge global audience demonstrates how involved consumers are with this televised event. A person may get so involved in interacting with a particular company’s website that he may view it as “play.” Response involvement is interest in certain decisions and behaviors. Consumers involved in certain decisions and behaviors are experiencing response involvement. For example, consumers may be highly involved in the process of deciding between brands. Because consumers can be involved with many different entities, it is important to specify the object of involvement when using the term involvement. For instance, consumers who are involved with brands because they are attached to them are unlikely to be involved in deciding which brand to buy since they already think their brand is the best. Similarly, consumers can be very involved in an ad because it is funny or interesting, yet they may not be involved in the advertised brand because they are loyal to another brand. We are motivated to behave, process information, or engage in effortful decision making about things that we feel are personally relevant. And we will experience considerable involvement when buying, using, or disposing of them. Think about all the behaviors that you engaged in when deciding where to go to college – obtaining applications and information packets, searching the Web, visiting campuses, weighing the information about each school, and choosing the school you will attend. You probably found the task of making this decision personally involving and were interested, enthusiastic, and perhaps overwhelmed during the process. Finally, we are also motivated to think deeply about issues pertinent to a given decision when we believe we will have to justify or explain our decisions.