UNDERSTANDING MARKET

Consumer Behavior

Session 3 & 4
Chapters 5, 6 & 7
 Consumer Behavior
Role of Marketing is:
To Understand the INTERVENING PROCESS
that Influences Buying Decision.

Think on:
Who buys? How do they buy?
When do they buy? Where do they buy?
Why do they buy?
Consumer Behavior Model
o Consumer Buying Behavior
Buying behavior of individuals and households that buy products for
personal consumption.
o Stimulus Response Model
Marketing and other stimuli enter the buyers black box and produce
certain choice/purchase responses.
Marketers must figure out what is inside of the buyers black box and
how stimuli are changed to responses.

Marketing & Other Stimuli Buyers Black box Buyer Responses

Marketing Other Buyer Buyer Product Choice
Product Economic Charac- Decision Brand Choice
Price Technological teristics Process Dealer Choice
Place Political Purchase Timing
Promotion Cultural Purchase Amount

Figure: Model of Buyer Behavior

Characteristics Affecting Consumer Behavior

o Culture
Key Factors
Subculture
o Cultural o Social Class
o Social Upper class
o Personal Middle Class
o Psychological Lower Class
Working Class
Characteristics Affecting Consumer Behavior

o Groups
Key Factors Membership
Reference
o Aspirational groups
o Cultural Opinion leaders
o Social o Buzz marketing
o Family
o Personal
Children can influence
o Psychological o Roles and Status
Characteristics Affecting Consumer Behavior

o Age and life cycle

o Occupation
Key Factors
o Economic situation
o Cultural o Lifestyle
Lifestyle segmentation
o Social
o Personality and self-
o Personal concept
o Psychological Brand personality
 An Example
Family Life Cycle & Banking Needs
Stage Financial Situation Banking Needs

Young Few Financial Burdens; Low-cost checking;

Single People recreation oriented auto loan; credit card

Full Nest I: Home purchasing peak; Mortgage; Credit card;

Youngest child Liquid assets low; Revolving Credit Line;
under 6 Many working mothers Bill Consolidation Loan

Full Nest II: Good Financial Position; Home Improvement Loans;

Older couples Many Working Mothers Equity Credit Lines;
with Dependent Money Mkt Deposit accounts
Children Investment services

Empty Nest: Significantly Monthly Income Checks on CDs;

Older Couples; reduced Income Direct Deposit of Social Security
No child at home;
One/ both Retired
Characteristics Affecting Consumer Behavior
o Motivation
Needs provide motives for
consumer behavior
Key Factors Motivation research
o Maslows hierarchy of needs

o Cultural o Perception
Selective attention,
o Social selective distortion,
selective retention
o Personal
o Learning
o Psychological Drives, stimuli, cues,
responses and
reinforcement
o Beliefs and attitudes
Maslows Hierarchy of Needs
Once a Lower-level need is Satisfied,
Self a Higher-level need Emerges,
actualization and Demands Satisfaction
Needs
Esteem Needs
Self-esteem

Belongingness & Love Needs

Friendship

Security & Safety Needs

Protection from physical harm

Physiological Needs
Hunger, thirst
Types of Buying Decision Behavior

Difference Involvement Level

between brands High Low

Significant Complex Variety-seeking

buying behavior buying behavior

Dissonance- Habitual buying

Few
reducing buying behavior
behavior
Five Stages Buyer Decision Process

o Needs can be
Process Stages triggered by:
Internal stimuli
o Need recognition o Normal needs
o Information search become strong
enough to drive
o Evaluation of
behavior
alternatives
o Purchase decision
External stimuli
o Advertisements
o Postpurchase
o Friends of friends
behavior
Five Stages Buyer Decision Process

o Consumers exhibit heightened

attention or actively search for
Process Stages information.

o Need recognition o Sources of information:

Personal
o Information search Commercial
o Evaluation of Public
alternatives Experiential

o Purchase decision o Word-of-mouth

o Postpurchase
behavior
Five Stages Buyer Decision Process

o Evaluation procedure
depends on the consumer
Process Stages and the buying situation.

o Need recognition
o Most buyers evaluate
o Information search multiple attributes, each of
o Evaluation of which is weighted differently.
alternatives
o Purchase decision
o At the end of the evaluation
o Postpurchase stage, purchase intentions
behavior are formed.
Five Stages Buyer Decision Process

Process Stages o Two factors intercede

between purchase
o Need recognition intentions and the
o Information search actual decision:
o Evaluation of
alternatives 1. Attitudes of others
o Purchase decision 2. Unexpected situational
o Postpurchase factors
behavior
Five Stages Buyer Decision Process
o Satisfaction is important:
Delighted consumers
Process Stages engage in positive word-of-
mouth.
o Need recognition Unhappy customers tell on
o Information search average 11 other people.
o Evaluation of It costs more to attract a
alternatives new customer than it does
o Purchase decision to retain an existing
customer.
o Post-purchase
behavior o Cognitive dissonance
is common!
 Marketing Research
The process of planning, collecting and analyzing data
relevant to a marketing decision.
Much can be learned on consumers by marketing research:
o Collecting,recording, and analyzing data important in
marketing products
o Communicating results to management

Must be done prior and after the sale

Marketing Research Process
Define the Marketing Problem
Choose a Method of Research
Collect the Data
Analyze the Data
Make Recommendations to Management
Buyer Decision Process for New Products
o New Products are goods, services or ideas that are
perceived by customers as new.

o Marketers should help consumers move through these

stages:
o Awareness
o Interest
o Evaluation
o Trial
o Adoption
Buyer Decision Process for New Products
o Individual Differences in o Product Characteristics
Innovativeness and Adoption
Consumers can be Five product
classified into five adopter characteristics influence
categories the adoption rate

o Innovators o Relative Advantage

o Early Adopters o Compatibility

o Early Majority o Complexity

o Late Majority o Divisibility

o Laggards o Communicability
 Business Markets: Buyer Behavior
The buying behavior of organizations that buy goods/services for
use in the production of other products and services or for the
purpose of reselling or renting them to others at a profit.
o Compared to consumer market
Characteristics Business markets
o have fewer but larger
customers
o Marketing Structure
and Demand Business customers
o are more geographically
o Nature of the concentrated
Buying Unit Demand is different
o Types of Decisions o Demand is derived
and the Decision o Demand is price inelastic
Process o Demand fluctuates more, and
changes more quickly
Business Markets: Buyer Behavior

o Compared to
Characteristics consumer purchases
Business purchases
o Marketing involve more buyers in
Structure and the decision process.
Demand Purchasing efforts are
o Nature of the undertaken by
Buying Unit professional buyers.
o Types of Decisions
and the Decision
Process
Business Markets: Buyer Behavior
o Compared to consumer purchases
Business buyers face more
Characteristics complex buying decisions.

Buying process is more

o Marketing Structure formalized, more participants in
the process:
and Demand
o Users
o Nature of the
o Influencers
Buying Unit
o Deciders
o Types of Decisions
o Buyers
and the Decision
o Gatekeepers
Process
Buyers and sellers work more
closely together and build long-
term relationships.
Eight Stages Business Buying Process
o Stage 1: Problem Recognition
o Stage 2: General Need Description
o Stage 3: Product Specification
Value analysis helps to reduce costs
o Stage 4: Supplier Search
Supplier development
o Stage 5: Proposal Solicitation
o Stage 6: Supplier Selection
o Stage 7: Order-Routine Specification
Blanket contracts are often used for maintenance,
repair and operating items.
o Stage 8: Performance Review
Major Influences on Business Buyers

Key Factors o Economic trends

o Supply conditions
o Environmental o Technological change
o Organizational o Regulatory and political
environments
o Interpersonal o Competitive
o Individual developments
o Culture and customs
Major Influences on Business Buyers

Key Factors o Objectives

o Policies
o Environmental
o Procedures
o Organizational o Organizational
o Interpersonal structure
o Individual o Systems
Major Influences on Business Buyers

Key Factors
o Authority
o Environmental o Status
o Organizational o Empathy
o Interpersonal o Persuasiveness
o Individual
Major Influences on Business Buyers

Key Factors o Authority

o Age
o Environmental o Education
o Organizational o Job position
o Interpersonal o Personality
o Individual o Risk attitudes
 Market Segmentation
Building Right Relationships with Right Customers!
Dividing a market into distinct groups with distinct needs,
characteristics, or behavior who might require separate
products or marketing mixes.
Topics
o Segmenting Consumer
o Geographical segmentation
Markets
o Segmenting Business o Demographic segmentation
Markets
o Psychographic segmentation
o Segmenting International
Markets o Behavioral segmentation
o Requirements for Effective
Segmentation
 Market Segmentation Variables
Geographic Behavioral Demographic
o World Region o Occasions o Age
or Country o Benefits o Gender
o State o User Status o Family size
o City Size o User Rates o Family life cycle
o Density o Loyalty Status o Income
o Climate o Readiness Stage o Occupation
o Neighborhood o Attitude toward the o Education
Product o Religion
Psychographic o Race
o Generation
o Lifestyle o Nationality
o social class
o personality
Market Segmentation (contd.)

Topics o Demographic segmentation

Industry, company size, location
o Segmenting Consumer o Operating variables
Markets Technology, usage status,
customer capabilities
o Segmenting Business o Purchasing approaches
Markets o Situational factors
o Segmenting Urgency, specific application, size
International Markets of order
o Personal characteristics
o Requirements for Buyer-seller similarity, attitudes
Effective Segmentation toward risk, loyalty
Market Segmentation (contd.)

Topics o Geographic segmentation

Location or region
o Segmenting Consumer o Economic factors
Markets Population income or level of economic
development
o Segmenting Business
o Political and legal factors
Markets
Type / stability of government,
o Segmenting monetary regulations, amount of
International Markets bureaucracy, etc.
o Cultural factors
o Requirements for Language, religion, values, attitudes,
Effective Segmentation customs, behavioral patterns
Market Segmentation (contd.)

Topics o Measurable
Size, purchasing power, and profile
of segment
o Segmenting Consumer
Markets o Accessible
Can be reached and served
o Segmenting Business o Substantial
Markets Large & profitable enough to serve
o Segmenting o Differentiable
International Markets Respond differently

o Requirements for o Actionable

Effective Segmentation Effective programs can be
developed
 Target Marketing Strategies
o Evaluating Market o Selecting Target Market
Segments
Undifferentiated (mass)
Segment size and marketing
growth

Target narrowness
Segment structural Differentiated
attractiveness (segmented) marketing
o Level of competition Concentrated (niche)
o Substitute products marketing
o Power of buyers
o Powerful suppliers Micromarketing (local or
Company objectives individual) marketing
and resources o Local marketing
o Individual Marketing (1-to-
1 marketing)
Target Marketing (contd.)
o Choosing a Strategy considering:
Company resources
The degree of product variability
Products life-cycle stage
Market variability
Competitors marketing strategies
 Positioning
o The place the product occupies in consumers minds
relative to competing products.
o Typically defined by consumers on the basis of
important attributes.
o Marketers need to prepare
Perceptional Positioning Range Rover
Lincoln Navigator
Maps showing consumer Escalade

Price
perceptions of their brand Hummer H1
Hummer H2
versus competing products Lexus LX 470
on important buying Lexus Cruiser
dimensions.
Luxury Performance
Orientation
Choosing a Positioning Strategy
o Identifying possible o Choosing the right
competitive advantages competitive advantage
o Products, services, channels, o How many differences to
people or image can be promote?
sources of differentiation. Unique selling proposition
Positioning errors to avoid
o Which differences to promote?

o Selecting an overall Important

Superior
positioning strategy
Preemptive
o More for More Value Proposition
o More for the Same Value Proposition Distinctive
o The Same for Less Value Proposition Communicable
o Less for Much Less Value Proposition Affordable
o More for Less Value Proposition
Profitable
Choosing a Positioning Strategy (contd.)

o Developing a positioning statement

o Statements summarize the company or brand positioning
Example: To (target segment and need) our (brand) is (concept)
that (point-of-difference).

To young, active soft-drink consumers who have little time for

sleep, Mountain dew is the soft-drink that gives you more energy
than any other brand because it has the highest level of
caffeine. With Mountain Dew, you can stay alert and keep going
even when you havent been able to get a good nights sleep.

o Communicating the chosen position