Consumer Behavior Study Guide (2).pdf

Unit 3 Study Guide Consumer Behavior 8 Concepts You Should Know 1. What is Consumer Behavior? Consumer behavior is the study of consumers and the processes they use to make decisions about purchasing products and services. 2. Why is consumer behavior important? Studying consumer behavior is import...

Unit 3 Study Guide Consumer Behavior 8 Concepts You Should Know 1. What is Consumer Behavior? Consumer behavior is the study of consumers and the processes they use to make decisions about purchasing products and services. 2. Why is consumer behavior important? Studying consumer behavior is important because it helps marketers understand what influences consumers’ buying decisions. Each consumer is different and sometimes target markets are broken down into Target Market Segments based on these behaviors. Important consumer behavior questions marketers need to answer when developing a marketing mix: ● What consumers think and how they feel about various alternatives (brands, products, etc.) ● What influences consumers to choose between various options ● Consumers’ behavior while researching and shopping ● How consumers’ environment (friends, family, media, etc.) influences their behavior 3. The four main types of consumer behavior ▪ Complex buying behavior: Encountered when consumers are buying an expensive, infrequently bought product. They are highly involved in the purchase process and consumers’ research before committing to a high-value investment. Cars, houses, retirement planning are examples. ▪ Dissonance-reducing buying behavior: The consumer is highly involved in the purchase process but has difficulties determining the differences between brands. ‘Dissonance’ can occur when the consumer worries that they will regret their choice. Lawn mowers, furniture, and travel are examples. ▪ Habitual buying behavior: Habitual purchases are characterized by the fact that the consumer has very little involvement in the product or brand category. Imagine grocery shopping: you go to the store and buy your preferred type of bread. ▪ Variety seeking behavior: In this situation, a consumer purchases a different product not because they weren’t satisfied with the previous one, but because they seek variety. 4. What influences consumer behavior? Many things can affect consumer behavior, but the most frequent factors influencing consumer behavior are: ▪ Marketing campaigns Marketing campaigns influence purchasing decisions a lot. If done right and regularly, with the right marketing message, they can even persuade consumers to change brands or opt for more expensive alternatives. ▪ Economic conditions For expensive products especially (like houses or cars), economic conditions play a big part. A positive economic environment is known to make consumers more confident and willing to indulge in purchases irrespective of their financial liabilities. ▪ Personal preferences Consumer behavior can also be influenced by personal factors: likes, dislikes, priorities, morals, and values. In industries like fashion or food, personal opinions are especially powerful. ▪ Group influence Peer pressure also influences consumer behavior. What our family members, classmates, immediate relatives, neighbors, and acquaintances think or do can play a significant role in our decisions. ▪ Purchasing power Most consumers consider their budget before making a purchase decision. The product might be excellent, the marketing could be on point, but if you don’t have the money for it, you won’t buy it. 5. There are five general stages in the buying process: ▪ Need recognition (awareness): The first and most important stage of the buying process, because every sale begins when a customer becomes aware that they have a need for a product or service. This stage is also sometimes called Stimulus. ▪ Search for information (research): During this stage, customers want to find out their options. This stage does not happen for some products such as habitual purchases. ▪ Evaluation of alternatives (consideration): This is the stage when a customer is comparing options to make the best choice. These options could include different brands, models, benefits, or other alternatives such as not purchasing anything. ▪ Purchasing decision (conversion): During this stage, buying behavior turns into action – it’s time for the consumer to buy! 6. The importance of customer retention Customer retention refers to your business’ ability to keep customers active from one period into another. Customers decide to stick with companies that consistently meet their needs. Over time, this develops into meaningful relationships and customer loyalty. Benefits of loyal customers: ▪ They spend more: about 67% more than a new customer ▪ More willing to try new products for the brand ▪ Cheaper than getting a new customer: It costs five times more to acquire a new customer than it does to keep a current customer. ▪ Promote your business: Repeat customers refer 50 percent more people than onetime buyers. ▪ Repeat customers generate profit: By increasing customer retention just five percent, a company’s profitability will increase by an average of 75 percent. 7. The Consumer Decision Journey There are three main “Moments of Truth” Moments of Truth refers to the moments when the consumer makes an evaluative decision about a product. There are general three main moments of truth: ▪ Zero Moment of Truth: when a consumer engages in research of a product to determine what products will make their short list of possible products that meet their needs. This short list is called the Initial Consideration Set. ▪ First Moment of Truth: The customer looks further at the products on their Initial Consideration Set either online or at the store. ▪ Second Moment of Truth: The consumer evaluates how well the product meets their needs. If the product is satisfactory, they may purchase the product again without going through the journey again. When the product is purchased again repeatedly, this becomes known as the Loyalty Loop. 8. The Importance of the Initial Consideration Set If a product does not make it to the consumers Initial Consideration Set, there is little chance the product will be purchased. It is vital that consumers have easy access to information that answers these questions: ▪ Will it save me money? ▪ Will it save me time? ▪ Will it improve my life? Consumers form their Initial Consideration Set from these sources: ▪ Product reviews ▪ Social media posts from friends and family ▪ Objective ratings ▪ News stories