Consumer Behaviour Textbook PDF

Okay, here is the text from the images converted into a structured markdown format. # Consumer Behaviour Consumer Behaviour ## Agenda 1. What is Consumer Behaviour? 2. Types of Consumers 3. Consumer Behaviour Models 4. Buying Decision Model ## What is consumer behaviour? The study of how individ...

Okay, here is the text from the images converted into a structured markdown format. # Consumer Behaviour Consumer Behaviour ## Agenda 1. What is Consumer Behaviour? 2. Types of Consumers 3. Consumer Behaviour Models 4. Buying Decision Model ## What is consumer behaviour? The study of how individuals, organizations and groups select, buy, use and dispose of goods, services, ideas, experiences to satisfy their needs and wants. ## Types of Consumers * **Consumers** * Buy for personal consumption!! * **Organisational Buyers/ Industrial Buyers** * Buy for organizational activity!! ## Consumer Buying Behaviour Model Model of Consumer Behavior | | Marketing Stimuli | Other Stimuli | | :----------------------------- | :--------------------------------------------- | :--------------------------------- | | Products & services | Economic | Consumer Psychology | | Price | Technological | Motivation | | Distribution | Political | Perception | | Communications | Cultural | Learning | | | | Memory | | Consumer Characteristics | Cultural | Buying Decision Process | | Social | Post-purchase behavior | Product choice | | Personal | | Brand choice | | | | Dealer choice | | | | Purchase amount | | Consumer Buying Black Box(CBBB) | Purchase decision | Purchase Timing | | | Problem recognition | Payment Method | | | Information search | Purchase Decision | | | Evaluation of alternatives | | | Cultural | Social | Personal | Psychological | | :---------- | :---------------- | :-------------------------- | :------------ | | Culture | Reference groups | Age and life-cycle stage | Motivation | | Subculture | Family | Occupation | Perception | | Social class | Roles and status | Economic situation | Learning | | | | Lifestyle | Beliefs and attitudes | | | | Personality and self-concept | Buyer | ## Consumer Characteristics There are four factors that determine the characteristics of consumer behaviour: personal, psychological, social, and cultural. All factors have a major impact on a consumer's behavior and the characteristics that define a customer will change as her/his life changes. ## Cultural Factors Culture, Subculture and Social class are Fundamentally affecting to consumer buying behaviour * **Culture** The combination of rituals, habits,beliefs, artifacts, customs which are shared by a large no. of people. The fundamental determinant of person's buying behaviour. Ex: American youth buying pattern is different from Sri Lankan Youth * **Sub Culture** A segmented, included part of the main culture which has its own rituals, customs and beliefs. Provide more specific identification to its member. Ex: Nationalities, religions, racial groups, State University subculture * **Social Class** Relatively homogeneous and enduring divisions in a society, hierarchically ordered and with members who share similar values, interests and behaviours. Ex: In USA- Upper Class, Middle upper class, Middle lower class Social- Economic Classification ## Characteristics of a social Class * Within a class, people tend to behave alike * Social class conveys perceptions of inferior or superior position * Class may be indicated by a cluster of variables (occupation, income, wealth) * Class designation is mobile over time ## Social Factors * Reference groups * Family * Social roles * Statuses **Reference Groups** The collection of all people who has a direct or indirect influence on their attitudes or behaviour. * ***Primary groups:** with whom person interact continuously and informally (family, friends, neighbours, coworkers)* * ***Aspirational groups:** The groups into which a person hopes to join (Association of Business Management, SoB)* * ***Cliques:** small groups whose members communicate frequently. Members are similar and it facilitates for effective communication and insulate cliques from new ideas. Ex: Family cousins cliques* * ***Membership groups:** the groups has a direct influence on consumer's behaviour or attitudes.* * ***Secondary groups:** with whom person interact less continuously and formally (religion, professional body, trade unions)* * ***Dissociative groups:** The groups into which a person dislike reject to join (Sri Lankan Politics, Prisoners)* * ***An opinion leader:** The person who provides information about a specific product, product category. Recommend a particular brand* **Family** the most basic (primary) organization which influence to individual consumer behaviour very closely. * ***Family of orientation:** Consist with parents and siblings. An individual obtain an orientation to religion, economics, politics, love and sense of self ambition* * ***Family of reproduction:** an individual's spouse and children. Clothing, food, leisure activities are determined through the family of reproduction. Ex: couple t-shirts, family food packs* **Roles and Status** Role implies activities a person is expected to perform and each role in turn connotes a status. Ex: Role of father in family and status for him. ## Personal Factors Personal Factors That Impact Consumer Buying Behavior * ***Age and Stage in the life cycle stage:** consumption is depending on age and life cycle stage - Ex: baby dressing in baby age and get preparation for new child birth* * ***Occupation and Economic Circumstances:** Different professions and occupations require different products and behaviours and economic resources matters for consumption. Ex: High scale executives prefer Mercedes, Gucci* * ***Personality and Self-Concept:** a set of distinguishing human psychological traits that lead to relatively consistent and enduring responses to environmental stimuli. Ex: Self-confidence, dominance, asymmetry, deference, sociability,* *** **Age**: This refers to the length of time a person has been alive. ***Self-concept**: This is how a person sees themself. It is influenced by a person's thoughts, feelings, and experiences. ***Life stage**: This refers to the different periods of a person's life. For example, infancy, childhood, adolescence, adulthood, and old age. ***Lifestyle**: This refers to the way a person lives their life. It includes their habits, interests, and values. ***Occupation**: This is a job or profession that a person has. ***Values**: These are the things that are important to a person. They guide a person's behavior and decision-making. ***Wealth**: This refers to the money and possessions that a person has. ***Personality**: This refers to the combination of a person's unique characteristics, such as their thoughts, feelings, and behaviors. **Family Life Cycle** The image shows a curve which charts the change in Average Spending potential as one progresses through various stages * Bachelor * Newly married * Empty Nest * Family Nest 1 * Family Nest 2 * Solitary Survivor **Bachelor Stage (Low Income, Low Expenses)** During the bachelor stage people are usually characterized by being interested mainly in appearances. Therefore, people at this stage tend to invest more in fashionable clothing and vehicles. Impulsive buying as well as premium buying is a common characteristic of the Bachelor stage. **Newly Married (High Income, High Expenses)** In the family life cycle, the new married couples are considered to be in a better financial position in the initial stage due to the absence of children. It might be possible that both, the husband and wife, are earning members. Thus, the buying decisions focus on quality and not quantity. A family person will always think about savings and insurances, and at the same time, they will invest in long term products like good furniture, new home, etc. Once married, they are less prone to impulsive decisions. **Families in full nest 1 and 2 (High Income, Low Expense)** This segment of the family life cycle consists of families already having children. The number of children may vary and hence they are categorised in Nest 1, Nest 2 etc. The purchases of these people are dominated by the children's needs mostly. Thus, people having 2 kids are likely to save money and spend more in the future of their children (this is most targeted by insurance companies and products like Boost and Complan) **Empty Nest (Low Income, Low Expense)** In the empty nest category, children are going away from home. This type of segment may be targeted for investing in their children who are away from home or to start spending money for their own vacations and hobbies and also focusing on savings for the retirement period. **Solitary Survivor (Low Income, Low Expense)** This can consist of either a widow/widower who are still working or who are retired. Their main focus is on savings and their purchases are dominated by accommodation and medication mostly. **Brand Personality** Personality Factors Cont. Consumers prefer to match their personalities with suitable brands which are backed by brand personalities 1. Sincerity- down to earth, honest, wholesome, cheerful Disney 2. Excitement- daring, spirited, imaginative, up to date MTV 3. Competence- reliable, intelligent, successful CNN 4. Sophistication- upper-class and charming Benz 5. Ruggedness- outdoorsy and tough Levi's ***Lifestyle and Values**: Lifestyle is a person's pattern of living in the world as expressed in activities, interests, and opinions. Ex: A computer manufacturer has recognized that computer buyers are achievement-oriented and aim the brand more clearly in their lifestyle, achiever lifestyle.* ## Key Psychological Processes Motivation:. A need become a motive when it is aroused to a sufficient level of intensity to drive us to act. There are biogenic needs and psychographic needs **Theories of Motivation** * Maslow's Theory * Herzberg's Theory * Freud's Theory **Maslow's Hierarchy of Needs** The image shows a pyramid with the following levels from bottom to top : * physiological needs breathing, food, water, shelter, clothing, sleep * safety and security health, employment, property, family and social stability * love and belonging friendship, family, intimacy, sense of connection * self-esteem confidence, achievement, respect of others, the need to be a unique individual * self-actualization morality, creativity, spontaneity, acceptance, experience purpose, meaning and inner potential Self esteem is a reflection of a person's own evaluation of his or her worth. Self actualization is the realization or fulfillment of one's talents and potentialities. * Why people are driven by particular needs at particular times * Humans follow the bottom to top approach in satisfying their needs * From least pressing to most pressing * People will satisfy their most important needs first then move to next * Shortfall: whether customer actually follow the flow? Or will escape it? Ex: T-sunami victims search for belonging needs rather than physical needs even they are lacking with **Herzberg's Two Factor Theory** * Dissatisfiers: factors cause to dissatisfaction * Satisfiers: factors that cause satisfaction Ex: A computer that does not come with a warranty is a dissatisfier. Yet the presence of a product warranty does not act as a satisfier or motivator of a purchase because it is not a source of intrinsic satisfaction. Ease of use is a satisfier Perception: is the process by which we select, organize, and interpret information inputs to create a meaningful picture of world. A motivated consumer is ready to act (purchase)- how is influenced by his/her perception of the situation. Consumers perceive many different kinds of information through their senses Perception depend not only on physical stimuli but also on the stimuli's relationship to the surrounding environment and on conditions within each of us. ## Perceptual process * ***Selective Attention** Attention is the allocation of processing capacity to some stimulus * ***Selective Attention** Customers get exposed to 1000 of marketing messages per day which cannot possibly attend to all these.* * ***Selective Attention** Selective attention - Customers screen most stimuli out.* * ***Selective Attention** People are more likely to notice stimuli that relate to a current need* * ***Selective Attention** People are more likely to notice stimuli they anticipate* * ***Selective Attention** People are more likely to notice stimuli whose deviations are large in relationship to the normal size of stimuli* * ***Selective Distortion** Tendency to interpret information in a way that fits our preconceptions.* * ***Selective Distortion** Consumers will often distort information to be consistent with prior brand and product beliefs and expectations* * ***Selective Distortion** When consumers report different opinions of branded and unbranded versions of identical products, it must be the reason that their brand and product beliefs, created by whatever means, have somehow changed their product perceptions.* * ***Selective Retention** We are likely to remember good points about a product we like and forget bad points about a product we like and forget good points about competing products.* People emerge with different perceptions of the same object because of three perceptual processes: selective attention, selective distortion, and selective retention. Learning When we act, we learn. Learning induces changes in our behaviour arising from experience. Most human behavior is learned, though much learning is incidental Learning theorists believe learning is produced through the interplay of drives, stimuli,cues, responses, and reinforcements. A drive is a strong internal stimulus impelling action. Cues are minor stimuli that determine when, where, and how a person responds. Suppose you buy a HP laptop. If your experience is rewarding, your response to the laptop and HP will be positively reinforced. Later, when you want to buy a printer, you may assume that because it makes good laptops, HP also makes good printers * Drive - An innate internal state, which leads to goal directed behavior aimed at reducing the drive. * Cue – Any stimulus in the environment that either triggers a drive, or determines the nature and direction of the goal-directed behavior. * Response - The behavior of the individual, who is guided by the cue, towards reducing the drive by attaining a goal, in the appropriate direction. * Reward – The reinforcement attained after reaching the goal – drive reduction. **Emotions** A brand or product may make a consumer feel proud, excited, or confident. An advertisement or Ad may create feelings of amusement, disgust, or wonder. When brands has intertwined with emotions, customers get glued to them. Ex: Coca-cola, Mc Donalds **Share a Coke, Share a feeling.** Show images of Coca-cola with different emoticons to express the feelings. ## Memory Short-term memory (STM): a temporary and limited repository of information Long-term memory (LTM): a more permanent, essentially unlimited repository | | Memory Encoding | Memory Retrieval | | :------------------- | :-------------------------------------------------------------------------------------------------------------------------------------------------------------- | :------------------------------------------------------------------------------------------------------------------------------------------------------------------ | | Memory Process | Describes how and where information gets into memory. | The way of information gets out of memory | | | More attention on meaning of encoding enhance the stronger resulting associations in memory | Important 3 facts of memory retrieval | | | | The presence of other product information in memory | | | | The time between exposure to information and encoding | | Memory Encoding | | Effectiveness of retrieval cues | # Buying Decision Process ## Steps 1. Problem Recognition 2. Information Search 3. Evaluation 4. Purchase Decision 5. Postpurchase Behavior **Step1: Problem recognition/ Need awareness** Buyer decision making process get starts with an Identification of a need or a problem triggered by internal or external stimuli * Internal stimuli – Hunger * External Stimuli - Friend **Step 2: Information search** Most probably, consumers only search for only limited information For consumer durables, consumers only look at only one store. Only 30% look at more than one brand of appliances. * Information sources * Personal: Family, friends, neighbors * Commercial: Advertising, web-sites, new papers, sales persons, dealers * Public: Mass media, social media, consumer ratings * Experiential: Handling, examining, using the product **Search Dynamics** | | Total | Awareness | Consideration | Choice | Decision | | :-------------------- | :----------- | :------------ | :------------ | :---------- | :------- | | Harvard | Harvard Wharton | Harvard Wharton | Harvard Wharton | Harvard Ross | ? | | Harvard London | Ross | Ross | Stanford | Stanford | | | Harvard Copenhagen | Stanford | Stanford | Stanford | | | | Harvard Ross | Columbia | Kellogg | | | | | Harvard Stanford | Columbia | | | | | | Harvard Columbia | Kellogg | | | | | | Harvard Kellogg | | | | | | * ***The Evoked Set (The Consideration Set)-This refers to the specific brand a consumer considers in making a purchase within a particular product category*** * ***Inert Set - This consists of the brands the consumer excludes from his known brand set because they are felt to be unacceptable*** * ***Inept Set-This consist of brands the consumer is indifferent towards because they are perceived as not having any particular advantage.*** **Step 3: Evaluation of Alternatives** How does the consumer process competitive brand information and make a final value judgement? * Consumers use their beliefs and attitudes to evaluate about alternatives * Belief: a descriptive though that a person holds about something * Attitude: a person's enduring favorable or unfavorable evaluations, feelings, and action tendencies toward an object or a person (Affection, Behviour and Cognition) * Expectancy-Value Model: expectancy-value model of attitude formation posits that consumers evaluate products and services by combining their brand beliefs: positive or negative according to importance **Step 4: Purchase Decision** Consumer make the final buying decision Five (5) sub-decisions of purchase decision * Brand decision: what brand to get select Ex: Apple i-Phone instead Samsung Galaxy * Dealer decision: From whom the product will purchase. Whose service is best Ex: Chinthana GSM or Authorized dealer of i-Phone * Quantity: the required amount of product EX: one mobile phone * Timing: when the purchase will take place. Any specific date or a time Ex: Weekend, weekday, end of next month * Payment method: what payment method to use as per convenience Ex: Cash/credit card/cheque **Step 5: Post purchase Behaviour** * Post purchase satisfaction: the comparison between perceived performance and expectations. (Disappointment, Satisfaction, Delightful) * Post purchase actions: talking favorably or unfavorably * Post purchase uses and disposal: an insight about how product was good or bad and disposal of product. Ex: disposing packing material ## Types of Buying decisions * Routine Decision Making (RDM) - Low risk, low price Ex: Sugar, tea, coffee * Limited Decision Making (LDM)- Moderate price, moderate risk and relatively infrequent purchase Ex: Clothing, Text books * Extended Decision Making (EDM)- High cost, high risk and infrequent purchase Ex: Electronics, Furniture, Automobiles **Questions** 1. Explain how Consumer buying black box (CBBB) factors affects to consumer buying behaviour along with suitable examples 2. Explain 5 stage buying decision process with referring to a purchase of new mobile phone 3. Discuss about “modern and traditional consumer in Sri Lanka" I hope this is helpful! Let me know if you have any questions.