DBA 1722 - Consumer Behaviour

MBA
(DISTANCE MODE)
DBA 1722 CONSUMER BEHAVIOUR
IV SEMESTER COURSE MATERIAL
Centre for Distance Education

Anna University Chennai Chennai 600 025
Author Dr. V.J SIVAKUMAR, .J. Dr. V.J. SIVAKUMAR,

Assistant Professor, (Marketing) Department of Management Studies National Institute of Technoloy (REC) Thiruchirapalli - 620 015
Reviewer Ms. Ms. A. Shameem

Professor & Head, Department of Management Studies Aalim Mohamed Salegh College of Engineering, Avadi - IAF, Chennai - 600 037
Editorial Board Dr.T.V.Geetha .T.V Dr.T.V.Geetha

Professor Department of Computer Science and Engineering Anna University Chennai Chennai - 600 025
Dr.H.Peeru .H.Peer Dr.H.P eer u Mohamed

Professor Department of Management Studies Anna University Chennai Chennai - 600 025
Dr.C Chellappan .C. Dr.C. Chella ppan

Dr.A.K .A.Kannan Dr.A.K annan

Copyrights Reserved (For Private Circulation only) ii
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ACKNOWLEDGEMENT
The author has drawn inputs from several sources for the preparation of this course material, to meet the requirements of the syllabus. The author gratefully acknowledges the following sources: Consumer Behavior by Michael R. Solomon - Pearson Education Consumer Behavior by Del I Hawkins, Roger J. Best, Kenneth A. Convey and Amit Mookerjee - Mc Graw Hill Consumer Behavior by London/ Della Bitta - Mc Graw Hill Consumer Behavior by John C. Mowen - Mc millan Consumer Bheavior by S. Ramesh Kumar - Pearson
Inspite of at most care taken to prepare the list of references any omission in the list is only accidental and not purposeful.
Dr.V.J. Sivakumar Author
DBA 1722 CONSUMER BEHAVIOUR

UNIT I - INTRODUCTION Consumer behaviour concepts dimensions of consumer behaviours application of consumer behaviour knowledge in marketing decisions approaches to the study of consumer behaviour. UNIT II - CONSUMER AS AN INDIVIDUAL Consumer needs and motives personality and consumer behaviour consumer perception learning consumer attitudes attitude formation and change communication and persuasion self image life style analysis. UNIT III - CONSUMERS IN THEIR SOCIAL AND CULTURAL Group dynamics and consumer reference groups Family Social class cultural and subcultural aspects cross cultural consumer behaviour. UNIT IV - CONSUMER DECISION PROCESS AND POST- PURCHASE BEHAVIOUR Personal influence and opinion leadership diffusion of innovations consumer decision making process models of consumer decision process Nicosia Howard sheth and Engel Kollat model post purchase behaviour consumer expectation and satisfaction managing dissonance consumer loyalty types of loyalty programmes. UNIT V - ADDITIONAL DIMENSIONS Consumerism consumer protection difficulties and challenges in predicting consumer behaviour online consumer behaviour organizational and industrial buyer behaviour consumer behaviour in Indian c contextemerging issues. REFERENCES 1. Leon G.Schiffman, Leslie Lazar Kanuk, Consumer Behaviour , Pearson Education, New Delhi, 2002. 2. David L.Loudon, Albert J Della Bitta, Consumer Behaviour , McGraw Hill, New Delhi 2002. 3. Jay D.Lindquist and M.Joseph sirgy, Shopper, buyer & consumer Behaviour, Theory and Marketing application, Biztantra Publication, New Delhi 2005. 4. Sheth Mittal, Consumer Behaviour A Managerial Perspective, Thomson Asia (P) Ltd., Singapore 2003. . K.K.Srivastava, Consumer Behaviour an Indian Context, Goal Gotia Publishing Co, New Delhi 2002.
6. S.L.Gupta & Sumitra Pal,Consumer Behaviour an Indian Perspectives, Sultan Chand, New Delhi 2001. 7. Ms.Raju, Dominique Xavedel, Consumer behaviour, Concepts Applications and cases vikas publiching house (P) Ltd., New Delhi 2004. 8. Henry Assael, Consumer behaviour strategic approach Biztantra, New Delhi, 2005.
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CONTENTS
UNIT I INTRODUCTION
1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 1.12 OVERVIEW LEARNING OBJECTIVES CONSUMER DEFINING CONSUMER BEHAVIOR THE NATURE OF CONSUMER BEHAVIOR BEHAVIORAL DIMENSIONS OF MARKETING APPLICATIONS OF CONSUMER BEHAVIOR: MARKET ANALYSIS COMPONENTS APPROACHES TO THE STUDY OF CONSUMER BEHAVIOR MARKETING STRATEGY AND CONSUMER BEHAVIOR CONSUMER DECISIONS OUTCOMES 1.12.1 Firm outcomes 1.12.2 Individual Outcomes 1.12.3 Society Outcomes SUMMARY REVIEW QUESTIONS 1 2 3 3 4 5 6 7 9 10 13 12 12 16 17 18 18
1.13 1.14
UNIT II CONSUMER AS AN INDIVIDUAL

2.1 2.2 2.3 OVERVIEW LEARNING OBJECTIVES THE NATURE AND ROLE OF MOTIVES 2.3.1 The Nature of Motives 2.3.2 The Role of Motives 2.3.3 Facets of motivation CUSTOMER NEEDS 2.4.1 Maslows Hierarchy of Needs 2.4.2 Mcguires Psychological Motives
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2.4
21 21 22 22 23 23 24 24 26
2.5 2.6 2.7
2.8 2.9 2.10 2.11 2.12 2.13 2.14
Murrays List of Psychogenic Needs Needs identified by Marketing Scholars Sheth, Newman and Gross have proposed that individual choice behavior stems from five needs: CUSTOMER EMOTIONS PERSONALITY AND CONSUMER BEHAVIOR CONSUMER PERCEPTION 2.7.1 Exposure 2.7.2 Attention 2.7.3 Interpretation LEARNING CONSUMER ATTITUDES COMMUNICATION AND PERSUATION PSYCHOGRAPHICS HAVE THREE COMPONENTS VALS SUMMARY REVIEW QUESTIONS
2.4.3 2.4.4 2.4.5
29 30 31 32 38 40 40 41 43 44 46 50 53 57 58 60
UNIT III COSUMERS IN THEIR SOCIAL AND CULTURAL SETTINGS

3.1 3.2 3.3 OVERVIEW LEARNING OBJECTIVES WHAT IS A GROUP? 3.3.1 Types of Groups 3.3.2 Consumer-Relevant Groups 3.3.3 Reference Groups 3.3.4 Types of Reference Groups 3.3.5 Factors that Affect Reference Group Influence 3.3.6 Reference Group Impact on Product and Brand Choice 3.3.7 Benefits of the Reference Group Appeal THE FAMILY 3.4.1 Structural Variables Affecting Families and Households 3.4.2 Sociological Variables Affecting Families and Households 3.4.3 Functions of the Family 3.4.4 Family Life Cycles
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3.4
61 61 62 62 63 65 67 67 69 70 70 72 72 72 74
3.5
3.6
3.7 3.8
3.4.5 Family Decision-Making 3.5.6 Family Marketing SOCIAL CLASS 3.5.1 Characteristics of Social Classes 3.5.2 Impact of social class CULTURE - MEANING 3.6.1 Characteristics of Culture 3.6.2 Types of Culture 3.6.3 Hofstedes Five Dimensions of Culture 3.6.4 Cultural Influences 3.6.5 Variation In Cultural Values 3.6.6 Subcultures and Consumer Behavior 3.6.7 Cross Cultural Consumer Behavior 3.6.8 Characteristic features of a firm going global 3.6.9 Problems in Cross Cultural marketing 3.6.10 Cross-Cultural Consumer Analysis 3.6.11 Tangible Benefits of Global Brand Building 3.6.12 Strategic Implications 3.6.13 Cultural Variations & Non-Verbal Communication SUMMARY REVIEW QUESTIONS
77 80 82 83 83 84 84 85 85 87 87 90 92 93 93 93 95 95 96 99 100
UNIT IV CONSUMER DECISION PROCESS AND POST- PURCHASE BEHAVIOUR

4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 OVERVIEW LEARNING OBJECTIVES OPINION LEADERSHIP DYNAMICS OF OPINION LEADERSHIP MOTIVATION BEHIND OPINION LEADERSHIP TYPES OF OPINION LEADERS COMPARISON OF OPINION LEADERS AND SURROGATE BUYER IDENTIFYING AN OPINION LEADER 101 101 102 102 103 104 106 107
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4.9 4.10 4.11 4.12 4.13 4.14 4.16 4.17 4.18 4.19 4.20 4.21 4.22 4.23 4.24 4.25 4.26 4.27 4.28 4.29 4.30 4.31 4.32 4.33
TACTICS ADOPTED BY MARKETERS TO GENERATE A BUZZ PROGRAMMES DESIGNED TO STIMULATE OPINION LEADERSHIP THE DIFFUSION CONCEPT ELEMENTS TO THE DIFFUSION OF INNOVATION INNOVATION TYPES OF INNOVATION CONSUMER RESISTANCE TO INNOVATION COMMUNICATION BARRIERS TO ADOPTION AND MARKETING STRATEGIES TO OVERCOME THEM TIME ADOPTION PROCESS STAGES IN ADOPTION PROCESS ADOPTERS RATE OF ADOPTION CONSUMER DECISION MAKING PROCESS CONSUMER DECISION MAKING THE COMPLEX APPROACH CONSUMER BEHAVIOUR AND MARKETING IMPLICATIONS CONSUMER BEHAVIOUR MODELS POST PURCHASE CONSUMDER BEHAVIOUR CONSUMER LOYALTY TYPES OF LOYALTY PROGRAMMES HOW LOYALTY CAN BE IMPLEMENTED SUMMARY REVIEW QUESTIONS
108 109 110 111 111 112 113 114 117 118 119 120 120 122 122 125 126 128 139 142 143 148 150 152
UNIT V ADDITIONAL DIMENSIONS

5.1 5.2 5.3 5.4 5.5 OVERVIEW LEARNING OBJECTIVES INTRODUCTION COMPONENTS OF CONSUMERISM THE CONSUMER PROTECTION ACT 1986
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155 155 156 157 161
5.6 5.7 5.8 5.9 5.10 5.11 5.12 5.13 5.14 5.15 5.16 5.17 5.18 5.19 5.20 5.21 5.22
CONSUMER RIGHTS PROTECTION OF CONSUMER RIGHTS METHODS OF CONSUMER PROTECTION DIFFICULTIES AND CHALLENGES OF PREDICTING CONSUMER BEHAVIOUR ONLINE CONSUMER BEHVIOUR ORGANISATIONAL AND INDUSTRIAL BUYER BEHAVIOUR PARTICIPANTS IN INDUSTRIAL MARKETING DIFFERENCES IN ORGANIZATIONAL MARKETS DIFFERENCES IN ORGANIZATIONAL TRANSACTIONS CONSUMER BEHAVIOUR VS ORGANISATIONAL BUYING BUY CLASSES BUYING CENTER CONSUMER BEHAVIOUR IN INDIA CONTEXT EMERGING ISSUES CHARACTERISTICS OF THE INDIAN CONSUMER BEHAVIOR CHANGING TRENDS IN INDIAN CONSMER BEHAVIOR SUMMARY REVIEW QUESTIONS
164 164 165 166 167 169 171 171 172 173 174 176 177 179 183 184 187
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CONSUMER BEHAVIOUR
UNIT I
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INTRODUCTION
1.1 OVERVIEW The fundamental basis of the marketing concept involves the matching of the skills and resources of the organization, profit or non-profit related, to the needs of the customer. Marketing management relies on an understanding of how customers make decisions and their likely reactions to the different elements of the marketing mix. In this context, consumer behavior not only refers to the physical activity of purchasing but also to relate pre-purchase and post-purchase activities. Loudon and Della Bitta (1993) define consumer behavior as the decision process and physical activity individuals engage in when evaluating, acquiring, using, and disposing of goods and services. One of the most useful applied distinctions in consumer behavior is between consumer behavior studied from a micro perspective and a macro perspective. At the micro-level, the focus is very much on the reaction of the individual consumer with applications that are relevant to advertising managers, salespeople, or product designers of individual firms or organizations. At the macro-level, consumer behavior involves the study of the influence of consumption on the economic and social conditions within society. The anticipation and forecasting of consumer behavior at that level can be used for organizational planning and product development, as well as formulation of public policy to improve the efficiency of the market system. Research in consumer behavior allied to the study of marketing basically stems from the 1950s. Economists had a developed series of models explaining consumer choice in terms changing utilities, or demand preferences, according to variations in price, income and quantity supplied. This approach has been relatively un influential within the marketing literature compare with the application of behavioral science concepts taken from psychology and sociology. The entries on psychology and sociology show how concepts such as learning, motivation, perception, attitude and social groups have been applied to help our understanding of every element of the marketing mix. This entry primarily seeks to give an overview of consumer decision making and show how those concepts listed above may be integrated to give an understanding of the role they play in explaining decision processes of consumers. However, before considering that material in detail, it is useful to reflect on
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some aspects of the history of consumer research in marketing in order to appreciate the variety of approaches and the overall complexity of the subject. This historical review is not intended as a comprehensive treatise on the development of consumer behavior but rather a framework to understand how the subject has arrived at its current status and content. It also helps to provide a platform from which to consider future developments in consumer behavior later in the entry. In the 1950s and through the mid-1960s much of consumer behavior research involved the evaluation of consumer characteristics for market segmentation. It was at this time that consumer behavior researchers investigated the application of personality theories and classifications of motives taken from psychology, and the family life-cycle and social class taken from sociology. These were applied with very different degrees of success in crosssectional studies of markets in order to explain variations in consumer demand for many different classes of products, and also for different choices of brands. Important contributions from this period, which are illustrative of some of the research and are still commonly referred to in the literature and in teaching consumer behavior, include Koponen (1960), Tucker and Painter (1961), Evans (1959), Haire (1950), Dichter (1964), Martineau (1958), Coleman (1960), Levy (1966), Wells and Gubar (1966), and Barton (1955). One of the studies from that period which has had a very profound influence on consumer behavior and marketing is Rogers work on the diffusion of innovations (1959, 1962). He segmented the potential market for a new product according to the time of adoption and developed a five stage classification within which to describe potential customers - innovators, early adopters, the early majority, the late majority and laggards. Another important facet of Rogers work was his characterization of the adoption process. During consumers adoption of innovations, Rogers described the individual as moving through the following series of stages in their decision to purchase: 1. Awareness; 2. interest; 3. evaluation; 4. Trial; and 5. Adoption. This was one of the first attempts to describe a sequential process which illustrated the stages of the consumer decision and, as will be seen in later discussion. 1.2 LEARNING OBJECTIVES After studying this unit, you should understand About the consumer The concept and the historical review of Consumer Behavior
ANNA UNIVERSITY CHENNAI
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The Nature and Dimensions of Consumer Behavior The Applications of Consumer Behavior knowledge in marketing decisions The Components for Marketing Analysis About the Segmentation of Market and the steps involved in it Approaches to the study of Consumer Behavior
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1.3 CONSUMER Consumer is a broad term and any person who uses a product or service or deals with it can be called a consumer. It is not necessary that the person should be a buyer of the product or service. The term consumer should not be confused with the word customer which has the limited meaning of usually denoting a person who contracts to buy the product. For example, if you are selling tea-dust, you may have just one customer in the Manager of a cafeteria. On the other hand all the persons who drink tea in the cafeteria are your consumers. Consumers are classified into two categories. They are personal consumers and institutional consumers. Personal consumers are those individuals and households who themselves consume goods or services. Institutional consumers on the other hand are businesses, organizations and groups that buy and consume goods and services during the course of their operations. 1.4 DEFINING CONSUMER BEHAVIOR Consumer behavior may be defined as, the decision process and physical activity individuals engage in when evaluating, acquiring, using, or disposing of goods and services. Technically, consumer behavior is defined as, the dynamic interaction of affect and cognition, behavior and environmental events by which human beings conduct the exchange aspects of their lives. One official definition of consumer behavior is The study of individuals, groups, or organizations and the processes they use to select, secure, use, and dispose of products, services, experiences, or ideas to satisfy needs and the impacts that these processes have on the consumer and society. Although it is not necessary to memorize this definition, it brings up some useful points: Behavior occurs either for the individual, or in the context of a group (e.g., friends influence what kinds of clothes a person wears) or an organization (people on the job make decisions as to which products the firm should use). Consumer behavior involves the use and disposal of products as well as the study of how they are purchased. Product use is often of great interest to the marketer, because this may influence how a product is best positioned or how we can encourage increased consumption. Since many environmental problems result from
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product disposal (e.g., motor oil being sent into sewage systems to save the recycling fee, or garbage piling up at landfills) this is also an area of interest. Consumer behavior involves services and ideas as well as tangible products. The impact of consumer behavior on society is also of relevance. For example, aggressive marketing of high fat foods, or aggressive marketing of easy credit, may have serious repercussions for the national health and economy.
Viewing consumer behavior in a broad context, it is actually a subset of human behavior. That is, factors affecting individuals in their daily lives also influence their purchase activities. 1.5 THE NATURE OF CONSUMER BEHAVIOR Figure 1.1 is the model that we use to capture the general structure and process of consumer behavior and to organize this text. It is a conceptual model. It does not contain sufficient detail to predict particular behaviors; however, it does reflect our beliefs about the general nature of consumer behavior. Individuals develop self-concepts and subsequent lifestyles based on a variety of internal (mainly psychological and physical) and external (mainly sociological and demographic) influences. These self-concepts and lifestyles produce needs and desires, many of which require consumption decisions to satisfy. As individuals encounter relevant situations, the consumer decision process is activated. This process and the experiences and acquisitions it produces in turn influence the consumers selfconcept and lifestyle by affecting their internal and external characteristics. This model, while simple, is both conceptually should and intuitively appealing. Each of us has a view of ourselves (self-concept), and we try to live in a particular manner given our resources (lifestyle). Our view of ourselves and the way we try to live are determined by internal factors (such as our personality, values, emotions, and memory) and external factors (such as our culture, age, friends, family, and subculture). Our view of ourselves and the way we try to live results in desires and needs that we bring to the multitude of situations we encounter daily. Many of these situations will cause us to consider a purchase. Our decision and even the process of making it, will cause learning and may affect many other internal and external factors that will change or reinforce our current self concept and lifestyle. A quick analysis of your own behavior and that of your friends will reveal the fallacy of this perception. Consumer behavior is frequently complex, disorganized, no conscious, organic, and circular. Unfortunately, we must present it in a relatively simple, linear manner due to the limitations of written communications.
CONSUMER BEHAVIOUR
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Figure. 1.1 The Nature of Consumer Behavior 1.6 BEHAVIORAL DIMENSIONS OF MARKETING Marketing has been developed as a discipline only in the past few decades in India. In todays world of competitive offerings, diversity of consumer preferences and proliferation of brands, consumer behavior has become extremely important for marketing decisionsbe it marketing mix elements, segmentation changes or exploring new dimensions in consumer behavior in a changing environment. Several interesting trends can be expected in the new millennium. Leisure and luxury markets have boomed in the recent times. Shampoos and creams, which only the elite could afford a decade back are today marketed in sachets across the country. Westernization has impacted the selection of product categories and brands. Jeans and the brands which exist in this category are an example of this impact. Even in such a category, an innovative marketer has come up with an ethnic brand (Ruf and Tuf) by applying the principles of consumer behavior. Shifts in psychographic and lifestyle changes have given rise to new eating habits (fast foods, eat-outs and food socials). A section of
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consumers may eat while driving. This trend, called grazing, has fast caught up in the developed world. This behavior, in turn, may give rise to products like refrigerated glove apartments and cup holders in cars and perhaps, yoghurts in tubes. Consumer behavior provides the behavioral fit to marketing mix elements which need to be changed from time to time by marketers. Consumer behavior deals with the psychological process of decision making by consumers in a social context which also exerts group pressures on them. For example a consumer buying a brand of two-wheelers, is motivated by a need to own the category and the particular brand (based on functional and emotional benefits) and buy the brand from an outlet. This buying behavior involves several psychological factors. These factors govern the individual thinking process (like motivation, personality, perception and attitude), decision-making steps involved in buying, (decision-making process) interaction of the consumer with several groups like friends, family and colleagues (group-oriented concepts and selection of the brand and outlet depending on price and features and emotional appeal (marketing mix elements in a given environment). Consumer behavior links these four aspects to enable a marketer to formulate marketing strategies. The basic elements of consumer behavior- what the consumer buys, how he buys, when and where he buys and how much he buys is understood by the interaction of different factors associated with consumer behavior. The field of consumer behavior is the study of individuals, groups, or organizations and the processes they use to select, secure, use, and dispose of products, services, experiences or ideas to satisfy needs and the impacts that these processes have on the consumer and society. This view of consumer behavior is broader than the traditional one, which focused much more on the buyer and the immediate antecedents and consequences of the purchasing process. This view will lead us to examine indirect influences on consumption decisions as well as consequences that involve more than the purchaser and seller. 1.7 APPLICATIONS OF CONSUMER BEHAVIOR: Marketing Strategy All marketing strategies and tactics are based on explicit or implicit beliefs about consumer behavior. Decisions based on explicit assumptions and sound theory and research are more likely to be successful than are decisions based solely on implicit intuition. Thus knowledge of consumer behavior can be an important competitive advantage. It can greatly reduce the odds of bad decisions. Social Marketing Is the application of marketing strategies and tactics to alter or create behaviors that have a positive effect on the targeted individuals or society as a whole. Social marketing
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has been used in attempts to reduce smoking, to increase the percentage of children receiving their vaccinations in a timely manner, to encourage environmentally sound behaviours such as recycling; to reduce behaviors potentially leading to AIDS; to enhance support of charities; to reduce drug use; and to support many other important causes. Just as commercial marketing strategy, successful social marketing strategy requires a sound understanding of consumer behavior. Regulatory Policy Marketing is a highly visible, important activity. It affects the life of individuals, the success of nonprofit groups, and the profits of businesses. There are many issues where the appropriate ethical action for marketers is not clear-cut. However, society has declared that other marketing actions are clearly inappropriate. It has done so by enacting laws and regulations that prohibit or require specific marketing actions. Regulating marketing activities requires the same level of understanding and the extensive knowledge of the consumer behavior as does managing marketing programs. Our consideration of the regulation of marketing practices will separate regulations designed to protect children from those designed to protect adults. Informed Individuals Most economically developed societies are legitimately referred to as consumption societies. Most individuals in these societies spend more time engaged in consumption than in any other activity, including work or sleep (both of which also involve consumption). Therefore, knowledge of consumer behavior can enhance our understanding of our environment and ourselves. Such an understanding is essential for sound citizenship, effective purchasing behavior and reasoned business ethics. Literally thousands of firms are spending millions of dollars to influence you, your family and your friends. These influence attempts occur in ads, packages, product features, sales pitches, and store environments. However, they also occur in the content of many television shows in the products that are used in movies, and in the materials presented to children in schools. Given the magnitude of these direct and indirect influence attempts, it is important that consumers accurately understand the strategies and tactics being used. It is equally important that all of us, as citizens, understand the consumer behavior basis of these strategies so that we can set appropriate limits on them when required. 1.8 MARKET ANALYSIS COMPONENTS Market analysis requires a thorough understanding of the organizations own capabilities, the capabilities of current and future competitors, the consumption process of potential customers, and the economic, physical, and technological environment in which these elements will interact.
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The Consumers It is not possible of anticipate and react to customers needs and desires without a complete understanding of consumer behavior. Discovering customers current needs is a complex process but it can often be accomplished by marketing research. The Company A firm must fully understand its own ability to meet customer needs. This involves evaluating all aspects of the firm, including its financial condition general managerial skills, production capabilities, research and development capabilities, technological sophistication, reputation, and marketing skills. Marketing skills would include new product development capabilities, channel strength, advertising abilities, service capabilities, marketing research abilities, market and consumer knowledge and so forth. Failure to adequately, understand ones own strengths can cause serious problems. IBMs first attempt to enter the home computer market with the PC Jr. was a failure in part for this reason. Although IBM had an excellent reputation with large business customer and a very strong direct sales force for serving them, these strengths were not relevant to the household consumer market. The Competitors It is not possible to consistently do a better job of meeting customer needs than the competition without a thorough understanding of the competitions capabilities and strategies. This requires the same level of knowledge of a firms key competitors that is required of ones own firm. In addition, for any significant marketing action, the following questions must be answered: 1. If we are successful, which firms will be hurt (lose sales or sales opportunities)? 2. Of those firms that are injured, which have the capability (financial resources, marketing strengths) to respond? 3. How are they likely to respond (reduce prices, increase advertising, and introduce a new product)? 4. Is our strategy (planned action) robust enough to withstand the likely actions of our competitors or do we need additional contingency plans? The Conditions The state of the economy, the physical environment, government regulations, and technological developments affect consumer needs and expectations as well as company and competitors capabilities. The deterioration of the physical environment has produced not only consumer demand for environmentally sound products but also government regulations affecting product design and manufacturing.
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International agreements such as NAFTA (North America Free Trade Agreement) have greatly reduced international trade barriers and increased the level of both competition and consumer expectations for many products. The development of computers has changed the way many people work and has creat5ed new industries. Clearly a firm cannot develop a sound marketing strategy without anticipating the conditions under which that strategy will be implemented. In India, each region, each state, provides a different environment. Tastes and combinations of food products would change significantly across states. Logistics and infrastructure across the interiors of Maharashtra and M.P would require radically different strategies. 1.9 APPROACHES TO THE STUDY OF CONSUMER BEHAVIOR Marketers may approach target markets in their aggregate and heterogeneous form or as smaller, more homogeneous segments. a) Market Aggregation A market aggregation strategy means, in effect, that little if any subdivision of market is applied. With this approach, a firm would produce a single product and offer it to all consumers with a single marketing program. Although the marketer recognizes that not everyone will buy the product, a number sufficient for profitable operations are expected to be attracted. This approach has also been described as mass marketing, undifferentiated marketing, and product differentiation. The reasoning behind market aggregation is that although consumers may differ, they are sufficiently alike to approach as a homogeneous grouping for the product under consideration. Market aggregation, therefore, presents a standard product that differs little if any from competition, makes heavy use of mass promotion, and attempts to distinguish the product as being superior. By so doing it seeks to have demand conform to what manufacturers are willing to supply. b) Market Segmentation Perhaps the most important marketing decision a firm makes is the selection of one or more market segments on which to focus. A market segment is a portion of a larger market whose needs differ somewhat from the larger market. Since a market segment has unique needs, a firm that develops a total product focused solely on the needs of that segment will be able to meet that segments desires better than a firm whose product or service attempts to meet the needs of multiple segments. To be viable, a segment must be large enough to be served profitably. To some extent, each individual or household has unique needs for most products (a preferred color combination, for example). The smaller the segment, the closer the total product can be to
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that segments desires. Historically, the smaller the segment, the more it costs to serve the segment. Thus, a tailor-made suit costs more than a mass-produced suit. However, flexible manufacturing and customized media are making it increasingly cost effective to develop products and communications for small segments or even individual consumers. Market segmentation involves four steps: 1. Identifying product-related need sets 2. Group customers with similar need sets 3. Describing each group 4. Selecting an attractive segment to serve 1.10 MARKETING STRATEGY AND CONSUMER BEHAVIOR Since all four of the applications of consumer behavior described above focus on the development, regulation, or effects of marketing strategy, we will now examine marketing strategy in more depth. To survive in a competitive environment, an organization must provide target customers more value than is provided by its competitors. Customer value is the difference between all the benefits derived from a total product and all the costs and risks of acquiring those benefits. For example, owning a car can provide a number of benefits, depending on the person and the type car, including flexible transportation, image, status, pleasure, comfort, and even companionship. However, securing these benefits requires paying for the car, gasoline, insurance, maintenance, and parking fees, as well as risking injury from an accident, adding to environmental pollution, and dealing with traffic jams and other frustrations. It is the difference between the total benefits and the total costs that constitutes customer value. Providing superior customer value requires the organization to do a better job of anticipating and reacting to customer needs than the competition does. Since customer value is delivered by the marketing strategy, the firm must develop its general marketing strategy as it evaluates potential target markets. Marketing strategy is basically the answer to the question: How will we provide superior customer value to our target market? The answer to this question requires the formulation of a consistent marketing mix. The marketing mix is the product, price, communications, distribution, and services provided to the target market. It is the combination of these elements that meets customer needs and provides customer value. The Product A Product is anything a consumer acquires or might acquire to meet a perceived need. Consumers are generally buying need satisfaction, not physical product attributes. As the former head of Revlon said, in the factory we make cosmetics, in the store we sell
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hope. Thus, consumers dont purchase quarter-inch drill bits but the ability to create quarter-inch holes. Federal Express lost much of its overnight letter delivery business not to UPS or Airborne but to fax machines and the Internet because they could meet the same consumer needs faster, cheaper, or more conveniently. Consider one analysts description of McDonalds product. The source of McDonalds pre-eminence is neither hamburgers nor fast-food service. Its giving a wide range of people the experience of a reliable break from fatigue, stress, grown-up responsibility. More variety, fewer calories, even enhanced freshness are not the principal criteria for success if what those people seek is a break today. We use the term product to refer to physical products and primary or core services. Thus, an automobile is a product, as is a transmission overhaul or a ride in a taxi. Over 15,000 new products and new versions of existing products are introduced to supermarkets alone each year. Obviously, many of these will not succeed. To be successful, products must meet the needs of the target market better than the competition does. Consider the Chinese computer market. A few years ago, a state-owned companyLegend-appeared headed for oblivion as China opened its market to Western firms. Today, it dominates all competitors. How? According to its general manager, We have much more insight into the needs of Chinese customer. These insights have been translated into bundling software products for first-time buyers (most of the market) into its computers. These include tutorials on such topics as using the computer, using the Internet, and organizing home finances. Communications Marketing communications include advertising, the sales force, public relations, packaging, and any other signal that the firm provides about itself and its products. An effective communications strategy requires answers to the following questions: With whom, exactly, do we want to communicate? While most messages are aimed at the target-market members, others are focused on channel members or those who influence the target-market members. For example pediatric nurses are often asked for advice concerning diapers and other nonmedical infant care items. A firm marketing such items would be wise to communicate directly with these individuals. Often it is necessary to determine who within the target market should receive the marketing message. For a childrens breakfast cereal, should the communications be aimed at the children or the parents or both? The answer depends on the target market and varies by country. What affect do we want our communications to have on the target audience? Often a manager will state that the purpose of advertising and other marketing communications is to increase sales. While this may be the ultimate objective, the behavioral objective for most marketing communications is often much more
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immediate. That is, it may seek to have the audience learn something about the product, seek more information about the product, like the product, recommend the product to others, feel good about having bought the product, or a host of other communications effects. What message will achieve the desired effect on our audience? What words, pictures, and symbols should we use to capture attention and produce the desired effect? Marketing messages can range from purely factual statements to pure symbolism. The best approach depends on the situation at hand. Developing an effective message requires a thorough understanding of the meanings the target audience attaches to words and symbols, as well as knowledge of the perception process. What means and media should we use to reach the target audience? Should we use personal sales to provide information? Can we rely on the package to provide needed information? Should we advertise in mass media, use direct mail, or rely on consumers to find us on the Internet? If we advertise in mass media, which media (television, radio, magazines, newspapers, Internet) and which specific vehicles (television programs, specific magazines, websites, and so forth) should we use? Answering these questions requires an understanding both of the media that the target audiences use and of the effect that advertising in those media would have on the products image. When should we communicate with the target audience? Should we concentrate our communications near the time that purchases tend to be made or evenly throughout the week, month, or year? Do consumers seek information shortly before purchasing our product? If so, where? Answering these questions requires knowledge of the decision process used by the target market for this product.
Price Price is the amount of money one must pay to obtain the right to use the product. One can buy ownership of a product or, for many products, limited usage rights (i.e., one can rent or lease the product such as a video). Economists often assume that lower prices for the same product will result in more sales than higher prices. However, price sometimes serves as a signal of quality. A product priced too low might be perceived as having low quality. Owning expensive items also provides information about the owner. If nothing else, it indicates that the owner can afford the expensive item. This is a desirable feature to some consumers. Therefore, setting a price requires a thorough understanding of the symbolic role that price plays for the product and target market in question. It is important to note that the price of a product is not the same as the cost of the product to the customer. Consumer cost is everything the consumer must surrender in order to receive the benefits of owning/using the product. As described earlier, the cost of owning/using an automobile includes insurance, gasoline, maintenance, finance charges, license fees, time and discomfort while shopping for the car, and perhaps even discomfort
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about increasing pollution, in addition to the purchase price. One of the ways firms seek to provide customer value is to reduce the nonprice costs of owning or operating a product. If successful, the total cost to the customer decreases while the revenue to the marketer stays the same or even increases. Part of this consideration is the risk perceived by the consumer in investing in the product. Distribution Distribution, having the product available where target customers can buy it, is essential t success. Only in rare cases will customers go to much trouble to secure a particular brand. Obviously, good channel decisions require a sound knowledge of where target customers shop for the product in question, as the following example shows: Huffy corp., a $700 million bicycle manufacturer, did careful research before launching a new bicycle called cross Sport. The new bike was a cross between a mountain bike and the traditional thin-framed 10-speed bicycle. Focus groups and product concept tests revealed strong consumer acceptance. Huffy quickly launched the $159Cross Sport through its strong mass distribution channels such as Kmart and Toys R Us. Unfortunately, the fairly serious adult rider that these bikes targeted demands individual sales attention by knowledgeable salespeople. Such salespeople are found at specially bike shops, not at mass retailers. As Huffys president said: It was a $5 million mistake. Service Earlier, we defined product to include primary or core services such as haircuts, car repairs, and medical treatments. Here, service refers to auxiliary or peripheral activities that ate performed to enhance the primary product or service. Thus, we would consider car repair to be a product (primary service), while free pickup and delivery of the car would be an auxiliary service. Although many texts do not treat service as a separate component of the marketing mix, we do because of the critical role it plays in determining market share and relative price in competitive markets. A firm that does not explicitly manage its auxiliary services is at a competitive disadvantage. Auxiliary services cost money to provide. Therefore, it is essential that the firm furnish only those services that provide value to the target customers. Providing services that customers do not value can result in high costs and high prices without a corresponding increase in customer value. 1.11 CONSUMER DECISIONS The consumer decision process intervenes between the marketing strategy (as implemented in the marketing mix) and the outcomes. That is, the outcomes of the firms marketing strategy are with determined by its interaction with the consumer decision process. The firm can succeed only if consumers see a need that its product can solve, become
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aware of the product and its capabilities, decide that it is the best available solution, proceed to it, and become satisfied with the results of the purchase. A significant part of this entire text is devoted an understanding of the consumer decision process.
Figure. 1.2 Consumer Purchase Decision Process The process may be viewed as starting when the consumer engages in problem recognition. It occurs when the consumer is activated by awareness of a sufficient difference between their actual state of affairs and their concept of the ideal situation. If an internal search does not provide sufficient information about products, or how to evaluate them, the consumer continues with a more involved external search for information. This result in exposure to numerous informational inputs called stimuli, which can arise from a variety of sources, including advertisements, printed product reviews, and comments from friends. Any informational stimuli are subject to information-processing activities which the consumer uses to derive meaning from stimuli. This process involves allocating attention to available stimuli, deriving meaning from these stimuli, and holding this meaning in what is termed short-term memory, where it can be retained briefly to allow further processing. The alternative-evaluation phase, involves comparing the information gained in the search process for alternative products and brands to the product judging criteria or standards the consumer has developed. When such comparison leads to favorable evaluations, the consumer is likely to develop a purchase intention toward that alternative receiving the most favorable evaluation. From the above figure, a purchasing process usually follows strong purchase intentions. This process involves a series of selections, including the type of retail outlet as well as the specific brand or service to use. The consumers purchase then leads to various outcomes. One such outcome is satisfaction as a result of direct experience in using the brand. Satisfaction will affect the consumers beliefs about the brand. Other outcomes are dissatisfaction and post sale doubt. These can generate a heightened desire for additional information and influence subsequent problem recognition. In both cases, post purchase experiences result in feedback to the problem-recognition stage.
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1.12 OUTCOMES 1.12.1 Firm outcomes Product position The most basic outcome for a firm of a marketing strategy is its product position-an image of the product or brand in the customers mind relative to competing products and brands. This image consists lf a set of beliefs, pictorial representations, and feelings about the product or brand. It does not require purchase or use for it to develop. It is determined by communications about the brand from the firm and other sources, as well as by direct experience with it. Most marketing firms specify the product position they want their brands to have and measure these positions on an ongoing basis. This is because a brand whose position matches the desired position of a target market is likely to be purchased when a need for that product arises. Sales Sales are a critical outcome, as they produce the revenue necessary for the firm to continue in business. Therefore, virtually all firms evaluate the success of their marketing programs in terms of sales. As we have seen, sales are likely to occur only if the initial consumer analysis was correct and if the marketing mix matches the consumer decision process. Customer Satisfaction Marketers have discovered that it is generally more profitable to maintain existing customers than to replace them with new customers. Retaining current customers requires that they be satisfied with their purchase and use of the product, Thus customer satisfaction is a major concern of marketers. Convincing consumers that your brand offers superior value is necessary in order to make the initial sale. Obviously, one must have a thorough understanding of the potential consumers needs and of their information acquisition process to succeed at this task. However, creating satisfied customer, and thus future sales, requires that customers continue to believe that your brand meets their needs and offers superior value after they have used it. You must deliver as much or more value than your customers initially expected, and it must be enough to satisfy their needs. This requires an even greater understanding of consumer behavior Hondas recent efforts in this are described below: Honda had the factory workers who actually assemble the cars as well as marketing mangers conduct telephone interviews with over 47,000 Accord owners. The interviews sought to determine customer satisfaction levels with all aspects of the Accord as well as ideas for improvements. The interviews were conducted by those who would have to make any necessary changes.
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1.12.2 Individual Outcomes Need Satisfaction The most obvious outcome of the consumption process for an individual, whether or not a purchase is made, is some level of satisfaction of the need that initiated the consumption process. This can range from none (or even negative if a purchase increases the need rather than reduces it) to complete. Two key processes are involved-the actual need fulfillment and the perceived need fulfillment. These two might take a food supplement because they believe it is enhancing their health while in reality it could have no direct health effects or even negative effects. One objective of government regulation and a frequent goal of consumer groups is to ensure that consumers can adequately judge the extent to which products are meeting their needs. Injurious Consumption While we tend to focus on the benefits of consumption, we must remain aware that consumer behavior has a dark side. Injurious consumption occurs when individuals or groups made consumption decisions that have negative consequences for their long-run well-being. For most consumers, fulfilling one need affects their ability to fulfill others due to either financial or time constraints. For example, some estimates indicate that most Americans are not saving at a level that will allow them to maintain a lifestyle near their current one when they retire. The cumulative impact of many small decisions to spend financial resources to meet needs now will limit their ability to meet what may be critically after retirement. For other consumers, readily available credit, unrelenting advertising, and widespread, aggressive merchandising result in a level of expenditures that cannot be sustained by their income. The result is often financial distress, delayed or bypassed medical or dental care, family stress, and inadequate resources for proper child care, bankruptcy, or even homelessness. Cigarette consumption is encouraged by hundreds of millions of dollars in marketing expenditures, as is the consumption of alcoholic beverages, snacks with high sugar or fat content, and other potentially harmful products. These expenditures cause some people to consume these products or to consume ore of them... Some of these people, and their families, in turn are then harmed by this consumption. Companies are not the only entities that promote potentially harmful products. Most states in the United States now promote state-sponsored gambling, which has caused devastating financial consequences for some. The following quote indicates the magnitude of the problem:
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Every year over 10 million American consumers suffer financial losses from their addiction to gambling There are currently 10 million alcoholics and 80 million cigarette smokers in the United States Every year 25,000 people die as a result of alcohol related traffic accidents All of these disturbing and disturbed between behaviors result from consumption gone wrong. While these are issues we should be concerned with and we will address throughout this text, we should also note that alcohol consumption seems to have arisen simultaneously with civilization and evidence of gambling is nearly as old. Consumers smoked and chewed tobacco long before mass media or advertising as we know it existed, and illegal drug consumption continues to grow worldwide despite the absence of large scale marketing, or at least advertising. Thus, though marketing activities based on knowledge of consumer behavior undoubtedly exacerbate some forms of injurious consumption, they are not the sole cause and, as we will see shortly, may also be part of the cure. 1.12.3 Society Outcomes Economic Outcomes The cumulative impact of consumers purchase decisions, including the decision to forgo consumption, is a major determinant of the state of a given countrys economy. Their decisions on whether to buy or save affect economic growth, the availability and cost of capital, employment levels, and so forth. The types of products and brands purchased influence the balance of payments, industry growth rates, and wage levels. Decisions made in one society, particularly large wealthy societies like the United States, Western Europe, and Japan have a major impact on the economic health of many other countries. A recession in the United States or a strong shift toward purchasing only American-made products would have profound negative consequences on the economies of many other countries, both developed and developing. Physical Environment outcomes Consumers make decision that have a major impact on the physical environments of both their own and other societies. The cumulative effect of American consumers decisions to rely on relatively large private cars rather than mass transit in significant air pollution in American cities as well as the consumption of nonrenewable resources from other countries. The decisions of people in most developed and in many developing economies to consume meat as a primary source of protein result in the clearing of rain forests for grazing land, the pollution of many watersheds due to large-scale feedlots, and an inefficient use of grain, water, and energy to produce protein. It also appears to produce health problems for many consumers. The destruction of the rain forests and other critical habitat areas receives substantial negative publicity. However, these resources are being used because of consumer demand, and consumer demand consists of the decisions you and I and our families and our friends make!
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Social Welfare Consumer decisions affect the general social welfare of a society. Decisions concerning how much to spend for private goods (personal purchases) rather than public goods (support for public education, parks, health care, and so forth) are generally made indirectly by consumers elected representatives. These decisions have a major impact on the overall quality of life in n a society. Injurious consumption, as described above, affects society as well as the individuals involved. The social costs of smoking-induced illnesses, alcoholism, and drug abuse are staggering. To the extent that marketing activities increase or decrease injurious consumption, they have a major impact on the social welfare of a society. However, the same authors conclude: Although these problems appear daunting, they are all problems that are solvable through altruistic [social] marketing. Thus, marketing and consumer behavior can both aggravate and reduce serious social problems. 1.13 SUMMARY This unit serves as an introduction to the field of consumer behavior. After several orienting discussion centers on defining consumer behavior and describing the focus and text uses for studying it to view consumer behavior as the decision process. Therefore we recognize that in certain situations consumers will purchase products and services for use by other individuals. A sound understanding of consumer behavior is essential to the longrun success of any marketing program. And the consumer attributes were discussed with the framework of market segmentation i.e., an approach to selecting groups of homogeneous consumers as targets for marketing activity. A clearer understanding should be gained about whom of consumer behavior that consumers are people of widely varying characteristics. Since customer value is delivered by the marketing strategy, the firm must develop its general marketing strategy as it evaluates potential target markets. And this unit ends with the consumer decision process intervenes between the marketing strategy (as implemented in the marketing mix) and the outcomes. 1.14 REVIEW QUESTIONS Review the activities undertaken by marketing oriented firms and show the relevance of consumer behavior to each activity. List out the pitfalls a marketer may encounter by ignoring the study of consumer behavior. How is the study of consumer behavior important in the following situations?
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a) b) c)
In an economy where there is surplus production capacity. In an economy where there are limited disposable incomes of the consumers and low purchasing powers. In an intensely competitive situation relating to a product marketed by several companies with their products being nearly identical.
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Relate one of your experiences where post purchase outcomes significantly influenced your future purchase behavior. How does the concept of market aggregation differ from market segmentation? What are the benefits and costs of market segmentation?
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UNIT II
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CONSUMER AS AN INDIVIDUAL
2.1 OVERVIEW The term individual means a human being or a single person. The individual may be major, minor, married or unmarried, and sound or unsound mind. The term consumer more generally refers to anyone engaging in any of the activities. The traditional viewpoint has been to define consumer strictly in terms of economic goods and services. This position holds that consumer is a potential purchaser of products and services offered for sale. Most economically developed societies are legitimately referred to as consumption societies. Most individuals in these societies spend more time engaged in consumption than in any other activity, including work or sleep (both of which also involve consumption). Therefore, knowledge of consumer behavior can enhance our understanding of our environment and ourselves. Such an understanding is essential for sound citizenship, effective purchasing behavior, and reasoned business ethics. Marketing stimuli have meaning only as individuals interpret them. Individuals are not passive interpreters of marketing and other messages but actively assign meaning based on their needs, desires, expectations, and experiences. Thus, consumers interpretations of negative publicity depend on their prior commitment to the brand involved. Likewise, consumers interpret movie critics reviews in light of their knowledge about the critic and his or her biases and preferences. The fairness of a price increase is interpreted on the basis of the consumers inferred motive for the increase. Information about competing brands is often inaccurately interpreted to favor a preferred brand. So any study of consumer behavior would be incomplete if it treated only one consumer role. 2.2 LEARNING OBJECTIVES After studying this unit, you should understand About the consumer needs and motivational process The Personality and consumer perception How consumers learn across a variety of situations The Consumer attitudes and change The Communication and persuasion of consumer About Self image and life style analysis of consumer
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2.3 THE NATURE AND ROLE OF MOTIVES 2.3.1 The Nature of Motives A number of writers have drawn distinctions between motives and other related concepts such as needs, wants, and drives. For our present purposes these distinctions are not very helpful and will be avoided. We will view a motive as an inner state that mobilizes bodily energy and directs it in selective fashion toward goals usually located in the external environment. This definition implies that motives involve two major components: 1. A mechanism to arouse bodily energy. 2. A force that provides direction to that bodily energy. The arousal component activates general tension or restlessness but does not provide direction for release of this energy. It might be compared to the generally random thrashing about that newborn babies often show. The directive aspect of motives focuses such aroused energy toward some goal in the individuals environment. That is, when our hunger is aroused, we are usually directed toward particular foods. The arousal leads a person to act (i.e., to behavior). Autonomic (physiological) or emotive arousal can elicit the relevant behavior directly. For example, the slight of a bear will automatically (i.e., automatically) make you flee, and seeing something funny may sees in the mail an express mail envelope, his or her automatic response is to open that envelope first. Emotive feelings are aroused when we buy products that are made in our home country versus foreign countries. These feelings are magnified when there are tensions between the home country and a foreign country. For example, the recent case of U.S. soldiers being held in China has aroused negative feelings towards Chinese products in the United States. Cognitive arousal also would elicit behavior by generally only after further cognitive activity to figure out possible goal-directed behaviors; for example, a person seeking a way out of a commitment will identify and deliberate available options. Or a person with a car breakdown will deliberate alternative ways of getting to the destination. In business, the onset of a new project causes cognitive arousal, and there is a request for proposals that are scanned and deliberated upon. Various concepts have been offered to explain how motives exert their directional influences on consumers. Earlier views held that inborn instincts beyond the individuals control provided the direction for behavior. Later it was stressed that basic needs (hunger, thirst, and the like) impelled people toward action. This view also held that behavior instrumental in satisfying a need would become associated with it and have a higher likelihood of occurring in future situations involving the same need arousal.
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These somewhat simplistic views of motivation have been found lacking because they imply that people are impelled by various forces and have very little conscious control over the direction of their own actions. For this reason, a cognitive orientation has gained in popularity. It emphasizes the role of mental processes such as planning, evaluation, and goal selection in directing behavior. This suggests that consumers have a very active role in selecting their goals, evaluating the relative usefulness of products in terms of these goals, and consciously orchestrating their behavior in terms of these products. 2.3.2 The Role of Motives The role of motives is to arouse and direct the behavior of consumers. The arousal component activates bodily energy so that it can be used for mental and physical activity. In their directive role, motives have several important functions for guiding behavior. Defining Basic Strivings Motives influence consumers to develop and identify their basic strivings. Included among basic strivings are very general goals such as safety, affiliation, achievement, or other desired states which consumers seek to achieve. They serve to guide behavior in a general way across a wide variety of decisions and activities. Identifying Goal Objects Although there are exceptions, people often view products of services as a means by which they can satisfy their motives. In fact, consumers often go one step further and think of products as their actual goals, without realizing that they actually represent ways of satisfying motives. Influencing Choice Criteria Motives also guide consumers in developing criteria for evaluating products. Thus, for a car buyer strongly influenced by the convenience motive, features such as electronic speed control and automatic driver-seat adjustments would become more important choice criteria than would styling or mileage. Directing Other Influences At a more fundamental level, motives affect the individual determinants of perception, learning, personality, attitudes, and how people process information. This also results in directional influences on behavior. For example, motives influence information processing, which in turn regulates how we interpret and respond to our environment. 2.3.3 Facets of motivation: Needs, Emotions, and psychographics Whatever the direction of motivation, it manifests in three facets: needs, emotions, and psychographics. Needs are gaps between the desired and the current state, and they
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lend themselves more readily to cognitive consciousness and appraisal. Emotions are more autonomic and engender more personal experience. Psychographics combine behaviors driven by both needs and emotions. 2.4 CUSTOMER NEEDS The concept of needs and wants is closely aligned to the concept of motivation. The desired state provides the goal-object, and its deprivation provides the drive. Psychologies and consumer researchers have suggested various categories of needs. Among the most relevant to marketers are Maslows need hierarchy, Murrays psychogenic needs, Ditchers consumption needs, and various marketing scholars list of customer needs. 2.4.1 Maslows Hierarchy of Needs According to psychologist Abraham Maslow, human needs and wants are arranged in a hierarchy. Higher-level needs are dormant until lower-level needs are satisfied. Maslows hierarchy of needs consists of (from lowest to higher): 1. Physiological needs (hunger, thirst) 2. Safety and security needs (Security, protection) 3. Belongingness and love needs (Social needs) 4. Esteem and ego needs (self-esteem, recognition, status) 5. Need for self-actualization (Self-development, realization) A person progresses to higher-level needs if the lower-level needs are satisfied; he or she regresses back to lower-level needs should these needs become unsatisfied again. Maslow does not distinguish between needs and wants, but most contemporary books on marketing do. According to this distinction, only the first two needs in Maslows hierarchy would be needs while the last three are wants. Maslows Needs for household customers Physiological needs lead customers to strive for, purchase, and use food, clothing and shelter. For many, such as those below the poverty line, these needs remain perpetually less than adequately met so that they never rise to higher-level needs. Furthermore, many of the differences in what customers use and buy are due to physiological differences, (i.e., physiological differences due to genetics, race, gender and age). At the next level, safety and security needs are responsible for many peoples fear of flying, for example, and for buying insurance against various uncertainties of life. Personal safety is a motive as old as survival itself, and in modern times, purchase and use of guns is on the rise in major urban centers to ensure personal safety. Likewise, other safety concerns relate to automobile safety with regard to health as consumers develop a germ phobia.
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Social motives of belongingness and love are evident when customers want to buy products that are well regarded by others so that the use of those products brings the customers peer approval, affection, and a sense of belonging. The kind of neighborhood you choose to live in, the kind of car you choose to drive, the designer logos on the clothes you wear, what school you send your youngster to, and the places you vacation are at least in part determined by how you peer and significant others will look upon these choices. Many products, such as greeting cards, flowers and other kinds of gifts, are bought specifically to promote relationships between individuals. Next, we all work hard to gain success in our individual sphere of activity and to acquire the qualities others consider desirable and virtuous so that we may win our own and others esteem. We also buy products and services we deem fitting of our esteem. Beyond impressing others, for example, we drive a car that, in our judgment, reflects who we are; we visit stores where we are treated with respect; and we even buy and give gifts to ourselves because we feel we deserve them. Finally, once these physiological, social, and esteem needs are satisfied, people begin to explore and extend the bounds of their potential- that is, seek self-actualization. This self actualization motive is what is behind a person engaging, for example, in self-improvement activities, such as taking an adult-education course or tenaciously pursuing a skill toward perfection, like in competitive sports, or even doing meditation to, according to Eastern philosophy, meet ones creator, to become what one was supposed to be, in a cosmic sense. Maslows needs for business customers Like customers in household markets, customers in the business markets experience Maslows hierarchy of needs. This can be visualized at two levels; business customer as an enterprise and business customer as individuals working in firms. First consider business as an enterprise. As an enterprise, business firms need, for their physical survival, at least three resources: money, employees, and raw materials and equipment. Banks and venture capitalists who supply cash, recruitment agencies who supply employees, and suppliers of raw materials and equipment are catering to the survival needs of the business enterprise, akin to physiological needs of the individual. Security needs for business firms translate into insurance against loss of property and assets and against liabilities that may arise in various business transactions. Indeed, safety and security are key concerns in government and business buying; for example, the safety features are of paramount importance when city governments procure vehicles for their police forces. In office buildings, elevators need to be inspected and maintained for safe operations. In department of Defense contracts, all vendors must assure ad abide by data security requirements.
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Belongingness for business enterprises refers to recognition by peer organizations and being admitted to formal or informal memberships groups of other similar organizations. Thus to belong to Fortune 500 or to Silicon Valley, to be listed on the stock exchange, to belong to the Better Bureau, to be recognized as a leading contender in the field, or to be certified and recertified by formal certification agencies are examples of an enterprises sense of belonging. Esteem comes partly from being recognized by various bodies but also partly from ones own sense of accomplishment, such as winning the Malcolm BAL ridge award or obtaining the AACSB accreditation by a business school (American Assembly of Colleges and schools in business). Qualifying to belong to a group of enterprises or to attain certain status and awards, businesses need to buy, use, and pay for a range of products and services-for example, tightly controlled quality in raw materials, training for its employees, or reengineering services. Finally, self-actualization is seen in business firms; striving to become what they want to be, such as 3M as the innovative company, Ben & Jerrys as the environmental company. Levi Strauss as the Diversity Company, and Benetton as the social consciousness company. Firms that have these and similar other business firms as their customers must themselves reflect these values and deal in ways that further or help the customer companies to actualize their selves. Now consider business customers as individuals working in organizations. Whatever they want to buy, they want to feel secure that it is a wise decision and be assured that the product or service will perform well and to the specifications. Whoever is making the purchase decision for the organization is held accountable for it, and often he or she is at risk of being perceived as being incompetent should an unwise purchase decision be made. Thus, business customers are likely to buy from someone they feel secure in dealing with. Next, many products are bought simply to satisfy a persons belongingness and esteem needs; for example corporate membership in country clubs, corporate jets, the kind of hotel one chooses on business travel, and even the location and address of business premises. Finally, self-actualization reflects a persons personal value system and affects what he or she buys and whom he or she buys from-for example, buying from local or minority suppliers. 2.4.2 Mcguires Psychological Motives Maslow presented a hierarchical set of five basic motives, and other researchers have proposed hundreds of additional, very specific motives. McGuire developed a classification system that organizes these various theories into 16 categories. This system helps markets isolate motives likely to be involved in various consumption situations. Each of McGuires 16 motives and their implications for marketing are briefly described in the following sections:
CONSUMER BEHAVIOUR
COGNITIVE PRESERVATION MOTIVES 1. Need for Consistency: A basic desire is to have all facets or parts of oneself consistent with each other. These facets include attitudes, behaviors, opinions, self-images, views of others, and so forth. Cognitive dissonance is a common motive of this type. Often making a major purchase is not consistent with the need to save money, to make other purchases, or to purchase a different brand with desirable features not in the purchased brand. This inconsistency motivates the individual to reduce it. Understanding the need for consistency is also important for structuring advertising messages and developing attitude change strategies. Consumers have a need for internal consistency, so they are reluctant to accept information that disagrees with existing beliefs. 2. Need for Attribution: This set of motives deals without need to determine who or what causes the things that happen to us. Do we attribute the cause of a favorable or unfavorable outcome to ourselves or to some outside force? The fact that consumers need to attribute cause underlies an area of research known as attribution theory. This approach to understanding the reasons consumers assign particular meanings to the behaviors of others has been used primarily for analyzing consumer reactions to promotional messages (in terms of credibility). When consumers attribute a sales motive to advice given by a salesperson or advertising message, they tend to discount the advice. In contrast, similar advice given by a friend would likely be attributed to a desire to be helpful and might therefore be accepted. 3. Need to Categorize: People have a need to categorize and organize the vast array of information and experiences they encounter in a meaningful yet manageable way. So they establish categories or mental partitions that allow them to process large quantities of information. Prices are often categorized such that different prices connote different categories of goods. Automobiles over $20000 and automobiles under $20000 may elicit two different meanings because of information categorized on the basis of price level. Many firms price items at $9.95, $19.95, $49.95, and so forth. One reason is to avoid being categorized in the over $10, $20, or $50 group. 4. Need for Objectification: These motives reflect needs for observable cues or symbols that enable people to infer what they feel and know. Impressions, feelings, and attitudes are subtly established by viewing ones own behavior and that of others and drawing inferences as to what one feels and thinks. In many instances, clothing plays an important role in presenting the subtle meaning of a desired image and consumer lifestyle. This is so critical that companies such as Anheuser-Busch use clothing consulting firms to tailor clothes for executives that are consistent with the firms desired image. COGNITIVE GROWTH MOTIVES 5. Need forAutonomy: The need for independence and individuality is a characteristic of the American culture. All individuals in all cultures have this need at some level. Americans are taught that it is proper and even essential to express and fulfill this
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need. In contrast, in countries such as Japan, fulfillment of this need is discouraged, while fulfillment of the need for affiliation is more socially acceptable. Owning or using products and services that are unique is one way consumers express their autonomy. The increasing popularity of handmade craft goods, original art, antiques, and other unique products reflects the need. Marketers have responded to this motive by developing limited editions of products and providing wide variety and customization options. In addition, many products are advertised and positioned with independence, uniqueness, or individuality themes. 6. Need for Stimulation: People often seek variety and difference out of a need for stimulation. Such variety-seeking behavior may be a prime reason for brand switching and some so-called impulse purchasing. The need for stimulation is curvilinear and changes over time. That is, individuals experiencing rapid change generally become satiated and desire stability, whereas individuals in stable environments become bored and desire change. 7. Technological Need: Consumers are pattern matchers who have images of desired outcomes or end states to which they compare their current situation. Behaviors are changed and the results are monitored in terms of movement toward the desired end state. This motive propels people to prefer mass media such as movies, television programs, and books with outcomes that match their view of how the world should work (the good guys win, the hero and heroine get together, and so forth). This has obvious implications for advertising messages. 8. Utilitarian Need: These theories view the consumer as a problem solver who approaches situations as opportunities to acquire useful information or new skills. Thus, a consumer watching a situation comedy on television not only is being entertained but is learning clothing styles, etiquette, lifestyle options, and so forth. Likewise, consumers may approach ads, salespeople, and other marketing stimuli as a source of learning for future decisions as well as for the current one. AFFECTIVE PRESERVATION MOTIVES 9. Need for Tension Reduction: People encounter situations in their daily lives that create uncomfortable levels of stress. In order to effectively manage tension and stress, people are motivated to seek ways to reduce arousal. Recreational products and activities are often promoted in terms of tension relief. 10. Need for Expression: This motive deals with the need to express ones identity to others. People feel the need to let others know who and what they are by their actions, which include the purchase and use of goods. The purchase of many products such as clothing and automobiles allows consumers to express an identity to others, because these products have symbolic or expressive meanings. Thus, the purchase of the latest in skiwear may reflect much more than a desire to remain warm while skiing. 11. Need for Ego Defense: The need to defend ones identity or ego is another important motive. When ones identity is threatened, the person is motivated to protect his or her self-concept and utilize defensive behaviors and attitudes. Many
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products can provide ego defense. A consumer who feels insecure may rely on well-known brands for socially visible products to avoid any chance of making a socially incorrect purchase. 12. Need for Reinforcement: People are often motivated to act in certain ways because they were rewarded for behaving that way in similar situations in the past. This is the basis for operant learning as described in the previous chapter. Products designed to be used in public situations (clothing, furniture, and artwork) are frequently sold on the basis of the amount and type of reinforcement that will be received. Keepsake Diamonds exploits this motive with an advertisement that states, Enter a room and you are immediately surrounded by friends sharing your excitement. AFFECTIVE GROWTH MOTIVES 13. Need for Assertion: Many people are competitive achievers who seek success, admiration, and dominance, Important to them are power, accomplishment, and esteem. The need for assertion underlies numerous ads. 14. Need forAffiliation: Affiliation is the need to develop mutually helpful and satisfying relationships with others. It relates to altruism and seeking acceptance and affection in interpersonal relations. Group membership is a critical part of most consumers lives, and many consumer decisions are based on the need to maintain satisfying relationships with others. Marketers frequently use such affiliation-based themes as Your kids will love you for it in advertisements. 15. Need for Identification: The need for identification results in the consumer playing various roles. A person may play the role of college student, sorority member, bookstore employee, fiance, and many others. One gains pleasure from adding new, satisfying roles and by increasing the significance of roles already adopted. Marketers encourage consumers to assume new roles (become a skateboarder) and position products as critical for certain roles (No working mother should be without one). 16. Need for Modeling: The need for modeling reflects a tendency to base behavior on that of others. Modeling is a major means by which children learn to become consumers. The tendency to model explains some of the conformity that occurs within reference groups. Marketers utilize this motive by showing desirable types of individuals using their brands. For example, some Rolex ads devote most of their copy to a description of very successful people such as Picabo Street or Monica Kristensen. They then state that this person owns a Rolex. 2.4.3. Murrays List of Psychogenic Needs Psychologist Henry Murray proposed a list of 12 primary (or viscerogenic) and 28 secondary (or psychogenic) human needs. The list of needs is:
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1. Autonomy: To be independent and free to act according to impulse; to be unattached, irresponsible; to defy convention. (e.g. Impulse buying, wearing unconventional clothing) 2. Dominance: To direct the behavior of others (e.g. Aggressively demanding attention in service establishments) 3. Nurturance: To give sympathy and to feed, help, and protect the needy. (e.g. wearing high-fashion clothing) 4. Cognizance: To explore, to ask questions, to seek knowledge (e.g. visiting museums, learning about new technology and products) 5. Exposition: To give information and explain, interpret, and lecture. (e.g. playing opinion leaders) Ernest Dichters Consumption Motives Ernest Dichter was psychoanalyst trained in Vienna in the early part of the century. A strong believer in Freuds theory of personality, he believed that unconscious motives play a significant role in peoples consumption decisions. Based on in-depth interviews with consumers for some 200-plus products, he identified a set of motives/needs that underlie an individuals consumption of diverse products. List of Consumption Motives are: Mastery over environment Status Rewards Individuality Social acceptance Love and affection Security Masculinity Femininity Eroticism Desalination Moral Purity/cleanliness Magic-mystery Kitchen appliances Scotch Gifts to oneself Foreign cars Companionship Giving children toys Full drawer of neatly ironed shirts Toy guns Decorating Sweets, Gloves Listening to and calling in talk shows White bread, bathing Religious rituals, crystals
2.4.4. Needs identified by Marketing Scholars Working more directly on marketing problems and reflecting specifically on an individuals behavior in the marketplace, several marketing scholars have identified and proposed their own classification of needs. Consumer researcher Geraldine Fennel identified consumer motives for product use based on use-situation-for example, aversive (to avert
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an adverse situation) or positive (to gain a reward) product-use situation. Consumer researcher Morris Holbrook has discussed the hedonic (i.e., pleasure seeking) consumption motive, distinguishing it from the more utilitarian consumption. Similarly, marketing professor Olli T.Ahtola has described utilitarian and hedonic consumer attitudes toward products. 2.4.5. Sheth, Newman and Gross have proposed that individual choice behavior stems from five needs: 1. Functional A product or service satisfies its physical or functional purpose (for example, soaps for cleansing and medicines for alleviating physical ailments). 2. Social A product or service satisfies the social need through its association selected demographic, socioeconomic, or cultural-ethnic segments of society (e.g. wearing a polo brand of shirt to identify with upper-income, successful people). 3. Emotional The product or service satisfies this need by creating the appropriate feelings and emotions, such as joy, love, or respect that a person experiences upon receiving a gift. 4. Epistemic the product or service satisfies the human need to know or learn something new (e.g. buying and reading a newspaper, watching a TV news program, or purchasing an encyclopedia or books on history, science, and commerce). 5. Situational Certain products or services satisfy needs that are situational or contingent upon the time and place (for example, an emergency car repairs on an out-of town trip). These classifications are valuable to study because they have been used in a number of consumer studies. Sheth and his colleagues, for example, have applied the classification to consumers transportation choice, to peoples voting behavior, and to an individuals smoking behavior. Finally, reviewing the entire literature on consumer needs consumer researcher Janice Hanna has proposed as list of seven consumer needs. 1. Physical safety The need to consume products so as to avoid harm or danger in their use, and to preserve clean air and water in the environment. 2. Material Security The need to consume an adequate supply of material possessions. 3. Material comfort The need to consume a large and/or luxurious supply of material possessions. 4. Acceptance by others The need to consume products in order to be associated with a significant other or a special reference group. 5. Recognition from others The need to consume products in order to be acknowledged by others as having gained a high status in his or her community. 6. Influence over other The need to feel ones impact on others consumption decisions. 7. Personal growth The need to consume products in order to be or become ones own unique self.
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2.5 CUSTOMER EMOTIONS Needs and emotions are closely related. Emotions are generally triggered by environmental events. Anger, joy, and sadness are most frequently a response to a set of external events. However, we can also initiate emotional reactions by internal processes such as imagery. Athletes frequently use imagery to psych themselves into a desired emotional state. Emotions are accompanied by physiological changes. Some characteristic changes are (1) eye pupil dilation, (2) increased perspiration, (3) more rapid breathing, (4) increased heart rate and blood pressure, and (5) enhanced blood sugar level. Emotions also have associated behaviors. While the behaviors vary across individuals and within individuals across time and situations, there are unique behaviors characteristically associated with different emotions: fear triggers, fleeing responses, anger triggers striking out, grief triggers crying, and so forth. Finally, emotions involve subjective feelings. In fact, it is the feeling component we generally refer to when we think of emotions. Grief, joy, anger, jealousy, and fear feel very different to us. These subjectively determined feelings are the essence of emotion.
Figure 2.1 Nature of Emotions Types of Emotion If asked, you could doubtless name numerous emotions and your friends could name others that did not appear on your list. Thus, it is not surprising that researchers have attempted to categorize emotions into manageable clusters. Some researchers have suggested that three basic dimensions pleasure, arousal, and dominance (PAD) underlie all emotions. Specific emotions reflect various combinations and levels of these three dimensions. Table 2.1 lists the three primary PAD dimensions, a variety of emotions or emotional categories associated with each dimension, and indicators or items that can be used to measure each emotion.
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Table 2.1 Emotional Dimensions, Emotions and Emotional Indicators.
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A model of Emotion Although a number of psychologists have tried to explain emotions, the most contemporary theory is Schachters two factor theory. According to psychologist Stanley Schachter, the experience of emotion depends on two factors, automatic arousal and its cognitive interpretation, or meaning analysis. In this model, we recognize that the initial stimulus can come from the external environment as well as from the inside of the organism, such as hunger pangs or a headache. Marketer can adapt or respond to customer emotions by (1) designing the stimulus and (2) aiding the meaning appraisal. The first intervention takes the form of making
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product or service designs to fit appropriate consumption emotions. The second takes the form of communication, such as in attaching symbolism to products or services in advertising or in explaining certain aspects of the marker offering or certain deviations from the expected marketplace events or outcomes. For example, positive attempts to help a customers meaning appraisal process might include a physician explaining treatment procedures to a patient or a serer explaining why there is a delay in serving food at a restaurant. Scales to Measure Plutchiks Eight Emotions Plutchiks emotions can be measured by rating the following triads of an adjectives, each rated on a five-point scale, ranging from not at all to very strongly. How do you feel at the moment? Fear Anger Joy Sadness Acceptance Disgust Anticipation Surprise : : : : : : : : threatened, frightened, intimidated Hostile, annoyed, irritated Happy, cheerful, and delighted gloomy, sad, and depressed. helped, accepted, trusting disgusted. Offended, unpleasant alert, attentive, curious Puzzled, confused, startled
WINDOW ON RESEARCH Customer Moods Moods are simply emotion s felt less intensely, they are also short-lived. They are easy to induce, and they appear and disappear frequently and readily. They are pervasive in that we are always in some kind of mood-happy mood or sad mood, pensive mood or careless mood, irritated or pleased, amused or bored. Moods affect our behavior of the moment in general and our response to the marketing activities to which we might be exposed at the time. For this reason, moods are important for marketers to understand. Moods are induced by external stimuli as well as internally by autistic thinking that is, recalling some past incident or fantasizing about some event. Among the marketing stimuli that can induce positive or negative moods are: The ambience of the store or service delivery facility The demeanor of the salesperson The sensory features pf the product The tone and manner of advertising
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The content of the message itself from a salesperson or in the advertisement whether it frustrates or fulfils ones goals in attending to that message (e.g., if the salesperson is not knowledgeable or if the advertisement is vain, the customer may feel frustration at having wasted the time).
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Mood states have consequences in terms of favorable or unfavorable customer response to marketer efforts. In research studies done by consumer researchers, customers have also been found to linger longer in positive mood environments, recall those advertisements more that had created positive moods, and feel more positive toward brands based on advertising that created feelings of warmth. Mood affects the strategies used to process information by consumers. However there is one stream of research that states that positive mood reduces the processing of stimulus information, and there is another that states that positive mood enhances the learning of brand names better in comparison to a neutral mood. Brand name recall is s pre requisite for the choice of the brand and recall depends on the process by which the brand was first encoded into memory. Researchers Lee and Sternthal state that two factors important in the encoding process are brand rehearsal how frequently and recently the brand has been exposed in the memory as a member of a particular category-and relational elaboration-the process by which consumers link the brands to the specific categories they belong to. In a brand-learning task, they found that being in a positive mood helps consumers to cluster the brands that they are exposed to, by the categories they belong to when the respondents are asked to recall as many brands as possible after this exposure, a positive mood helps them recall more categories and more brands as members of these categories, thus increasing the number of brands recalled compared to when they are in a natural mood. Corroborating this finding is the research study by Barone, Miniard, and Romeo on the effect of positive mood on brand extension evaluations. They show that a positive mood influences the perceptions of similarity between the brand extensions. Both of these factors are important determinants of extension evaluations, and positive mood enhances evaluation of brand extensions by influencing these determinants. Thus, marketers could use advertising, point-of-sale material, celebrity endorsements, free gifts, and several other strategies to induce positive moods in consumers to enable a more positive evaluation of a brand extension, thereby influencing choice. Marketers on the Internet attempt to overcome their inability to actually bring the customer into the store by creating the mood or ambience within the web site. This might include the incorporation of store colors and background music aimed at creating a favorable mood in the customer.
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Hedonic consumption, seeking Emotional value Emotions and moods drive a host of consumption behaviors. While detergents, lawn mowers, microwave ovens, chain saws, insurance policies, investment portfolios, and computers are purchased and used for some utilitarian/functional end-states, such products and services as perfumes/colognes, diamonds, and bubble baths and such activities as sports, theater, movies, music concerts, and amusement parks are used or engaged in purely for the emotional or hedonic values they provide. We introduced the concept of emotional value as a discretionary value. Hedonic consumption refers to the use of products or services for the sake of intrinsic enjoyment rather than to solve some problem in the physical environment. More specifically, heteronyms refers to sensory pleasure. Thus, hedonic consumption is the use of products and services that give pleasure through the sense, that help create fantasies and that give emotional arousal. Here are some examples: Sensory pleasure taking a bubble bath; relaxing in a Jacuzzi or sauna; using perfume and colognes; wearing exciting colors in clothing; enjoying strobe lights in a discotheque; choosing office dcor, landscaping the corporate office building. Aesthetic pleasure- reading poetry, visiting an art gallery, taking a course in Greek history; having original works of art in the corporate offices. Emotional experience Watching movies or soap operas on TV; taking a roller coaster ride; sending gifts; receiving gifts; visiting relatives; making or receiving long-distance social calls; dating; attending class reunion; celebrating silver wedding anniversary; celebrating winning a major business contract from a highly coveted client. Fun and enjoyment video games arcade, playing sports; dancing; vacationing attending a business convention; entertaining a business customer in a game of golf; attending office Christmas parties. It is interesting to note tat while American teenagers are enamored by the newness and hedonic vale of technological gadgets; European teenagers are concerned with their functional utility. They look at technology as a means to an end. The end they are interested in is social connectivity. They want to keep in touch with friends and develop relationships with peers, and they consider devices such as computers and cell phones to be a means to achieving this end.
Deep involvement One special case of hedonic consumption is deep involvement in a product, service, or activity. This describes customers relationships with a select few products that are consumed with interest, pausing to savor their taste, smell their aroma, feel their texture, or hear their sound. We like them; we enjoy them; we love them.
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Everyone has a favorite activity, a favorite product, a favorite brand. Some of us are fashion experts; others, car buffs; still others, computer jocks. We are eager to get to know these products (e.g., fashions, cars, and computers) and find out everything there is to know; we get excited whenever the topic comes up, and, of course, we want to be using them whenever possible. This relationship we develop as users with selected products and services is called deep involvement. It can be defined as a customers extreme interest in a product or service on an ongoing basis. Involvement is a general term that can be defined as the degree of personal relevance of an object, product, or service to a customer. Furthermore, involvement is a matter of degree-how relevant or how central a product is. Involvement, defined as the degree of interest, can be viewed as having two forms: enduring involvement and situational involvement. Enduring involvement is the degree of interest a customer feels in a product or service on an ongoing basis. In contrast, situational involvement is the degree of interest in a specific situation or on a specific occasion, such as when buying a product or when consuming something in the presence of an important client or friend. Thus, Celia Fernandez is not much interested in dishwashers; she takes the one in her kitchen for granted. But the last time she was buying one, she became extremely interested (i.e., involved) in dishwashers, attempting to learn about them, deliberating over various options, and weighing them vis--vis her own needs. In contrast, she is enduringly involved in gardening and in garden-related products, taking considerable interest in them and enjoying them. In a business context, a major infrastructure project in a company is an object of high situational involvement, and maximizing the lifetime value of its customers would be a matter of enduring involvement. The extreme form of enduring involvement is deep involvement. Deep involvement affects customer behavior in a number of ways. First, deeply involved consumers are knowledgeable about the product or service and, thus, can act as opinion leaders. Second, they consume a greater quantity of the product and also buy related products. Third, they are less price sensitive for that product and are willing to spend well. Fourth, they seek constant information about products and services. Fifth, they want to spend more time in related activities. It is easier to build more extended relationships with these customers. Consider for example, Harley-Davidson motorcycle owners; there is a Harley Owners Club (HOG), and members participate in a wide range of activities, including charity work. The fanatic loyalty that favored IBM at one time but now favors the Apple Mac shows the deep involvement that these users have for the product. Finally, deeply involved customers can act as lead users for new products; they try products in innovative ways and, thus are sources of new-product ideas.
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Psychographics Along with needs and emotions, the third facet of motivation is psychographics. Psychographics are characteristics of individuals that describe them in terms of their psychological and behavioral makeup-how people occupy themselves (behavior) and what psychological factors underlie that activity pattern. They are manifestation of an individuals underlying motivations, and they, in turn, define them. For example, persons need to seek affiliation or peer approval makes him or her engage, say, in going to theaters or playing golf. Theater going or playing golf, thus becomes part of his or her psychographics. This psychographic, in turn, drives customer behavior toward buying golf equipment or doing whatever is needed to implement that particular psychographic; it becomes motivational. 2.6 PERSONALITY AND CONSUMER BEHAVIOR While motivations are the energizing and directing force that makes consumer behavior purposeful and goal directed, the personality of the consumer guides and directs the behavior chosen to accomplish goals is different situations. Personality is an individuals characteristic response tendencies across similar situations. If someone asked you, What is your dad like? it is unlikely that you would describe him in terms of demographics. Instead, you would probably use a combination of physical features and personality characteristics. We can easily describe the personalities of our family members and friends. For example, you might say that one of your friends is fairly aggressive, competitive, outgoing, and witty. What you have described are the behaviors your friend has exhibited over time across a variety of situations. These characteristic ways of responding to a wide range of situations should, of course, also include responses to marketing strategies. While there are many personality theories, all have two common assumptions: (1) all individuals have internal characteristics or traits, and (2) there are consistent and measurable differences between individuals on those characteristics. Most of these theories state that the traits or characteristics are inherited or formed at an early age and are relatively unchanging over the years. Single-trait theories emphasize one personality trait as being particularly relevant to understanding a particular set of behaviors. They do not suggest that other traits do not exist or are not important; rather, they study a single trait for its relevance to a set of behaviors, in our case, consumption-related behaviors. Some examples of single-trait theories that have been shown to be relevant to marketing are those that deal with neuroticism, consumer conformity, and vanity, affect intensity, trait anxiety, locus of control, sensation, seeking, self-monitoring, and the need for cognitive closure. Another single-trait theory of use to marketers is termed consumers need for uniqueness. It is defined as an individuals pursuit of differentness relative to others that is
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achieved through the acquisition, utilization, and disposition of consumer goods for the purpose of developing and enhancing ones personal and social identity. It affects what consumers own and value, why they own it, and how they use it. The concepts fit with the increasingly common marketing practice of deliberate scarcity producing less of an item than the predicted demand. Such a strategy helps preserve the uniqueness of the product and enhances the distinctiveness and status of those who own it. In contrast to a single-trait theory, a multitrait personality theory specifies several traits that in combination capture a substantial portion of the personality of the individual. The multitrait theory used most commonly by marketers is the Five-Factor Model of personality. This theory identifies five basic traits that are formed by genetics and early learning. These core traits interact and manifest themselves in behaviors triggered by situations. Table 2.2 lists the five traits and some of their manifestations. Table 2.2 The Five-Factor Model of Personality
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The Use of Personality in Marketing Practice Often consumers use products to bolster an area of their personality. Thus, a timid person might drive a powerful car. While driving the car, this person might feel less timid and more powerful. However, another timid person might forgo a powerful or flashy car because its just not me. Consider one consumers explanation of why she did not purchase the conservative clothing she felt was most suitable for their work:
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Figure 2.2 Dimensions of Brand Personality 2.7 CONSUMER PERCEPTION Information processing is a series of activities by which stimuli are perceived, transformed into information, and stored. A useful information-processing model having four major steps or stages: exposure, attention, interpretation, and memory. The first three of these constitute perception. 2.7.1. Exposure Exposure occurs when a stimulus comes within range of our sensory receptor nerves. For an individual to be exposed to a stimulus requires only that the stimulus be placed within the persons relevant environment. That is, you have been exposed to a television commercial if it aired while you were in the room, even if you were not paying attention and did not notice the commercial. An individual can be exposed to only a minuscule fraction of the available stimuli. There are now hundreds of television channels, thousands of radio stations, innumerable magazines, and an exponentially increasing number of websites. Yet one normally watches only one television station at a time, reads one magazine, newspaper, or book at a time, and so forth. What determines which stimuli an individual will be exposed to? Generally, people seek information that they think will help them achieve their goals. These goals may be immediate or long range. Immediate goals could involve seeking stimuli such as a television program for amusement or a website to assist in a purchase decision. Long-range goals might involve studying this text in hopes of passing the next exam, obtaining a degree, becoming a better marketing manager, or all three. An individuals goals and the types of information needed to achieve those goals are a function of that persons existing and desired lifestyle and such short-term motives as hunger or curiosity. Of course, people are also exposed to a large number of stimuli on a more or less random basis during their daily activities. While driving, they may hear commercials, see billboards and display ads, and so on that they did not purposefully seek out.
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The impact of the active, self-selecting nature of exposure can be seen in the zipping, zapping, and muting of television commercials. Zipping occurs when one fast-forwards through a commercial on a prerecorded program. Zapping involves switching channels when a commercial appears. Muting is turning the sound off during commercial breaks. The nearly universal presence of remote controls makes zipping, zapping, and muting very simple. And yes, males do use the remote more than women for zapping, changing channels during the show, and channel surfing. Although consumers often avoid commercials, sometimes they actively seek them out. Many viewers look forward to the commercials developed for the Super Bowl. More impressive is the positive response consumers have to infomercials program-length commercials (often 30 minutes), generally with an 800 number and/or Web address through which to order the product or request additional written information. They have been found to positively affect brand recall, attitudes, and purchase intentions. One study found that early adopters, opinion leaders, and active shoppers are more likely to view infomercials than are other consumers. This suggests that they may have significant indirect effects through their impact on word-of-mouth communications. Banner ads are the dominant form of advertising on the Internet. Exposure to these ads is generally involuntary, as consumers encounter them while seeking other information or entertainment. In one survey, 75 percent of recent Internet users had visited a companys home page, primarily to obtain product information. Eighty-five percent of these sought out a website because they saw or heard about it in a mass media ad. The study also found that half of those using the Internet sometimes click on banner ads for additional information. 2.7.2. Attention Attention occurs when the stimulus activates one or more sensory receptor nerves, and the resulting sensations go to the brain for processing. People are constantly exposed to thousands of times more stimuli than they can process. Each television network shows 6,000 commercials per week, and radio stations air many more. Therefore, consumers have to be selective in attending to marketing as well as to other messages. What determines or influences attention? At this moment, you are attending to these words. If you shift your concentration to your feet, you will most likely become aware of the pressure being exerted by your shoes. A second shift in concentration to sounds will probably produce awareness of a number of background noises. These stimuli are available all the time but are not processed until a deliberate effort is made to do so. However, no matter how hard you are concentrating on this text, a loud scream or a sudden hand on your shoulder would probably get your attention.
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Of course, attention always occurs within the context of situation. The same individual may devote different levels of attention to the same stimulus in different situations. Attention is determined by these three factors: The stimulus, the individual and the situation. STIMULUS FACTORS 1. Size and Intensity: Larger stimuli are more likely to be noticed than smaller ones. Thus, a large banner ad is more likely to be noticed than a small one. In one study, consumers seeking a business from the Yellow Pages attended to more than 90 percent of the quarter-page ads but only a quarter of the small listings. 2. Color and Movement: Both color and movement serve to attract attention, with brightly colored and moving items being more noticeable. Thus, banner ads with dynamic animation attract more attention than similar ads without dynamic animation. A brightly colored package is more apt to receive attention than a dull package. 3. Position: Position refers to the placement of an object in a persons visual field. Objects placed near the center of the visual field are more likely to be noticed than those near the edge of the field. This is a primary reason why consumer goods manufacturers compete fiercely for eye-level space in grocery stores. Likewise, advertisements on the right-hand page receive more attention than those on the left. The position of text and illustrations within a print ad has a significant influence on which will be attended to first and how much attention each will receive. 4. Isolation: Isolation is separating a stimulus object from other objects. The use of white space (placing a brief message in the center of an otherwise blank or white advertisement) is based on this principle, as it surrounding a key part of a radio commercial with a brief moment of silence. 5. format: Catalog merchants wishing to display multiple items per page often create an environment in which the competition for attention across items reduces attention to all of the items. However, with proper arrangement and formatting, this competition for attention can be reduced and sales improved. 6. Contrast/Expectations: Consumers pay more attention to stimuli that contrast with their background than to stimuli that blend with it. Ads that differ from the type of ad consumers expect for a product category often motivate more attention than ads that are more typical for the product category. 7. Interestingness: What one is interested in is generally an individual characteristic. Snowboarders would be likely to attend to ads related to that activity, whereas nonboarders would not. However, there are characteristics of the message itself that cause ads to interest a large percentage of population. 8. Information Quantity: A final stimulus factor, information quantity, relates more to the total stimulus field than to any particular item in that field. Although there is substantial variation among individuals, all consumers have limited capacities to process information.
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INDIVIDUAL FACTORS Individual factors are characteristics of the individual. Interest and need are the primary individual characteristics that influence attention. Interest is a reflection of overall lifestyle as well as a result of long-term goals and plans (e.g. becoming a sales manager) and short-term needs (hunger). SITUATIONAL FACTORS Situational factors include stimuli in the environment other than the focal stimulus (i.e., the ad or package) and temporary characteristics of the individual that are induced by the environment, such as time pressures or a crowded store. Program involvement: In general, the audience is attending to the medium because of the program or editorial content, not the advertisement. In fact, as we saw earlier, many individuals actively avoid commercials by zapping them. 2.7.3. Interpretation Interpretation is the assignment of meaning to sensations. It is a function of the gestalt, or pattern, formed by the characteristics of the stimulus, the individual, and the situation. Thus, the entire message, including the context in which it occurs, influences our interpretation, as does the situation in which we find ourselves. For example, our beliefs about a product are influenced by our beliefs about the capabilities and social responsibility of the company that produces it as well as its price, country of origin, and the store in which it is sold. The interpretation of a sale sign on a brand depends on how many other brands are on sale as well as the past history of sales for the brand. Cognitive Interpretation It is a process whereby stimuli are placed into existing categories of meaning. This is an interactive process. The addition of new information to existing categories also alters those categories and their relationships with other categories. The more radically new a new product is (a discontinuous innovation), the more difficult it is to place into an existing category or knowledge structure. It is the individuals interpretation, not objective reality that influences behavior. A firm may introduce a high-quality new brand at a lower price than existing brands because the firm has a more efficient production or marketing process. However, if consumers interpret this lower price to mean lower quality, the new brand will not be successful regardless of the objective reality. Affective Interpretation: It is the emotional or feeling response triggered by a stimulus such as an ad. Like cognitive interpretation, there are normal (within-culture) emotional responses to many stimuli. Likewise there are also individual variations to this response. Consumers confronting new products or brands often assign them to emotional as well as cognitive categories.
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2.8. LEARNING Learning is the term used to describe the processes by which memory and behavior are changed as a result of conscious and nonconscious information processing. Learning is essential to the consumption process. In fact, consumer behavior is largely learned behavior. People acquire most of their attitudes, values, tastes, behaviors, preferences symbolic meanings, and feelings through learning. Culture and social class, through such institutions as schools and religious organizations, as well as family, friends, mass media, and advertising, provide learning experiences that greatly influence the type of lifestyle people seek and the products they consume. Learning is any change in the content or organization of long-term memory or behavior. Thus, learning is the result of information processing. LEARNING UNDER CONDITIONS OF HIGH AND LOW INVOLVEMENT A moments reflection will reveal that people learn things in different ways. Preparing for an exam generally involves intense, focused attention. The outcome of these efforts is rewarded with a grade. However most learning is of a much different nature. Most people know who is playing in the World Series each year even if they dont care for baseball because they hear about it frequently. High-involvement learning: It is one which the consumer is motivated to process or learn the material. For example, an individual reading Laptop Buyers Guide prior to purchasing a computer is probably highly motivated to learn relevant material dealing with the various computer brands. Low-involvement learning: It is one which the consumer has little or no motivation to process or learn the material. A consumer whose television program is interrupted by a commercial for a product he or she doesnt currently use or feel a desire for generall has little motivation to learn the material presented in the commercial. CONDITIONING Conditioning refers to learning based on association of a stimulus (information) and response (behavior or feeling). The word conditioning has a negative connotation to many of people and brings forth images of robot like humans. However, conditioned learning simply means that through exposure to some stimulus and a corresponding response, one learns that they go together (or do not go together). There are two basic form of conditioned learning Classical and Operant. Classical Conditioning: The process of using an established relationship between a stimulus and response to bring about the learning of the same response to a different stimulus is called classical conditioning. This is most common in low-involvement situations. It is likely that many consumers devote little or no focused attention to the advertisement since cigarette
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ads are low-involvement messages even for most smokers. However, after a sufficient number of low-involvement scanning or glances at the advertisement, the association may be formed. It is important to note that what is learned is generally not information but emotion, or an affective response. Operant Conditioning: Instrumental learning, or operant conditioning, differs from classical conditioning primarily in the role and timing of reinforcement. Operant conditioning often involves the actual usage of the product. Thus, a great deal of marketing strategy is aimed at securing an initial trial. Free samples (at home or in the store), special price discounts on new products, and contests all represent rewards offered to consumers to try a particular product or brand. If they try the brand under these conditions and like it (reinforcement), they are likely to take the next step and purchase it in the future. COGNITIVE LEARNING Cognitive learning encompasses all the mental activities of humans as they work to solve problems or cope with situations. It involves learning ideas, concepts, attitudes, and facts that contribute to our ability to reason, solve problems, and learn relationships without direct experience or reinforcement. It can range from very simple information acquisition to complex, creative problem solving. Three types of cognitive learning are important to marketers. Iconic Rote Learning: Learning the association between two or more concepts in the absence of conditioning is known as iconic rote learning. A substantial amount of lowinvolvement learning involves iconic rote learning. Numerous repetitions of a simple message that occur as the consumer scans the environment may result in the essence of the message being learned. Through iconic rote learning, consumers may form beliefs about the characteristics or attributes of products without being aware of the source of the information. Vicarious Learning/Modeling: It is not necessary for consumers to directly experience a reward or punishment to learn. Instead, they can observe the outcomes of others behaviors and adjust their own accordingly. Similarly, they can use imagery to anticipate the outcome of various courses of action. This is known as vicarious learning or modeling. Reasoning/Analogy: The most complex form of cognitive learning is reasoning, including analogical reasoning. In reasoning, individuals engage in creative thinking to restructure and recombine existing information as well as new information to form new associations and concepts. Information from a credible source that contradicts ones existing beliefs will often trigger reasoning. Analogical learning occurs when a consumer uses an existing knowledge base to understand a new situation or object.
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MEMORY Memory is the total accumulation of prior learning experiences. It consists of two interrelated components: short-term and long-term memory. These are not distinct physiological entities. Instead, short-term memory is that portion of total memory that is currently activated or in use. In fact, it is often referred to as working memory. People also have explicit memory (memory of specific events or objects) and implicit memory (generalized memory about events or objects). Short-term memory has a limited capacity to store information and sensations. In fact, it is not used for storage in the usual sense of that term. It is more like a file in a computer system that is currently in use. Active files are used to hold information while it is being analyzed, augmented, or altered. After the processing is complete, the reconfigured information is transferred to another system (printed, for example) or returned to a more permanent storage facility such as the hard drive. Long-term Memory is viewed as an unlimited, permanent storage. It can store numerous types of information such as concepts, decision rules, processes, affective (emotional) states, and so forth. Marketers are particularly interested in semantic memory, which is the basic knowledge and feelings an individual has about a concept. It represents the persons understanding of an object or event at its simplest level. 2.9. CONSUMER ATTITUDES An attitude is an enduring organization of motivational, emotional, perceptual, and cognitive processes with respect to some aspect of our environment. It is a learned predisposition to respond in a consistently favorable or unfavorable manner with respect to a given object. Thus, an attitude is the way one thinks, feels, and acts toward some aspect of his or her environment such as a retail store, television program, or product. Attitude serve four key functions for individuals: 1. Knowledge function: Some attitudes swerve primarily as a means of organizing beliefs about objects or activities such as brands and shopping. These attitudes may be accurate or inaccurate with respect to objective reality, but the attitude will often determine subsequent behaviors rather than that reality. For example, a consumers attitude toward cola drinks may be they all taste the same. This consumer would be likely to purchase the least expensive or most convenient brand. 2. Value-expressive function: Other attitudes are formed and serve to express an individuals central values and self-concept. Thus consumers who value nature and the environment are likely to develop attitudes about products and activities that are consistent with that value. These consumers are likely to express support for environment protection initiatives, to recycle, and to purchase and use green products.
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3. Utilitarian function: This function is based on operant conditioning. People tend to form favorable attitudes toward objectives and activities that are rewarding and negative attitudes toward those that are not. Marketers frequently promise rewards in advertising and conduct extensive product testing to be sure the products are indeed rewarding. 4. Ego-defensive function: People form and use attitudes to defend their egos and self-images against threats and shortcomings. Products promoted as very macho may be viewed favorably by men who are insecure in their masculinity. Or individuals who feel threatened in social situations may form favorable attitudes toward products and brands that promise success or at least safety in such situations. These individuals would be likely to have favorable attitudes toward popular brands and styles of clothes and use personal care products such as deodorants, dandruff shampoo, and mouthwash. Attitudes are formed as the result of all the influences we have been describing in the previous chapters, and they represent an important influence on an individuals lifestyle. ATTITUDE COMPONENTS It is useful to consider attitudes as having three components: cognitive (beliefs), Affective (feelings), and behavioral (response tendencies). Cognitive Component: Cognitive component consists of a consumers belief about an object. For most attitude objects, people have a number of beliefs. Many beliefs about attributes are evaluative in nature; for example, high gas mileage, attractive styling, and reliable performance are generally viewed as positive beliefs. The more positive beliefs associated with a brand, the more positive each belief is, and the easier it is for the individual to recall the beliefs, the more favorable the overall cognitive component is presumed to be. Affective Component: Feelings or emotional reactions to an object represent the affective component of an attitude. A consumer who states I like Diet Coke or Diet Coke is a terrible soda is expressing the results of an emotional or affective evaluation of the product. The overall evaluation may be simply a vague, general feeling developed without cognitive information or beliefs about the product. Behavioral Component: The behavioral concept of an attitude is ones tendency to respond in a certain manner toward an object or activity. A series of decisions to purchase or not purchase. Diet Coke or to recommend it or other brands to friends would reflect the behavioral component of an attitude. Actual behaviors reflect these intentions as they are modified by the situation in which the behavior will occur. ATTITUDE CHANGE STRATEGIES The managers can form and change attitudes toward products and brands. It also raises ethical questions concerning how firms use this knowledge. In addition to ethical
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issues, it poses difficult challenges to regulators who want to limit the ability of firms to develop favorable attitudes toward products whose consumption may prove harmful to some portion of the population. Marketers and other ultimately want to change behaviors or response tendencies. Challenge organizations faces when attempting to reduce smoking is that many smokers know the habit is harmful to their health but postpones quitting or are unable to quit. Thus, the belief component appears to be in place but the behavior component is not. INDIVIDUAL AND SITUATIONAL CHARACTERISTICS THAT INFLUENCE ATTITUDE CHANGE Attitude change is determined by the individual and the situation as well as the activities of the firm or social agency. There are individual differences in how easily individuals will shift attitudes. Some people are more stubborn or closed-minded or less subject to social influence than are others. Attitudes that are strongly held are more difficult to change than are those that are weakly held. Think of something you feel strongly about - perhaps your school, your favorite sports team or band, or a disliked behavior such as chewing tobacco. What would be required to change your attitude about this item or activity? Clearly, it would be difficult. Consumers tend to avoid messages that are counter to their attitude. The Elaboration likelihood model (ELM) is a theory about how attitudes are formed and changed under varying conditions of involvement. The ELM suggests that brand involvement (the degree of personal relevance of the brand, which may change with the situation) and decision motivations are key determinants of how information is processed and attitudes are changed. High involvement results in a central route to attitude change by which consumers deliberately and consciously examine and precede those message elements that they believe are relevant to a meaningful and logical evaluation of the brand. The ELM suggests that vastly different communications strategies are required to communicate effectively with consumers highly involved with the product compared with consumers with little product involvement. In general, more detailed, factual and logical information can be used in high-involvement, central route situations. Low-involvement, peripheral route situations generally require limited information, such as pictorial ads that allow quick association to the key attribute with the brand. COMMUNICATION CHARACTERISTICS THAT INFLUENCE ATTITUDE FORMATION AND CHANGE In this, we describe communication techniques that enhance attitude change. It must be emphasized that, as with all aspects of consumer behavior, individual and situational characteristics interact with the communication features to determine effectiveness.
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Source Characteristics The source of a communication can be an identifiable person, an unidentifiable person (a typical home-maker), a company or organization, or an inanimate figure such as a cartoon character. The source of message is important because consumers respond differently to the same message delivered by different sources. Source Credibility: Influencing attitudes is easier when the target market views the source of the message as highly credible. This is referred to as source credibility. Source credibility appears to be composed of two basic dimensions: trustworthiness and expertise. A source that has no apparent reason other than to provide complete, objective, and accurate information would generally be considered trustworthy. Most of us would consider our good friends trustworthy on most matters. However, our friends might not have the knowledge necessary to be credible in a certain area. Although sales personnel and advertisers often have ample knowledge, many consumers doubt their trustworthiness because it might be to their advantage to mislead the consumer. Celebrity sources: Celebrities are widely used in advertising, and evidence indicates that their use may increase a firms value. A visible use of celebrity endorsers in recent years has been the mustache campaign for milk. Celebrity sources may enhance attitude change for a variety of reasons. First, they may attract more attention to the advertisement than would non celebrities. Second, they may be viewed as more credible than non celebrities. Third, consumers may identify with or desire to emulate the celebrity. Finally, consumers may associate known characteristics of the celebrity with attributes of the product that coincide with their own needs or desires. Sponsorship: A company providing financial support for an event such as the Olympics or a concert is one of the most rapidly growing marketing activities. It often works in much the same manner as using a celebrity endorser. That is, the characteristics of the sponsored event may become associated with the sponsoring organization. Appeal Characteristics As you would expect, the nature of the appeal used affects attitude formation and change. As with all aspects of attitude change, appeal characteristics interact with the consumer and the situation to influence attitudes. Fear Appeals: Fear appeals use the threat of negative (unpleasant) consequences if attitudes or behaviors are not altered. Fear appeals have been studied primarily in terms of physical fear (physical harm from smoking, unsafe driving, and so forth), but social fears (disapproval of ones peers for incorrect clothing, bad breath, or inadequate coffee) are also used in advertising.
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Humorous Appeals: At almost the opposite end of the spectrum from fear appeals are humorous appeals. Ads built around humor appear to increase attention to and liking of the ad. Their overall effectiveness is generally increased when the humor relates to the product or brand in a meaningful way and is viewed as appropriate for the product by the target audience. Emotional Appeals: Emotional or feeling ads are being used with increasing frequency. Emotional ads are designed primarily to elicit a positive affective response rather than provide information or arguments. Emotional ads such as those that arouse feelings of warmth trigger a physiological reaction. They are also liked more than neutral ads and produce more positive attitudes toward the product. Message Structure Characteristics One-sided versus Two-sided Messages: In advertisements and sales presentations, marketers generally present only the benefits of their product without mentioning any negative characteristics it might possess or any advantages a competitor might have. These are one-sided messages, since only one point of view is expressed. The idea of a two-sided message, presenting both good and bad points, is counterintuitive, and most marketers are reluctant to try such an approach. However two-sided messages are generally more effective than one-sided messages in changing a strongly held attitude. Positive versus Negative Framing: Message framing refers to presenting one of two equivalent value outcomes either in positive or gain terms (positive framing) or in negative or loss terms (negative framing). Describing (framing) ground beef as 98 percent fat free would be positive framing, whereas describing it as 2 percent fat would be negative framing. Non-verbal Components: Pictures, music, surrealism, and other nonverbal cues are also effective in attitude change. Emotional ads, described earlier, often rely primarily or exclusively on nonverbal content to arouse an emotional response. Nonverbal ad content can also affect cognitions about a product. 2.10 COMMUNICATION AND PERSUATION Communication with existing and potential consumers, for molding consumer behavior, is a must for any company. Persuasion is the subtle part of communication that will encourage continued favorable behavior of existing consumers and convert potential consumers into customers. Communication and persuasion are important tool in the hands of the marketers used by them to create a customer base large enough to generate profitability, to keep and expand the base, to keep existing business and develop it for further new business.
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Communication can be defined as the transmission of information and message to consumer via the media or personal contact, mail, print tele / electronic means and broadcast. Receiving feedback and learning from it is also a part of communication. COMMUNICATION MIX Today the concept of communication mix is equally important for a company to achieve the most effective communication. The following are the elements from among which choices are to be made by the marketer in arriving at the most appropriate communications mix. 1. Face to face (vis--vis) meetings and interactions between sales force and customers. 2. Direct marketing by means of mailing of letter and catalogues, telephone, fax, or e-mail, to convey information, develop dialogue and achieve interaction. 3. Advertising in one or several mass media available like Print/Radio/TV/Internet. 4. Sales promotion, which may include a variety of incentives, to stimulate trial purchases and to establish dialogue with the consumers. 5. Publicity and Public relations exercises to project a general favorable image of the company or the product to consumers at large. Some Marketplace Beliefs and Myths Develop Due to Insufficient Communication Where there is insufficient communication, consumers form their own assumptions and these assumptions solidify into beliefs and myths. Some examples particularly encountered in the developing world are the following: Price and Quality are directly related and therefore a low-priced product cannot have good quality. A big companys products are costlier per se and its consumer is made to pay for the high overheads of the company. New products are always costly. If you wait sufficiently the prices will come down. Synthetic products are lower in quality than those made of natural materials. Large quantities of a same product presented in economy packages are always economical. If the seller is losing (clearance sale, closing down sale etc.) it must be a good bargain. Advertised goods are costly because customers pay for the advertisements. Stores Channel A large amount of purchases takes place at stores. Whatever may be the direct communication attempted by the manufacturer, stores is the place where the consumer is present to receive it again. It is where the purchase happens. Therefore, it is worthwhile
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to examine the consumers behavior vis--vis his stock and obtain clues for addressing him there with effective communication. Shoppers Beliefs to be addressed by communication Shoppers choose their store mainly from convenience point of view. They may stick to a stores but while shopping do think about other stores. Shoppers too have their pet beliefs and marketers have to address these. Some examples of the beliefs are New stores offer lower prices. Prices are higher in very large and modern stores. A discounted sale is a good bargain. If you buy a highly advertised product you pay for the advertisement and it is the label you get not the quality The advertisement is for keeping in touch with the customer and to inform, the duty of a responsible manufacturer. Stores Environment The purchase situation of the consumer is influenced to a certain extent by the environment of the point of purchase. It is comparable to the situation of audience watching a stage performance or a sports event. In a store too, each one is influenced by the attitude exhibited by the other visitors. The there are the noticeable impulse actions. The impulse actions in a store are like picking up what other shopper ahead has picked up or buying products, which are conveniently placed near the exit of the store. Communication and the consumer profile The profile of the consumer exhibits among other things exposure to media and values. Depending on these the marketer can decide on the selection of media for communication and the strategy for appeal in the communication. In fact, the other particulars in the consumer profile like the age, income, education etc. of the consumer will also help in formulating the message about the benefit of the product. Strategies It is worthwhile to examine the actual strategies available to the marketer for making benefit appeals and emotional appeals. In the benefits route the communication focuses on one or more of the following: Economy of price Guarantees Value for money Economy in maintenance
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Technical features Expert endorsement 2.11. PSYCHOGRAPHICS HAVE THREE COMPONENTS; VALUES, SELF-CONCEPT, AND LIFESTYLES Values When you think about what is important to you in life, you are thinking about your values. Values are end-states of life, the goals one lives for. Psychologist Milton Rokeach has identified two groups of these: terminal and instrumental. Terminal values are the goals we seek in life (e.g., peace and happiness) whereas instrumental values are the means or behavioral standards by which we pursue these goals (e.g., honesty). Rokeach developed these lists of values for understanding human psychology. Consumers researchers felt a need for values more directly relevant to everyday consumer behavior. For this purpose, consumer researcher Lynn Kahle and his associates developed a List of Values (LOV), consisting of nine terminal values: 1. Self-respect 2. Self-fulfillment 3. Security 4. Sense of belonging 5. Excitement 6. Sense of accomplishment 7. Fun and enjoyment 8. Being well respected 9. Warm relationships with others. This list of values corresponds well to the needs in Maslows hierarchy, except that Maslow includes physiological needs, and LOV adds values of fun and excitement. Kahle argues that the nine values in LOV relate more closely to the values of lifes major roles, such as marriage, parenting, work, leisure, and daily consumption, than do the values in Rokeach Value Survey. In a number of studies, LOV has been found to be well related to consumer activities. For example, consumer researcher Sharon Beatty and her associates found that people who value a sense of belonging especially like group activities. Those who value fun and enjoyment especially like sing, dancing, backpacking, hiking, and camping, and they consume a lot of alcohol. People who value a warm relationship with others tend to give gifts to others for no reason at all.
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Linking Product Attributes to Customer Values One of the basic tenets of marketing has been that customers dont buy products or services; rather, they buy benefits. Thus, when consumers buy an automobile, they are not buying simply 5,000 pounds of sheet metal. Rather they are buying transportation. They want a car with ergonomic seats because they want their body to feel comfortable, or they want a car with acceleration from 0 to 60 miles per hour in 7 seconds versus 10 seconds to experience the driving thrill. If we go one step further, transportation, comfort, or driving thrill is important to consumers so that they can overcome the physical distance barrier, or escape to a more desirable place, or master the machine. Ultimately, then, the product or service features make sense only because they serve some more fundamental needs (such as the needs in Maslows hierarchy) or values (as in the List of Values). Identifying, the connections between product or service features on the one hand and customers fundamental needs and values on the other is important if marketers are to design features that would offer value to customers. This linking is an accomplished by drawing means-end chains. Means-end chains are simply linkages between the products physical features and customers fundamental needs and values. They are identified by a research technique called laddering, in which potential customers are asked repeatedly in iterative sequence. Why is that feature important to you? Self-Concept Everyone has a self-image of who he or she is. This is called self-concept. Furthermore, the self-concept includes an idea of what the person currently is and what he or she would like to become; these two concepts are respectively called actual self and ideal self. For some, the self-concept pertains to their intellectual and /or career accomplishments; for example one wants to be a successful writer or an engineer or a Wall Street financial executive. For many, the self-concept pertains to the kind of material life they want to live. The self-concepts influence a persons consumption deeply, for people live their self concepts in large measure by what they consume. The consuming as Integration metaphor describes how consumers are able to integrate their self-concepts and objects through a variety of consumption rituals, self extension and personalizing rituals. For example, business students who are about to enter the corporate world start dressing more seriously in their senior year, or employees who are promoted to executive cadre change their wardrobe to include suits. Marketers can apply the principle of self-concept by obtaining a self-concept profile of customers in terms of selected personality traits, then obtaining the consumers perceptions of a brand on the same traits. From these two profiles, it is possible to identify the match or gaps between consumers self-concept and their perceptions of the personality
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of the brand. If the gaps are significant, the marketer may want to make changes to the product or to marketing communication about the product. Businesses, too, have a self-concept. Some think of themselves as a company at the forefront of technology, others view their essence to be in communications wherever and in whatever form it may exist; still others define their essence as innovation. For example, Benettons self-concept can be described as a clothing company for the young that promotes social issues. Basically, corporate self-concepts are expressed in mission statements. Self-Concept as Users, payers and Buyers Individuals have their self-concepts as individuals in general, of course. But they also have a self-concept of themselves in their specific roles of user, payer, and buyer. Illustratively, a user could have the self-concept of a very discerning connoisseur user or a very involved (or alternatively, very detached) user. They payer could have the self-concept of being thrifty for financially prudent, or of having the attitude of money is no object to me. Finally, the buyer could have the self-concept of being a convenience seeker or service seeker or of being very time conscious. Lifestyle Along with what we think of ourselves and what we value, psychographics describes us in terms of lifestyles, or the way we live. Consider two consumers with very different lifestyles. Thelma is a home-and family-oriented, traditional, religious, educated, politically active, nonworking mother of two children. She likes to cook, spend most of her time at home, and entertain relatives and friends over the weekend. Candice, in contrast, is a very outgoing, career-oriented, fashion-oriented, nonreligious, single mother of a five-year old. She likes to go out rather than stay at home and dislikes household chores. Given different lifestyles, these customers have very different customer behaviors as well.
Lifestyle Determinants Demographics Subculture Social class Motives Personality Emotions Values Household life cycle Culture Past experiences Life Style How we live Activities Interests Likes/dislikes Attitudes Consumption Expectations Feelings Impact on behavior Purchases How When Where What With Whom Consumption Where With whom How When What
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Figure 2.3 Lifestyle and the Consumption Process
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Lifestyles are determined by (a) a customers personal characteristics, namely, genetics, race, gender, age, and personality; (b) his or her personal context, namely, culture, institutions and reference groups, and personal worth; and (c) needs and emotions. These three sets of factors together influence the pattern of our activities-how we spend time and money. How do consumers live their lifestyles? How else but by doing activities that inevitably entails marketplace exchange and choices. Thelma obviously eats out less but buys more of the food items from the market than does Candice. Candice uses babysitting services more than Thelma does. Candice also uses dry-cleaning services more while Thelma buys laundry detergents more. Candice is a frequent visitor to the fashion boutiques while Thelma buys all of her own and familys clothing at a department store. Because commercial products play a major role in customers enactment of their lifestyles, lifestyles can explain customer behavior significantly. For instance, come consumers are extremely frugal in their consumption of goods and services. Frugality is unidimensional consumer lifestyle trait characterized by the degree to which consumers are both restrained in a acquiring and resourcefully using economic goods and services to achieve long-term goals. Empirical research shows that the frugal are less susceptible to interpersonal influence, less materialistic, less compulsive in buying, and more price and value conscious. The frugal are not found to use coupons more often than regular customers; frugality affects customer decisions about whether to buy and what to buy. Beyond buying it also affects customer as users since the frugal are more resourceful in using products and services (for example-timing, showers, packing lunch for work). Catering to different lifestyles of consumers are lifestyle retail brands like Gap, Benetton, and Laura Ashley. Their basic retail propositions is augmented with a set of added values that have symbolic value and meaning for the lifestyles of a specific consumer group. In shopping at these stores, the consumer is projecting these lifestyles on his or her purchases, and with each different store the expectation is completely different, including store atmospherics. Laura Ashley represents gentile English country lifestyle, while the Gap represents a classic American, casual lifestyle and the Polo/Ralph Lauren experience is the realm of an exclusive gentlemans club and the country house. Even in business, clothing can signify lifestyles. A professor is encouraged to wear semi-formal clothing at school campuses while an investment banker is likely to wear suits, and software professionals are likely to be dressed in business casuals. Some companies like IBM and Anderson Consulting ask their employees and consultants to dress conservatively in dark suits and white shirts that make them look older than their real age and, thereby, adds credence when they meet with top executives of their client organizations.
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Psychographics as AIO Profiles The appeal of Psychographics in marketing from the outset has been its quantifiabilitylike demographics; psychographics were derived based on quantitative measures. To measure psychographics (i.e., Values, self-concepts, and lifestyles), researchers present a series of statements about possible activities, interests, and opinions. Respondents indicate their agreement or disagreement with these statements. To analyze and interpret data from measures based on AIO statements, researchers, and group together people with similar responses. These groups, considered to have relatively similar lifestyles, values and self-concepts, can then be described using certain AIO profiles, called psychographic profiles. These profiles are excellent indications of how people are thinking and where they are going with their lives. In an attempt to profile online shoppers, Ernst & Young charted their psychographic profile. They found that leisure time activities of studys online buyers were not much different from the average household. Some differences were visible in movie attendance (37 percent of online shoppers go to movies frequently or regularly compared to 26 percent of the average household), recreational travel (42 percent versus 32 percent), performing arts attendance (25 percent versus 17 percent), and family-time pursuits (57 percent versus 50 percent). A smaller percentage of online shoppers watched television (61 percent) compared to 65 percent of average households. Online shoppers are, however, similar to all households in volunteer activities, gardening, gourmet cooking, photography, and attending sporting events. 2.12. VALS One of the most psychographic profiling schemes is called VALS. Developed by SRI International, Inc., its first version groups the entire U.s. Population into nine groups, based on the identities they seek and implement via market place behaviors. According to SRI, people pursue and acquire products, services, and experiences that provide satisfaction and give shape, substance, and character to their identities. Even though this scheme has been replaced by a new VALs system with an eight-segment classification, the original scheme, introduced in 1978, its important to understand for us as students of consumer psychology. That scheme used two dimensions for its conceptual foundation: (1) Maslows hierarchy-the theory that people rise from physiological, to safety, to social belonging, to self-esteem, to self-actualization motivations; and (2) Riesmans social character Theory that a person is either inner directed or outer directed, deriving ones code of conduct respectively from oneself or from others. Inner-directed persons are more independent minded, whereas outer-directed persons are concerned with others opinion of them. At the bottom of the VALS hierarchy are survivors and sustainers, who are, respectively, the elderly poor and unemployed youth. Belongers is the next group, the largest of the nine
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groups and comprising middle-aged, middle class, outer-directed Americans. Along with the Belongers, two other outer-directed groups are called Emulators and Achievers. Achievers are the most affluent, successful professionals and business people. In contrast, Emulators dont have as much money or success, but they try to emulate the lifestyles of Achievers. On the other side are three inner-directed segments, I-am-mes, experiential, and societal conscious. I-am-mes are teenagers with rebellion against the established ways as their principal motto. Experiential are big on experiencing all the sensory and recreational experiences life has to offer-mountaineering, skiing, sports, travel, bungee-jumping, and so on. The Societal Conscious is concerned about and works for larger, societal issues, such as the environment. world peace, and racial harmony. Finally the group at the top is the Integrated, a small group that has gained material well-being and success in the material world and is, at the same time, working for larger issues or in jobs that give some intrinsic meaning to life rather than merely fame and wealth. 2.13 SUMMARY Consumer motivations are energizing forces that activate behavior and provide purpose and direction to that behavior. There are numerous motivation theories. Maslows need hierarchy states that basic motives must be minimally satisfied before more advanced motives are activated. McGuire developed a more detailed set of motives the needs for consistency, attribution, categorization, objectification, autonomy, stimulation, desired outcomes, utility, tension reduction, expressive, ego defense, reinforcement, assertion, affiliation, identification, and modeling. The personality of a consumer guides and directs the behavior chosen to accomplish goals in different situations. There are many personality theories, but all have two common assumptions: (1) individuals have internal characteristics or traits, and (2) there are consistent differences between individuals on these characteristics or traits that can be measured. Brands, like individuals, have personalities, and consumers tend to prefer products with brand personalities that are pleasing to them. Consumers also prefer advertising messages that portray their own or a desired personality. Perception consists of those activities by which an individual acquires and assigns meaning to stimuli. Perception begins with exposure. This occurs when a stimulus comes within range of one of an individuals primary sensory receptors. Attention occurs when the stimulus activates one or more of the sensory receptors and the resulting sensations go into the brain for processing. Because of the amount of stimuli they are exposed to, people selectively attend to those stimuli that physically attract or personally interest them.
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Interpretation is the assignment of meaning to stimuli that have been attended to. Interpretation is a function of individual as well as stimulus and situation characteristics. Consumer must learn almost everything related to being a consumer product existence, performance, availability, values, preference, and so forth. Marketing managers therefore are very interested in the nature of consumer learning. High-involvement learning occurs when an individual is motivated to acquire the information. Low-involvement learning occurs when an individual is paying only limited or indirect attention to an advertisement or other message. Learning is defined as any change in the content or organization of long-term memory or behavior. Two basic types of learning, conditioning and cognition, are used by consumers. Memory is the result of learning. Most commonly, information goes directly into shortterm memory for problem solving or elaboration where two basic activities occur elaborative activities and maintenance rehearsal. Long-term memory is information from previous information processing that has been stored for future use. Attitude can be defined as the way people think, feel, and act toward some aspect of their environment. Results of all the factors discussed so far in the text, attitudes influence, as well as reflect, the lifestyle individuals pursue. Attitude change strategies can focus on affect, behavior, cognition, or some combination. Attempts to change affect generally rely on classical conditioning. Change strategies focusing on behavior rely more on operant conditioning. Changing cognitions usually involves information processing and cognitive learning. Attitudes, particularly the cognitive component, are the basis for market segmentation strategies, such as benefit segmentation, and for new-product development strategies. Self-concept is ones belief and feelings about oneself. There are four types of self concept: actual self concept, social self-concept, private self-concept, and ideal self-concept. An individuals self-concept, the way one defines his or herself, typically includes some of the persons possessions. The self-concept, including the possessions one uses to define oneself, is termed the extended self. Lifestyle can be defined simply as how one lives. It is a function of ones inherent individual characteristics that have been shaped through social interaction as the person moves through his or her life cycle. It is how an individual expresses his or her self-concept in actions. The VALS system, developed by SRIC-BI, divides the United States into eight groups Actualizes, Fulfilled, Believers, Achievers, Strivers, Experiences, Makers, and Strugglers.
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2.14 Review Questions Given that smoking scenes in movies increase the positive image and intention to smoke among youth, what regulations, if any, should apply to this? How would you teach teenagers an eating script that involved consistently washing ones hands first? Is low-involvement learning really widespread? Which products are most affected by low-involvement learning? How could Maslows motive hierarchy be used to develop marketing strategy for the following: Habitat for Humanity Neutrogenas lipsticks Listerine mouthwash
List all the emotions you can think of. Place each in one of the core traits. Do Marketers create needs? Do they create demand? What ethical issues are relevant? Suppose you wanted to form highly negative attitudes toward smoking among college students. Which attitude component would you focus on? Why? What type of appeal would you use? Why? Is your self-concept predominantly independent or interdependent? Why? Does VALS make sense to you? What do you like or dislike about it?
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UNIT III
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COSUMERS IN THEIR SOCIAL AND CULTURAL

3.1 OVERVIEW Everybody in this world is a consumer. Everyday of our life we are buying and consuming an incredible variety of goods and services. However, we all have different tastes, likes and dislikes and adopt different behavior patterns while making purchase decisions. Many factors affect how we, as individuals and as societies, live, buy, and consume. External influences such as culture, ethnicity, and social class influence how individual consumers buy and use products, and help explain how groups of consumers behave. The study of culture encompasses all aspects of a society such as its religion, knowledge, language, laws, customs, traditions, music, art, technology, work patterns, products, etc. Culture is an extremely critical and all pervasive influence in our life. With the exception of those very few people who can be classified as hermits, people tend to be involved with others on a rather constant basis. Like almost all behavior, an individuals social relationships are often motivated by the expectation that they will help in the satisfaction of specific needs. For example, a person might become a volunteer ambulance driver to satisfy a need for community recognition. Another person might join a computer club in an effort to find compatible friends to satisfy social needs. A third person might join a health food cooperative to obtain the benefits of group buying power. These are just a few of the almost infinite number of reasons why people involve themselves with others. 3.2 LEARNING OBJECTIVES After studying this unit, you should understand The basic concepts of social involvement and group dynamics. The Social Class and its impact on consumer decisions. Emphasize the role of reference groups in influencing consumer behavior. Identify other social and societal groupings that influence consumer buying processes. A Family and its types
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Family life cycle and its implications on consumer behavior Family roles and consumption patterns & relationships and family marketing The various influences on culture, sub-cultures and its influences The environmental variations and cultural values. Explain the cross-cultural influences on consumer behavior. 3.3 WHAT IS A GROUP? A group may be defined as two or more people who interact to accomplish some goals. Within the broad scope of this definition are both an intimate group of two neighbors who informally attend a fashion show together and a larger, more formal group, such as a neighborhood. 3.3.1 Types of Groups To simplify our discussion, we will consider four different types of group classification: primary versus secondary groups, formal versus informal groups, large versus small groups, and membership versus symbolic groups. 1. Primary versus Secondary Groups If a person interacts on a regular basis with other individuals (with members of his or her family, with neighbours, or with co-workers whose opinions are valued), then these individuals can be considered as a primary group for that person. On the other hand, if a person interacts only occasionally with such others, or does not consider their opinions to be important, then these others constitute a secondary group for that person. From this definition, it can be seen that the critical distinctions between primary and secondary groups are the frequency with which the individual interacts with them and. the importance of the groups to the individual. 2. Formal versus Informal Groups Another useful way to classify groups is by the extent of their formality; that is, the extent to which the group structure, the members roles, and the groups purpose are clearly defined. If a group has a highly defined structure (e.g., a formal membership list), specific roles and authority levels (a president, treasurer, and secretary), and specific goals (to support a political candidate, improve their childrens education, increase the knowledge or skills of members), then it would be classified as a formal group. The local chapter of the American Red Cross, with elected officers and members who meet regularly to discuss topics of civic interest, would be classified as a formal group. On the other hand, if a group is more loosely defined, if it consists, say, of four women who were in the same college sorority and who meet for dinner once a month, or three co-workers who, with their spouses, see each other frequently then it is considered an informal group.
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3. Large versus Small Groups It is often desirable to distinguish between groups in terms of their size or complexity. A large group might be thought of as one in which a single member is not likely to know more than a few of the groups members personally, or be fully aware of the specific roles or activities of more than a limited number of other group members. Examples of large groups include such complex organizations as General Motors, with its numerous subordinate divisions, and the American Bar Association, with its many state, county, and city chapters. In contrast, members of a small group are likely to know every member personally and to be aware of every members specific role or activities in the group. For example, each staff member of a college newspaper is likely to know all the other members and be aware of their duties and interests within the group. In the realm of consumer behavior, we are principally concerned with the study of small groups, since such groups are more likely to influence the consumption behavior of group members. 4. Membership versus Symbolic Groups Another useful way to classify groups is by membership versus symbolic groups. A membership group is a group to which a person either belongs or would qualify for membership. For example, the group of women with whom a young homemaker plays golf weekly or with whom she hopes to play golf when an opening occurs would be considered, for her, a membership group. In contrast, a group in which an individual is not likely to receive membership, despite acting like a member by adopting the groups values, attitudes, and behavior, is considered a symbolic group. Clearly, actual membership groups offer a more direct, and thus a more compelling, influence on consumer behavior. In summary, we can say that small, informal, primary membership groups are of the great interest to marketers because they exert the greatest potential influence on consumer purchase decisions. 3.3.2 Consumer Relevant Groups To more fully comprehend the kind of impact that specific groups have on individuals, we will examine six basic consumer-relevant groups: the Family, Friendship groups, Formal social groups, Shopping groups, Consumer action groups and Work groups. The Family An individuals family is the most important group to influence his or her consumer decisions. The familys importance in this regard is due to the frequency of contact that the individual has with other family members and that the family has a greater extent of influence on the establishment of a wide range of values, attitudes, and behavior.
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Friendship Groups Friendship groups are informal groups because they are, usually unstructured and lack specific authority levels. In terms of relative influence, after an individuals family, it is friends who are most likely to influence the individuals purchase decisions. Seeking and maintaining friendships is a basic drive of most people. Friends fulfill a wide range of needs: they provide companionship, security, and opportunities to discuss problems that an individual may be reluctant to discuss with members of his or her own family. Friendships are also a sign of maturity and independence, for they represent a breaking away from the family and the forming of social ties with the outside world. Consumers are more likely to seek information from those friends they feel have values or outlooks similar to their own. Formal Social Groups In contrast to the relative intimacy of friendship groups, formal social groups are more remote and serve a different function for the individual. A person joins a formal social group to fulfill such specific goals as making new friends, meeting important people (e.g., for career advancement), or promoting a specific cause. Because members of a formal social group often consume certain products together, such groups are of interest to marketers. For example, the membership list of a mens club would be of interest to local men, Insurance agents, automobile agents, tax accountants. Membership in a formal social group may influence a consumers behavior in several ways. For example, members of such groups have frequent opportunity to informally discuss products, services, or stores. Some members may copy the, consumption behavior of other members whom they admire. Shopping Groups Two or more people who shop together-whether for food, for clothing, or simply to pass the time, can be called a shopping group. Such groups are often offshoots of family or friendship groups. People like to shop with others who they feel have more experience with or knowledge about a desired product or service. Shopping with others also provides an element of social fun to an often boring but necessary task. In addition, it reduces the risk that a purchase decision will be socially unacceptable. Relatively few marketing or consumer behavior studies have examined the nature of shopping groups. However, one study of the in-store behavior of shoppers revealed some differences between group and individual shopping. The research found that shopping parties of at least three persons deviated more from their original purchase plans (they bought either more or less than originally planned) than did either single shoppers or twoparty groups. The study also found that shopping groups tended to cover more territory in
CONSUMER BEHAVIOUR
the store than individuals shopping alone, and thus had more opportunity to see and examine merchandise and to make unplanned purchases. A special type of shopping group is the in-home shopping group, which typically consists of a group of women who gather together in the home of a friend, to attend a party devoted to the marketing of a specific line of products. The in-home party approach provides marketers with an opportunity to demonstrate the features of their products simultaneously to a group of potential customers. The undecided guests often overcome a reluctance to buy when they see their friends make positive purchase decisions. Furthermore, some of the guests may feel obliged to buy because they are guests in the home of the sponsoring hostess. Consumer Action Groups A particular kind of consumer group-a consumer action group- has emerged in response to the consumerist movement. This type of consumer group has become increasingly visible since the 1960s and has been able to influence product design and marketing practices of both manufacturers and retailers. Consumer action groups can be divided into two broad categories: those that organize to correct a specific consumer abuse and then disband, and those that organize to address broader, more pervasive, problem areas and operate over an extended or indefinite period of time. A group of tenants who band together to dramatize their dissatisfaction with the quality of service provided by their landlord, or a group of irate community members who unite to block the entrance of a fast-food outlet into their middle-class neighborhood, are examples of temporary, cause-specific consumer action groups. Work Groups The sheer amount of time that people spend at their jobs, frequently more than thirtyfive hours per week, provides ample opportunity for work groups to serve as a major influence on the consumption behavior of members. Both the formal work group and the informal friendship/work group have the potential for influencing consumer behavior. The formal work group consists of those individuals who work together as a team. Their direct and sustained work relationship offers substantial opportunity for one or more members to influence the consumer-related attitudes and activities of other team members. Members of informal work groups may influence the consumption behavior of other members during coffee or lunch breaks or after-hours meetings. 3.3.3. Reference Groups Reference groups are groups that serve as a frame of reference for individuals in their purchase decisions. This basic concept provides a valuable perspective for understanding the impact of other people on an individuals consumption beliefs, attitudes, and behavior. It also provides some insight into methods that Groups can be used to effect desired changes in consumer behavior.
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What is a Reference Group? A reference group is any person or group that serves as a point of companion (or reference) for an individual in the formation of either general or specific values, attitudes, or behavior. The usefulness of this concept is enhanced by the fact that it places no restrictions on group size or membership, nor does it require that consumers identify with a tangible group (i.e., the group can be symbolic: prosperous business people, rock stars, and sports heroes). Reference groups that influence general values or behavior are called normative reference groups. An example of a childs normative reference group is the immediate family, which is likely to play an important role in molding the childs general consumer values and behavior (e.g., which foods to select for good nutrition, appropriate ways to dress for specific occasions, how and where to shop, what constitutes good value). Reference groups that serve as benchmarks for specific or narrowly defined attitudes or behavior are called comparative reference groups. A comparative reference group might be a neighboring family whose lifestyle appears to be admirable and worthy of imitation (the way they maintain their home, their choice of home furnishings and cars, the number and types of vacations they take). Both normative and comparative reference groups are important. Normative reference groups influence the development of a basic code of behavior; comparative reference groups influence the expression of specific consumer attitudes and behavior. It is likely that the specific influences of comparative reference groups are to some measure dependent upon the basic values and behavior patterns established early in a persons development by normative reference groups. Broadening the Reference Group Concept Like many other concepts borrowed from the behavioral sciences, the meaning of reference group has changed over the years. As originally employed, reference groups were narrowly defined to include only those groups with which a person interacted on a direct basis (e.g., family and close friends). However, the concept has gradually broadened to include either direct and indirect individual or group influences. Indirect reference groups consist of those individuals or groups with whom a person does not have direct face-toface contact, such as movie stars, sports heroes, political leaders, or TV personalities. Referents that a person might use in evaluating his or her own general or specific attitudes or behavior vary from an individual to several family members to a broader kinship, from a voluntary association to a social class, a profession, an ethnic group, a community, or even a nation.
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3.3.4 Types of Reference Groups Reference groups can be classified in terms of a persons membership or degree of involvement with the group and in terms of the positive or negative influences they have on his or her values, attitudes, and behavior. Four types of reference groups that emerge from a cross-classification of these factors: contactual groups, aspirational groups, disclaimant groups, and avoidance groups. 1. A contactual group is a group in which a person holds membership or has regular face-to-face contact and of whose values, attitudes, and standards he or she approves. Thus a contactual group has a positive influence on an individuals attitudes or behavior. 2. An aspirational group is a group in which a person does not hold membership and does not have face-to-face contact, but wants to be a member. Thus it serves as a positive influence on that persons attitudes or behavior. 3. A disclaimant group is a group in which a person holds membership or has faceto-face contact but disapproves of the groups values, attitudes, and behavior. Thus the person tends to adopt attitudes and behavior that are in opposition to the norms of the group. 4. An avoidance group is a group in which a person does not hold membership and does not have face-to-face contact and disapproves of the groups values, attitudes, and behavior. Thus the person tends to adopt attitudes and behavior that are in opposition to those of the group. Consider Ram, a senior majoring in advertising at the state university in the southwestern United States. The schools Advertising Club, of which he is vice-president, serves as one of Rams contractual groups. Ram believes that continuing his education to obtain an MBA will enhance his career opportunities. It is clear that individuals who hold the MBA degree serve as an aspirational group for him. Still further, although he enjoys his position as a reporter on the universitys newspaper, the recent editorials (endorsed by most of the staff) urging students to adopt a more conservative political philosophy run counter to his own views. Thus the newspaper staff is currently a disclaimant group. Finally, Ram personally knows a number of students who have quit college during their final year; these former students serve as an avoidance group. 3.3.5 Factors that Affect Reference Group Influence The degree of influence that a reference group exerts on an individuals behavior usually depends on the nature of the individual and the product and on specific social factors. This section discusses how and why some of these factors operate to influence consumer behavior.
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1. Information and Experience An individual who has firsthand experience with a product or service, or can easily obtain full information about it, is less likely to be influenced by the advice or example of others. On the other hand, a person who has little or no firsthand experience with a product or service, and does not expect to have access to objective information about it (e.g., a person who believes that relevant, advertising may be misleading or deceptive), is more likely to seek out the advice or example of others. Research on imitative behavior provides some interesting insights on how insufficient experience or information concerning a product makes consumers more susceptible to the influence either positive or negative, of others. For example, if a medical school student wants to impress his new girl-friend, he may take her to a restaurant that he knows from experience to be good or to one that has been highly recommended by the local newspapers Dining-Out Guide. If he has neither personal experience nor information he regards as valid, he may seek the advice of friends or imitate the behavior of others by taking her to a restaurant he knows is frequented by physicians whom he admires. 2. Credibility, Attractiveness, and Power of the Reference Group A reference group that is perceived as credible, attractive, or powerful can induce consumer attitude and behavior change. For example, when consumers are concerned with obtaining accurate information about the performance or quality of a product or service, they are likely to be persuaded by those they consider to be trustworthy and knowledgeable. That is, they are more likely to be persuaded by sources with high credibility. When consumers are primarily concerned with the acceptance or approval of others they like, with whom they identify, or who offer them status or other benefits, they are likely to adopt their product, brand, or other behavioral characteristics. When consumers are primarily concerned with the power that a person or group can exert over them, they might choose products or services that conform to the norms of that person or group in order to avoid ridicule or punishment. However, unlike other reference groups that consumers follow either because they are credible or because they are attractive, power groups are not likely to cause attitude change. Individuals may conform to the behavior of a powerful person or group but are not likely to experience a change in their own attitudes. Different reference groups may influence the beliefs, attitudes, and behavior of an individual at different points in time or under different circumstances. For example, the dress habits of a young female attorney may vary, depending on her place and role. She may conform to the dress code of her office by wearing conservative business suits by day and drastically alter her mode of dress after work by wearing more conspicuous, flamboyant styles.
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3. Conspicuousness of the Product The potential influence of a reference group varies according to how visually or verbally conspicuous a product is to others. A visually conspicuous product is one that can be seen and identified by others, and that will stand out and be noticed (e.g., a luxury item or novelty product). Even if a product is not visually conspicuous, it may be verbally conspicuous it may be highly interesting or it may be easily described to others. Products that are especially conspicuous and status-revealing (a new automobile, fashion clothing, home furniture) are most likely to be purchased with an eye to the reactions of relevant others. Products that are less conspicuous (canned fruits, laundry soaps) are less likely to be purchased with a reference group in mind. The success of a brand of status running shoes like Reebok is aided by the fact that it is relatively easy to spot a person wearing them-given the distinctive flag symbol on the side of each shoe. 3.3.6. Reference Group Impact on Product and Brand Choice In some cases, and for some products, reference groups may influence both a persons product category and brand (or type) choices. Such products are called product plus, brand-plus items. In other cases, reference groups influence only the product category decision. Such products are called product-plus, brand minus items. In still other cases, reference groups influence the brand (or type) decision. These products are called productminus, brand-Plus items. Finally, in some cases, reference groups influence neither the product category nor the brand decision; these products are called product-minus, brandminus items. The idea of classifying products and brands into four groups in terms of the suitability of a reference group appeal was first suggested in the mid-1950s, along with an initial classification of a small number of product categories. Reference Groups and Consumer Conformity Marketers are particularly interested in the ability of reference groups to change consumer attitudes and behavior (i.e., to encourage conformity). To be capable of such influence, a reference group must 1. Inform or make the individual aware of a specific product or brand; 2. Provide the individual with the opportunity to compare his or her own thinking with the attitudes and behavior of the group; 3. Influence the individual to adopt attitudes and behavior that are consistent with the norms of the group; 4. Legitimize an individuals decision to use the same products as the group. The ability of reference groups to influence consumer conformity is demonstrated by the results of a classic experiment designed to compare the effects.
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3.3.7. Benefits of the Reference Group Appeal Reference group appeals have two principal benefits for the advertiser: they increase brand awareness and they serve to reduce perceived risk. 1. Increased Brand Awareness Reference group appeals provide the advertiser with the opportunity to gain and retain the attention of prospective consumers with greater ease and effectiveness than is possible with many other types of promotional campaigns. This is particularly true of the celebrity form of reference group appeal, where the personality employed is generally well known to the relevant target segment. Celebrities tend to draw attention to the product through their own popularity. This gives the advertiser a competitive advantage in gaining audience attention, particularly on television where there are so many brief and similar commercial announcements. 2. Reduced Perceived Risk The use of one or more reference group appeals may also serve to lower the consumers perceived risk in purchasing a specific product. The example set by the endorser or testimonial-giver may demonstrate to the consumer that uncertainty about the product purchase is unwarranted: Following are examples of how reference group appeals serve to lower the consumers perceived risk. Celebrity: Consumers who admire a particular celebrity often have the following reactions to the celebritys endorsement or testimonial. For eg. She wouldnt do a commercial for that product if she didnt believe it was really good. Expert: When consumers are concerned about the technical aspects of a product, they welcome the comments of an acknowledged or apparent expert. For eg. If he says it works, then it really must work. Common Man: When consumers are worried about how a product will affect them personally, they are likely to be influenced by a common man endorsement or testimonial. For eg. People just like me are using that product, 3.4 THE FAMILY The importance of the family or household unit in consumer behavior arises for two reasons: 1. Many products are purchased by a family unit. 2. Individuals buying decisions may be heavily influenced by other family members. How families or households make purchase decisions depends on the roles of the various family members in the purchase, consumption, and influence of products. Household
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products like food and soaps may be purchased by a person but consumed by many, whereas personal care items, such as cosmetics or shaving cream, might be purchased by an individual family member for his or her own consumption. Homes and cars, on the other hand, are often purchased by both spouses, perhaps with involvement from children or other member of the extended family. Visits to shopping malls often involve multiple family members buying clothing and accessories, something with a heavy dose of influence by family memberschildren may buy clothing paid for and approved of by parents, whereas teenagers may influence the clothing purchase of a parent. Regardless of how many family members are present when items are being purchased, the other family members play an important role in the purchase. Just because of being mother for two young children, it is her responsibility for buying food for the family and act as an individual in the market. It does not mean that her decisions are not influenced by the preferences and power of other family members. Although marketing communications are usually directed to individuals, marketers should consider the consumption circumstances and the family structure before deciding on specific communicate on or advertising methods to attract their segment. What is a Family? A family is a group of two or more persons related by blood, marriage, or adoption who reside together. The nuclear family is the immediate group of father, mother, and child(ren) living together. The extended family is the nuclear family, plus other relatives, such as grandparents, uncles and aunts, cousins, and parents-in-law. The family into which one is born is called the family of orientation, whereas the one established by marriage is the family of procreation. In a more dynamic sense, the individuals who constitute a family might be described as members of the most basic social group who live together and interact to satisfy their personal and mutual needs. What is a Household? The term household is used to describe all person, both related and unrelated, who occupy a housing unit. There are significant differences between the terms household and family even though they are sometimes used interchangeably. It is important to distinguish between these terms when examining data. The term household is becoming a more important unit of analysis for marketers because of the rapid growth in nontraditional families and non-family households. Among non-family households, the great majority consist of people living alone. The remaining non-family households include those consisting of elderly people living with non-family members. For example, persons of Opposite Sex Sharing Living Quarters, friends living together, and same sex couples.
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3.4.1 Structural Variables Affecting Families and Households Structural variables include the age of the head of household or family, marital status, presence of children, and employment status. For example, consumer analysts have enormous interest in whether families have children and how many they have. Children increase family demand for clothing, food, furniture, homes, medical care, and education, while they decrease demand for many discretionary items, including travel, higher-priced restaurants, and adult clothing. Other structural changes affect the types of products that are manufactured. For example, in Japan, high-tech companies have formed a consortium to standardize technology that has been developed to monitor and manage households. 3.4.2. Sociological Variables Affecting Families and Households Marketers can understand family and household decisions better by examining the sociological dimensions of how families make consumer decisions. Three sociological variables that help explain how familys function includes cohesion, adaptability, and communication. Cohesion is the emotional bonding between family members. It measures how close to each other family members feel on an emotional level. Cohesion reflects a sense of connectedness to or separateness from other family members. Adaptability measures the ability of a family to change its power structure, role relationships, and relationship rules in response to situational and developmental stress. The degree of adaptability shows how well a family can meet the challenges presented by changing situations. Communication is a facilitating dimension, critical to movement on the other two dimensions. Positive communication skills (such as empathy, reflective listening, supportive comments) enable family members to share their changing needs as they relate to cohesion and adaptability. Negative communication skills (such as double messages, double binds, criticism) minimize the ability to share feelings, thereby restricting movement in the dimensions of cohesion and adaptability. Understanding whether family members are satisfied with family purchase requires communication within the family. To determine how the family makes its purchase decisions and how the family affects the future purchase behavior of its members, it is useful to understand the functions provided and the roles played by family members to fulfill their consumption needs. 3.4.3. Functions of the Family Four basic functions provided by the family are particularly relevant to a discussion of consumer behavior. These include (1) Economic well-being, (2) Emotional support, (3) Suitable family lifestyles, and (4) Family-member socialization.
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(1) Economic Well-Being Providing financial means to its dependents is unquestionably a basic family function. How the family divides its responsibilities for providing economic well-being has changed considerably during the past 25 years. The traditional roles of husband as economic provider and wife as homemaker and child rearer are still valid. The economic role of children has changed. Today, even if some teenage children work, they rarely assist the family financially. Their parents are still expected to provide for their needs. But some of them get enough pocket money to decide their consumption of discretionary items. (2) Emotional Support The provision of emotional nourishment (including love, affection, and intimacy) to its members is an important basic function of the contemporary family. In fulfilling this function, the family provides support and encouragement and assists its members in coping with personal or social problems. To make it easier for working parents to show their love affection and support for their children, greeting-card companies have been marketing cards especially for parent to give to their children. For instance, in most communities, many educational and psychological centers are available that are designed to assist parents who want to help their children improve their learning and communication skills, or generally, better adjust to their environments. (3) Suitable Family Lifestyles Another important family function in terms of consumer behavior is the establishment of a suitable lifestyle for the family. Family lifestyle commitments, including the allocation of time, greatly influence consumption patterns. For example, the increase in the number of married women working outside the home has reduced the time they have available for household chores, and has created a market for convenience products and fast-food restaurants. Also, with both parents working, an increased emphasis is placed on the notion of quality time, rather than the quantity of time spent with children and other family members. Realizing the scarcity of quality family time, Hotels feature a variety of weekend packages targeted to couples and their children. (4) Socialization of Children and Other Family Members The socialization of family members, especially young children, is a central family function. In large part, this process consists of imparting to children the basic value and modes of behavior consistent with the culture. These generally include moral and religious principles, interpersonal skills, dress and grooming standard, appropriate manners and speech, and the selection of suitable educational and occupational or career goals. Socialization skills (manners, goals, values, and other qualities) are imparted to a child directly through instruction and indirectly through observation of the behavior of parents and older siblings. Marketers often target parents looking for assistance in the task of socializing preadolescent children.
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3.4.4. Family Life Cycles Families pass through a series of stages that change them over time. This process historically has been called the family life cycle (FLC). The concept may need to be changed to household life cycle (HLC) or consumer life cycle (CLC) in the future to reflect changes in society. However, we will use the term FLC to show how the life cycle affects consumer behavior. Family Life Cycle Characteristics The traditional FLC describes family patterns as consumers marry, have children, leave home, lose a spouse, and retire. These stages are described in Table 3.1, along with consumer behaviors associated with each stage. But consumers dont necessarily have to pass through all these stages-thy can skip multiple stages. Table 3.1 Consumer Activities Occurring in Various Life Cycles
Stages in Family Economic Life Cycle Circumstances Earning reasonable good Bachelorhood salary, no financial (Young, Single burdens staying alone) Parenthood (young married just attained parenthood ) Post parenthood (growing children or grown up children) Better off financially, though home purchases at peak, less liquid assets, not able to save more Financial position improved with wife working, probability of home ownership on the higher side) Likely Buying Behaviour Buy, Basic kitchen equipment basic furniture, two wheeler, vacation with friends Buys baby food, toys, diapers, chest & cough medicines
Dissolution (retired & lone surviving spouse)
Concentrates on home improvements, Buy more tasteful furniture, car, home appliances, and magazines. Interested in vacation packages. Income though good, not Buy more medicinal products and other products like the interested in spending. retired people. Seeks more of At times drastic cut in attention, affection and income is likely security conscious
Young Singles Young singles may live alone, with their nuclear families, or with friends, or they may co-habitate with partners in this stage. Although earnings tend to be relatively low, these consumers usually dont have many financial obligations and dont feel the need to save for their futures or retirement. Many of them find themselves spending as much as they make on cars, furnishings for first residences away from home, fashions, recreation, alcoholic beverages, food away from home, vacations, and other products.
CONSUMER BEHAVIOUR
Newly Married Couples Newly married couples without children are usually better off financially than they were when they were single, since they often have two incomes available to spend on one household. These families tend to spend a substantial amount of their incomes on cars, clothing, vacations, and other leisure activities. They also have the highest purchase rate and highest average purchases of durable good (particularly furniture and appliances) and appear to be more susceptible to advertising. Full Nest I With the arrival of the first child, parents begin to change their roles in the family, and decide if one parent will stay to care for the child or if they will both work and buy daycare services. In this stage, families are likely to move into their first home; purchases furniture and furnishings for the child; and purchase new items such as baby food, toys, sleds, and skates. These requirements reduce families ability to save, and the husband and wife are often dissatisfied with their financial position. Full Nest II In this stage, the youngest child has reached school age, the employed spouses income has improved. Consequently, the familys financial position usually improves, but the family finds itself consuming more and in larger quantities. Consumption patterns continue to be heavily influenced by the children, since the family tends to buy large-sized packages of food and cleaning suppliers, bicycles, music lessons, clothing, sports equipment, and a computer. Full Nest III As the family grows older and parents enter their min-40s, their financial position usually continues to improve because the primary wage earners income rises, the second wage earner is receiving a higher salary, and the children earn from occasional and parttime employment. The family typically replaces some worn pieces of furniture, buys some luxury appliances, and spends money on education. Families also spend more on computers in this stage, buying additional PCs for their older children. Depending on where children go to college and how many are seeking higher education, the financial position of the family may be tighter than other instances. Married, No Kids Couples who marry and do not have children are likely to have more disposable income to spend on charities, travel, and entertainment than others in their age range. Not only do they have fewer expenses, these couples are more likely to be dual-wage earners, making it easier for them to retire earlier if they save appropriately.
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Older Singles Single, age 40 or older, may be single again (ending married status because of divorce or death of a spouse), or never married (because they prefer to live independently or because they co-habitate with partners), either group of which may or may not have children living in the household. This group now has more available income to spend on travel and leisure but feels the pressure to save for the future, since there is no second income on which to rely as they get older. Empty Nest I At this stage, the family is most satisfied with its financial position. The children have left home and are financially independent allowing the family to save more. In this stage discretionary income is spent on what the couple wants rather than on what the children need. Therefore, they spend on home improvements, luxury items, vacations, sports utility vehicles, food away from home, travel, and product for their grand children. Empty Nest II But this time, the income earners have retired, usually resulting in a reduction in income and disposable income. Expenditures become health oriented, centering on such items as medical appliances and health, and medicines. But many of these families continue to be active and in good health, allowing them to spend time traveling, exercising, and volunteering. Many continue working part time to supplement their retirement and keep them socially involved. Solitary Survivor Solitary survivors be either employed or not employed. If the surviving spouse has worked outside the home in the past, he or she usually continues employment or goes back to work to live on earned income (rather than saving) and remain socially active. Expenditures for clothing and food usually decline in this stage, with income spent on health care, sickness care, travel entertainment, and services.. Those who are not employed are often on fixed incomes and may move in with friends to share housing expenses and companionship, and some may choose to remarry. Retired Solitary Survivor Retired solitary survivors follow the same general consumption patterns as solitary survivors; however, their income may not be as high. Depending on how much they have been able to save throughout their lifetimes, they can afford to buy a wide range of products. These individuals have special needs for attention, affection, and security based on their lifestyle choices. Marketers use the descriptions of these FLC stages when analyzing marketing and communication strategies for products and services, but they often add
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additional information about consumer markets to analyze their needs, identify niches, and develop consumer-specific marketing strategies. 3.2.5. Family Decision-Marking Families use products even though individuals usually buy them. Determining what products should be bought, which retail outlet to use, how and when products are used, and who should buy them is a complicated process involving a variety or roles and actors. Role Behavior Families and other groups exhibit what sociologist Talcott Parsons called instrumental and expressive role behaviors. Instrumental roles, also known as functional or economic roles, involve financial, performance, and other functions performed by group members. Expressive roles involve supporting other family members in the decision making process and expressing the familys aesthetic or emotional needs, including upholding family norms. Individual Roles in Family Purchases Family consumption decisions involve at least five definable roles, which may be assumed by spouses, children, or other members of a household. Both multiple roles and multiple actors are normal. Marketers need to communicate with consumers assuming each of these roles, remembering that different family members will assume different roles depending on the situation and product. Children, for example, are users of cereals, toys, clothing, and many other products but may not be the buyers. One or both of the parents may be the decider and the buyer, although the children may be important as influencers and users. Family Roles For a family to function as a cohesive unit, roles or tasks-such as doing the laundry, preparing meals, setting the dinner table, taking out the garbage, walking the dog must be carried out by one or more family members. In our dynamic society, etc. family-related roles are constantly changing. Key Family Consumption Roles The roles played by the different family members will vary from product to product. While shopping in the market, a housewife comes across a new variety of juice that she buys for the family. Her decision to purchase does not directly involve the influence of other family members. She is the decider, buyer; but she may or may not be the preparer and is not the only user. In case of products such as television, car, music systems, furniture
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or any other product which is likely to be used by some or all the family members, the purchase decision is likely to be joint or group decision. There are eight distinct roles in the family decision-making process. A look at these roles provides further insight into how family members act in their various consumptionrelated roles: 1. Influencers: Those family members who provide information and advice and thus influence the purchase. The housewife tells her family about the new eatery that has opened in the neighborhood and her favorable description about it influences her husband and teenaged children. 2. Gatekeepers: Those family members who control the flow of information about a product/service thus influencing the decisions of other family members. The teenaged son who wants a racing bicycle, may withhold from his father much of the relevant information on all brands except the one that he fancies, thereby influencing his fathers decision in favor of his preferred brand. 3. Deciders: Family members who have the power to unilaterally or jointly decide whether or not to buy a product or service. The husband and wife may jointly decide about the purchase of a new refrigerator. 4. Buyers: Those family members who actually buy a particular product or service. A housewife may be the person who actually buys all the foodstuffs, rations and toiletries, which are consumed by all the family members. 5. Preparers: Those family members who transform or prepare the product into the form in which it is actually consumed. The housewife may prepare the family meal using raw vegetables, lentils, spices, oil and other ingredients. 6. Users: Those family members who use or consume a particular product or service. All family members may use the car, watch the television, and listen to the stereo music system 7. Maintainers: Family member(s) who service or repair the product so that it will provide continued satisfaction. 8. Disposers: Family member(s) who initiate or carry out the disposal or discontinuation of a particular product or service. Influencing Spouses and Resolving Consumer Conflicts When making consumer decisions, husbands and wives commonly attempt to influence each other to arrive at what they feel to be the best outcome. Six influence strategies for resolving husband/wife consumption-related conflicts have been identified: 1. Expert: At attempt by a spouse to use his or her superior information about decision alternatives to influence the other spouse. 2. Legitimacy: An attempt by a spouse to influence the other spouse on the basis of position in the household.
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3. Bargaining: An attempt by a spouse to secure influence now that will be exchanged with the other spouse at some future date. 4. Reward: An attempt by a spouse to influence the behavior of the other spouse by offering a reward. 5. Emotional: An attempt by spouse to use an emotion-laden reaction to influence the other spouses behavior. 6. Impression: Any persuasive attempts by one spouse to influence the behavior of the other. These influence strategies tend to be used by either husbands or wives when they find themselves in disagreement or in conflict with the other spouse regarding specific consumer decision. For instance, we all have experienced occasions on which different restaurants to visit, see different movies, or go on a different type of family vacation. These are only a few examples of the almost endless possibilities of potential family consumption conflicts that might need to be resolved. Children As any parent knows, young children attempt to influence family decisions as soon as they possess the basic communication skills needed to interact with other family members (Buy me a cookie, I want a Barbie doll, Lets eat at McDonalds.). Older children are likely to participate more directly in family consumption activities. In a study of children aged 6 to 14, more than half indicated that they influenced family purchase decisions, such as choice of vacations, stereo equipment, and home computers. Other research indicates that children play relatively important roles when it comes to initiating interest in a new computer and in the actual purchase decision. The parent-child relationship, as it relates to consumer behavior, can be viewed as an influence versus yield situation. Specifically, children attempt to influence their parents to make a purchase (to yield). In observing shoppers in a supermarket, it is quite evident that children attempt to influence their parents to make purchases of special interest (e.g., laundry detergents) for which they see ads on TV. Teenagers and Post teens A significant number of teenagers have discretionary spending in terms of spending patterns. High school students (those in grades 7 through 12) are most interested in sports and fitness. Boys between the ages of 16 and 19 spend most of their money on movies, dating, entertainment, vehicle expenses, and clothing, while girls of that age spend most of their money on clothing, cosmetics, and fragrances. The teen market can be segmented in terms of lifestyle groups. Figure below presents a four-category segmentation schema of the teenage market. Such segmentation framework has value for marketers who wish to focus their marketing efforts on a particular subgroup of teens.
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1 2
Table 3.2 Lifestyle segmentation of the teen marker

Segment Name Socially Driven Versatile Participant Key characteristics Primarily female: active and extroverted. They are optimistic and plan to attend college. Slightly more females than males responsible teens. But less optimistic and less likely to plan to attend college than the Social Driven. They are comfortable in Social and solitary situations. Slightly more males than females: withdrawn, selfconscious, and the least comfortable in social situation. They are less optimistic about, the future, and spend the least. Primarily males: outgoing, active, and greatly interested in participating in and watching sports, sports influence their self-image ad what they buy.
Passive introverts
Sports Oriented
3.4.6. Family Marketing Family marketing focuses on the relationships between family members based on the roles they assume, including the relationship between purchaser and family consumer and between purchaser and purchase decision maker. Family marketing identifies scenarios where some purchase might have more than one decision maker, whereas some have more than one consumer. The family marketing model, as see in Figure 3.1, represents nine cells describing various purchaser-consumer relationships. Depending on where in the matrix various products fall, marketers can advertise and position products differently according to their purchaser-consumer relationships.
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Figure 3.1 The Family Marketing Model The family purchase decision-making process can be complex, but answering the following questions helps identify different purchaser-consumer relationships. 1. Whos buying for whom? 2. Who are the principal characters? 3. Whats the plot for the purchase? 4. Who wants what when? 5. What can we assume? Although these answers may not identify all essential relationships marketers should consider, they do identify a family marketing plan, which creates a relationship between individuals and products based on the role each individual has in the influence or purchase of products. In the restaurant industry, the trend has been to focus on marketing to the family as a single unit. Admittedly, the appeal to families arose from the restaurant industrys desire to grow sales and profits. Influences on the Decision Process How do husbands and wives perceive their relative influence on decision making across the decision stages? And what does this mean for marketers? Joint decisions tend to be made about vacations, televisions, refrigerators, and living room furniture. Autonomic decision-making tends to be present in decisions about categories that include womens jewelry, mens leisure clothing, indoor paint and wallpaper, and luggage. By understanding
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where on this map the decisions to buy particular products fall, marketers can being to determine which aspects of specific product to advertise to different household members and which media will reach the influential family member. Influence by Decision Stage Spouses exert different degrees if influence when passing through the different stages of the decision-making process. This movement from information search to final decision may be minimal in the case of many low-involvement goods but more pronounced for goods that are risky or have high involvement for the family. Movement is most pronounced for refrigerators, family autos, upholstered living room furniture, and carpets or rugs. Vacations are perhaps the most democratic of a familys purchase decisions. Separate campaigns may be timed to coincide with specialized interests, especially for products with a long planning cycle. Influence of employment In the past, marketers were able to refer to the traditional role structure categories to determine which family member was most likely to purchase a specific product. Although traditional buying roles still apply, husbands in dual-income marriages may be willing to stop at the grocery store to pick up a few items, and working wives may drop the family car at the service station for an oil change. However, contemporary couples are not inclined to shift traditional joint buying responsibilities to only one spouse, but they are willing to shop jointly for major items. Influence of Gender As the gender gap narrows, husband and wife decisions are increasingly made jointly. Qualls studied family decisions concerning vacations, automobiles, childrens education, housing, insurance, and savings. Prior studies showed that decisions regarding these products were usually reported as wife or husband dominant. Qualls found overwhelmingly that joint decisions are now the norm for these products, with 80 percent of childrens education and housing decisions made jointly. Increasing resources of women and shift toward egalitarianism are producing more joint decision-making in product and service categories of perceived high risk. 3.5. SOCIAL CLASS Social class is more of a continuum, i.e., a range of social positions, on which each member of society can be place. But, social researchers have divided this continuum into a small number of specific classes. Thus, we go by this framework, social class is used to assign individuals or families to a social-class category.
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Social class can be defined as The division of members of a society into a hierarchy of distinct status classes, so that members of each class have relatively the same status and the members of all other classes have either more or less status. Table 3.3 Factors showing social class differences Factors responsible for social stratification
S.No Status, Value & prestige enjoyed 1 Low Social Class Lower Class Factors affecting social class
NOTES
Medium
High
Lower level occupation with no authority, less income, and no education or minimum education. For example, labour class or clerks etc. Middle Graduates, or postgraduates executives class managers of companies with authority, drawing handsome salary of which certain amount can be saved and invested. For example, executives or middle level managers of companies. Higher Authoritative person, drawing handsome Class salary, very often professionally qualified, working in a very senior position or a person born into a rich family, with a good background of education.
3.5.1. Characteristics of Social Classes The main characteristics of Social class 1. Persons within a given social class tend to behave more alike 2. Social class is hierarchical 3. Social class is not measured by a single variable but is measured as a weighted function of ones occupation, income, wealth, education, status, prestige, etc. 4. Social class is continuous rather than concrete, with individuals able to move into a higher social class or drop into a lower class. 3.5.2. Impact of social class Provides a sense of identity Imposes a set of normative behaviors Classes share values, possessions, customs and activities Marketing response to customers of different economic means Marketing to the low-income consumer
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Some marketers ambivalent as not perceived as long-term customers constitutes a substantial group Target with value-oriented strategies 3.6. CULTURE - MEANING For the purpose of studying consumer behavior, culture can be defined as the sum total of learned beliefs, values and customs that serve to guide and direct the consumer behavior of all members of that society. Howard and Sheth have defined culture as A selective, manmade way of responding to experience, a set of behavioral pattern. Thus, culture consists of traditional ideas and in particular the values, which are attached to these ideas. It includes knowledge, belief, art, morale, law, customs and all other habits acquired by man as a member of society. An accepted concept about culture is that includes a set of learned beliefs, values, attitudes, habits and forms of behavior that are shared by a society and are transmitted from generation to generation within that society. Culture is learned through the following three ways: 1. Formal learning: parents and elders teach children the proper way to behave. For instance, you have been taught that you need to study to be successful and happy in life. This learning may influence your response both as a student and individual towards education. 2. Informal learning: we learn by imitating the behavior of our parents, friends, or by watching TV and film actors in action. 3. Technical learning: instructions are given about the specific method by which certain things to done such as painting, dancing, singing etc. 3.6.1. Characteristics of Culture Culture is learned. Culture regulates society Norms, standards of behavior, rewards and punishments. Culture makes life more efficient All members follow same norms. Culture is adaptive. Culture is environmental. Multiple cultures are nested hierarchically. Culture also determines what is acceptable with product advertising. Culture determines what people wear, eat, reside and travel. Cultural values in India are good health, education, respect for age and seniority. But in our culture today, time scarcity is a growing problem, which implies a change in meals. Some changes in our culture:
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1. Convenience: as more and more women are joining the work force there is an increasing demand for products that help lighten and relieve the daily household chores, and make life more convenient. This is reflected in the soaring sale of Washing machines, microwaves, Pressure cookers, Mixer grinders, food processors, frozen food etc. 2. Education: People in our society today wish to acquire relevant education and skills that would help improve their career prospects. This is evident from the fact that so many professional, career oriented educational centers are coming up, and still they cannot seem to meet the demand. As a specific instance count the number of institutions offering courses and training in computers that has opened in your city. 3. Physical appearance: Today, physical fitness, good health and smart appearance are on premium today. Slimming centers and beauty parlors are mushrooming in all major cities of the country. Cosmetics for both women and men are being sold in increasing numbers. Even exclusive shops are retailing designer clothes. 4. Materialism: There is a very definite shift in the peoples cultural value from spiritualism towards materialism. We are spending more money than ever before on acquiring products such as air-conditioners, cars CD players etc, which adds to our physical comfort as well as status. 3.6.2. Types of Culture National culture: The culture prevalent in a nation, common to everyone Popular culture: The culture of the masses with norms of mass appeal Subculture: The culture of a group within the larger society. Group identification based on nationality of origin, race, region, age, religion, gender, etc. Corporate culture: The companys values, rituals, customs, myths and heroes 3.6.3. Hofstedes Five Dimensions of Culture Culture has a profound impact on the way consumers perceive themselves, products they buy and use, purchasing processes, and the organisations from which they purchase. Marketers, however, are giving more attention, to understanding macro cultures and how they affect consumer behavior. Hofstede found five dimensions of culture that are common among 66 countries. These dimensions serve as a foundation for characterizing, comparing and contrasting specific national cultures, and they are helpful in identifying environmentally sensitive segments of the market. 1. Individualism versus collectivism ( Pursuit of self- or group interest ) Individualism describes the relationship between an individual and fellow individuals, or the collectivity that prevails in society. Table 3.4 below depicts the attitudinal and behavioral differences associated with individualism and collectivism.
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Table 3.4 Individualism versus Collectivism
Self Construal Role of others Values
Motivational drives Behavior
Individualism (E.g., United States, Australia, Canada Etc) Defined by internal attributes, personal traits Self-evaluation e.g., standards of social comparison, sources of appraisal regarding self. Emphasis on separateness, individuality Focus differentiation, relatively greater need to unique Reflective of personal preferences and needs
Collectivism (E.g., Hong Kong, Japan, India) Defined by important others, family and friends Self-definition e.g., relationships with others define self and affect personal preferences. Emphasis on connectedness, relationships Focus on similarity, relatively greater need to blend in Influenced by preferences, needs of close others
2. Power distance ( Social inequality and submission to authority) Power distance reflects the degree to which a society accepts inequality in power at different levels in organisations and institutions. It can affect preferences for centralization of authority, acceptance of differential rewards, and the ways people of unequal status work together. 3. Uncertainty avoidance ( Tolerance/avoidance of ambiguity ) Uncertainty avoidance concerns the different ways in which societies react to the uncertainties and ambiguities inherent in life. Some societies need well defined rules or rituals to guide behavior, whereas others are tolerant of deviant ideas and behavior. 4. Masculinity/femininity (Segregation of male and female roles in society) This factor determines the extent to which societies hold values traditionally regarded as predominantly masculine or feminine. For instance, assertiveness, respect for achievement, and the acquisition of money and material possessions are identified with masculinity; and nurturing, concern for the environment and championing the underdog are associated with a cultures femininity. 5. Abstract versus associative thinking Creation of value in products based on cause/effect logic or association among events without a logical link.
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3.6.4. Cultural Influences Culture is that complex whole which includes knowledge, belief, art, law, morals, customs and any other capabilities and habits acquired by humans as members of society. Culture influences the pattern of living, of consumption, of decision-making by individuals. Culture is acquired. It can be acquired from the family, from the region or from all that has been around us while we were growing up and learning the ways of the world. Culture forms a boundary within which an individual thinks and acts. When one thinks and acts beyond these boundaries, he is adopting a cross-cultural behavior and there are crosscultural influences as well. The nature of cultural influences is such that we are seldom aware of them. One feels, behaves, and thinks like the other members of the same culture. It is all pervasive and is present everywhere. Material culture influences technology and how it brings cultural changes like use of telephones, mobile phones, clothing styles and fashions, gives the marketers a chance to improve the product, packing, etc. to meet the needs of the customers. Norms are the boundaries that culture sets on the behavior. Norms are derived from cultural values, which are widely told beliefs that specify what is desirable and what is not. Most individuals obey norms because it is natural to obey them. Culture outlines many business norms, family norms, behavior norms, etc. How we greet people, how close one should stand to others while conducting business, the dress we wear and any other patterns of behavior. Culture keeps changing slowly over time; and is not static. Changes take place due to rapid technologies. In case of emergency, war, or natural calamities, marketers and managers must understand the existing culture as well as the changing culture and culture of the country where the goods are to be marketed. Major companies have adapted themselves to international culture and are accepted globally. Coca Cola is sold allover the world. Procter & Gamble and other companies give cross-cultural training to their employees. By making cross-cultural mistakes, many companies have difficulty in pushing their products for example, (i) Coca Cola had to withdraw its 2 litres bottle from Spain, because it did not fit in the local refrigerator; (ii) Many countries are very traditional and do not like women displayed on the products. This acts as a detriment to business in those countries. 3.6.5. Variation In Cultural Values There are three broad forms of cultural values as shown in the following figure. I. Other Oriented Values This shows the relationship between individuals and the society. The relationship influences marketing practices. If the society values collective activity, decisions will be taken in a group. It gives rise to following questions which affect consumer behavior.
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Individual/ collective: Whether individual initiation has more value than collective activity? Romantic orientation: This depicts whether the communication is more effective which emphasizes courtship or otherwise. In many countries a romantic theme is more successful. Adult/ child theme: Is family life concentrated round children or adults? What role do children play in decision-making? Masculine/ Feminine: Whether the society is male dominant or women dominant or balanced. Competitive/ Cooperation: Whether competition leads to success. This is achieved by forming alliances with others. Youth/ age: Are prestige roles assigned to younger or older members of the society. American society is youth oriented and Korean is age oriented. Decisions are taken by mature people in Korea. II. Environment Oriented Values Cleanliness: If a culture lays too much stress on cleanliness. There is scope for the sale of beauty creams, soaps, deodorants, insecticides, washing powder, vacuum cleaner, etc. In western countries, a lot of emphasis is placed on this aspect and perfumes and deodorants are widely used. Performance/ status: A status oriented society cares for higher standards of living, and chooses quality goods and established brand names and high prices items. This is true for the United States, Japan, Singapore, Malaysia, Indonesia, Thailand and most Arabic countries. In performance oriented societies, where rewards and prestige is based on an individuals performance, less importance is given to brand names. Products which function equally well and may not be big brand names are used. Germans do not give the same amount of emphasis to brand names. The marketers adopt strategies accordingly. Tradition/ change: Traditional oriented societies stick to the old product and resist innovation or new techniques. In traditional societies, there is less scope for new products, and old traditional products are in greater demand. In some societies which are upwardly mobile, consumers are looking for modern methods, new products, new models and new techniques. Risk taking/ security: An individual who is in a secure position and takes a risk can be either considered venturesome or foolhardy. This depends on the culture of the society. For developing new entrepreneurs risk taking is a must. It leads to new product development, new advertising themes and new channels of distribution. Security oriented societies have little chances of development and innovation.
CONSUMER BEHAVIOUR
Problem solving/fatalist: A society can be optimistic and have a problem solving attitude or, be inactive and depend on fate. This has marketing implications on the registering of complaints when consumers are dissatisfied with the purchase of the products. Advertising plays an important part and gives guidance to the consumer, and removes these doubts to a great extent. Nature: There are differences in attitude over nature and its preservation. Consumers stress on packing materials that are recyclable and environment friendly. Some countries give great importance to stop environmental pollution and to recycling of products. Companies like P&G, Colgate-Palmolive captured a great extent of the market by offering products which are less harmful to the environment. They also use ingredients in the products which are not harmful in any way. III. Self-Oriented Values Active/passive: Whether a physically active approach to life is valued more highly than a less active orientation. An active approach leads to taking action all the time and not doing anything. In many countries, women are also taking an active part in all activities. This makes the society a highly active one, where everybody is involved in work. Material/ non-material: In many societies money is given more importance, and a lot of emphasis is on being material minded. While in many societies things like comfort, leisure and relationships get precedence over being materialistic. Materialism can be of two types. Instrumental materialism, which is the acquisition of things to enable one to do something or achieve something. Cars are used for transportation. People like to possess things of material value which would help them to bring efficiency. Terminal materialism, is the requisition of materialism for the sake of owing it rather than for use-Art is acquired for owing it. Cultural differences play art important role in this type of materialism. Instrumental materialism is common in the United States of America, where as Japanese advertisements are mostly dominating terminal materialism. Hard work/leisure: This has marketing implications on labor saving products and instant foods. Some societies value hard work and consider it as a fuller life. Others adopt labour saving devices and instant foods to have more leisure time at their disposal. Postponed gratification/ immediate gratification: Should one save for the rainy day or live for the day? Sacrifice the present for the future, or live only for the day? Some countries like The Netherlands and Germany consider buying against credit cards as living beyond ones means, whereas credit cards are very popular in America and other countries having a different cultural orientation, some prefer cash to debt. Some societies save for tomorrow; others enjoy the present and spend lavishly.
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Sexual gratification/Abstinence: Some traditional societies curb their desires, food, drinks or sex, beyond a certain requirement. Muslim cultures are very conservative, and do not want their women to be seen in public or be exposed, so the Polaroid camera which gives instant photographs can be purchased and pictures can be taken by the family members without their women being exposed to the developers in a photo lab. Humour/ serious: Should we take life lightly and laugh it off on certain issues or, take everything seriously? This is another aspect of culture. Advertising personnel selling techniques and promotion may revolve around these themes and the way the appeal for a product is to be made in various cultures. 3.6.6. Subcultures and Consumer Behavior Culture can be divided into subcultures. A subculture is an identifiable distinct, cultural group, which, while following the dominant cultural values of the overall society also has its own belief, values and customs that set them apart from other members of the same society. Sub-culture categories are: Nationality: Indian, Srilanka, Pakistan Religion: Hinduism, Islam Race: Asian, black, white Age: young, middle aged, elderly Sex: Male, Female Occupation: Farmer, teacher, business Social class: upper, middle, lower Geographic regions: South India, North-eastern India 1. Regional, Ethnic, and Religious Influences on Consumer Behavior The three major aspects of culture that have important effects on consumer behavior are regional, ethnic, and religious differences. Firstly, consumption patterns may differ in various regions of India and the world, and marketing strategy can sometimes be tailored specifically to these regions. Secondly, our country has a number of different ethnic groups, and population trends will dramatically alter the demographic profile of the country in the next 50 years. The very diverse Asian American subculture is described as young and having higher socioeconomic status, placing strong value on the family and the group, and being strongly brand loyal. In spite of its diversity, marketing strategies can be developed for this group. Finally, religious beliefs and values can influence consumer. Many marketers are now becoming multicultural in their marketing activities by trying to appeal to a variety of cultures
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at the same time. Although the diversity of the Indian melting pot may be unique, there are many important ethnic groups in other areas of the world. 2. Age, Gender, and Household Influences on Consumer Behavior Among the four major age groups, Teens, who need to establish an identity, are the consumers of tomorrow and have an increasing influence on family decisions. The somewhat disillusioned Generation X consists of smart and cynical consumers who can easily see through obvious marketing attempts. Baby boomers grew up in a very dynamic and fast-changing world, and this has affected their values for individualism and freedom. The 50 and older segment can be divided into two groups-the young again and the gray market. Neither group likes to be thought of as old. The affect of gender differences on consumer behavior is examined next. Sex roles are changing. Women are becoming more professional and independent, and men are becoming more sensitive and caring. Also, men and women can differ in terms of traits, information processing, decision styles, and consumption patterns. Gender is consistent throughout lifetime, influencing customer values and preferences. Gender shows different consumption patterns and perceptions of consumption situations E.g. the wedding ceremony. Households play a key role in consumer behavior. The proportion of nontraditional households has increased due to factors such as 1. Later marriages, 2. Cohabitation, 3. Dual-career families, 4. Increased divorce, and 5. Fewer children. Households also exert an important influence on acquisition and consumption patterns. First, household members can play different roles in the decision process (gatekeeper, influencer, decider, buyer, and user). Second, husbands and wives vary in their influence in the decision process, depending on the situation husband- dominant, wife-dominant, autonomic, or synchronic. 3. Psychographics: Values, Personality, and Lifestyles The roles of psychographics in affecting consumer behavior are detailed below. Values are enduring beliefs about things that are important. They are learned through the processes of socialization and acculturation. Our values exist in an organized value system, with some values being viewed as more important than others. Some are regarded as terminal values and reflect desired end states that guide behavior across many different
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situations. Instrumental values are those needed to achieve these desired end states. Domainspecific values are those that are relevant within a given sphere of activity. Western cultures tend to place a relatively high value on material goods, youth, the home, family and children, work and play, health, hedonism, and technology. Marketers use tools like value segmentation to identify consumer groups with common values. Personality consists of the distinctive patterns of behaviors, tendencies, qualities, and personal dispositions that make people different from one another. Approaches to the study of personality include 1. The psychoanalytic approach, which sees personality arising from unconscious internal struggles within the mind at key stages of development; 2. Trait theories, which attempt to identify a set of personality characteristics that describe and differentiate individuals, such as introversion, extroversion, and stability; 3. Phenomenological approaches, which propose that personality is shaped by an individuals interpretation of life events; 4. Social-psychological theories, which focus on how individuals act in social situations (e.g., compliant, detached, or aggressive); and 5. Behavioral approaches, which view an individuals personality in terms of past rewards and punishments. Marketers also measure lifestyles, which are patterns of behavior (or activities, interests, and opinions). These lifestyles can provide some additional insight into consumers consumption patterns. Finally, some marketing researchers use Psychographic techniques that involve all of these factors to predict consumer behavior. One of the most well known Psychographic tools is the Values and Lifestyle Survey (VALS). The newer VALS2 identifies eight segments of consumers who are similar in their resources and self-orientations. 3.6.7. Cross Cultural Consumer Behavior Cross cultural marketing: Objectives and Policies Cross-cultural marketing is defined as the effort to determine to what extent the consumers of two or more nations are similar or different. This will facilitate marketers to understand the psychological, social and cultural aspects of foreign consumers they wish to target, so as to design effective marketing strategies for each of the specific national markets involved. A company can enter a foreign market as a Domestic exporter Foreign importer Foreign government-solicit the firm to sell abroad
CONSUMER BEHAVIOUR
The firms objectives could be: To determine how consumers in two or more societies are similar/different and devise suitable, appropriate strategies Devise individualized marketing strategy if cultural beliefs, values and customs of a specific country are different 3.6.8. Characteristic features of a firm going global: 1. High market share in the domestic market 2. Advantageous economies of scale 3. Access to marketing/manufacturing bases across global borders 4. Availability of resources and capability to absorb huge losses 5. Product/technology clout 6. Cost and differentiation advantages 3.6.9. Problems in Cross Cultural marketing 1. Problems related to product selection: The marketer going for cross cultural marketing has to select the customers/ market not on the basis of the superficial similarities of age or income, but by using the real motivating factors that prompt them to accept or reject products. 2. Problems related to promotion/marketing communication: e.g. Ariel in the middle east and also Pepsi 3. Problems related to pricing: the marketer has to adjust his pricing policies according to the local economic conditions and customs. 4. Problems related to selection of distribution channels: in Japan, P & G used this to sell soap 3.6.10. Cross-Cultural Consumer Analysis To determine whether and how to enter a foreign market, we need to conduct some form of cross-cultural consumer analysis. Cross-cultural consumer analysis can be defined as the effort to determine to what extent the consumers of two or more nations are similar or different. Such analysis can provide marketers with an understanding of the psychological, social, and cultural characteristics of the foreign consumers they wish to target, so that they can design effective marketing strategies for the specific national Markets involved. Similarities and differences among people A major objective of cross-cultural consumer analysis is to determine how consumers in two or more societies are similar and how they are different.
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Table 3.5 Japanese and American cultural traits difference Alternative Multinational Strategies
Japanese Culture Traits Homogenous Harmony to be valid and preserved Group, not individual, important Ambiguous General Hold back emotions in public Process-oriented Make a long story short Nonverbal communication important Interested in who is speaking American Culture traits Diverse Fight for ones beliefs/positions Individualistic Clear-cut Specific Display emotions in public Result oriented Make a short story long Verbal communication important Interested in what is spoken
Some of us may argue as markets are becoming more and more similar, standardized marketing strategies are becoming more and more feasible. But, some more would argue back that differences between consumers of various nations are far too great to permit a standardized marketing strategy. Whether to use shared needs and values as a segmentation strategy or to use national borders as a segmentation strategy? Shared needs and values would mean to appeal to consumers in different countries in terms of their common needs, values, and goals. Using national borders as a segmentation strategy would mean to use relatively different local or specific marketing strategies for members of distinctive cultures or countries. Table 3.6 Alternative Global Marketing Strategies
1. Favoring a World Brand: A lot of companies have created world brand products that are manufactured, packaged, and positioned in exactly the same way regardless of the country in which they are sold. For instance, Sony sells its Walkman in this fashion. 2. Adaptive Global Marketing: In contrast to the above, some other organisations imbibe a strategy that adapts their advertising messages to the specific values of particular cultures. A very good example here would be that of McDonalds, which tries to localize its advertising to consumers in each of the cross-cultural markets in which it operates.
CONSUMER BEHAVIOUR
3.6.11. Tangible Benefits of Global Brand Building Global brand building drastically reduces marketing investments. A strong brand needs lower and lower levels of incremental investment to sustain itself over time. A new and unknown player will have to spend two to four times more than the market leader to achieve the same share of mind. Given the huge difference in business volumes, the pressure of the bottom-line is much higher for an un established player. Strong global brands always account for more stable businesses. Global brand building commands a premium. As long as there is a distinct value attached to your offering, the consumer will always be willing to pay more for it. That is the only reason why an unknown brand called Titan could command a substantial premium over HMT. That is the same reason why a brand such as BPL at a higher cost beat the stuffing out of companies such as Akai, Sony and Philips in the CTV wars. Global brand building builds entry barriers. Human beings as a species love status quo. Therefore, a brand which is entrenched in the consumers mind is very difficult to dislodge. Global brand building increases cash flow efficiency: Global brand building also increases value of the business due to the international presence. Phillip Morris bought Kraft from General Foods in 1991 for $13 billion, more than three times its book value. Coca-Cola paid $60 million to acquire Thumbs-Up from Parle. Neither buyer had any lacunae in manufacturing, finance or human resources. They merely bought business with very powerful brand equities and therefore paid more than the net worth of the businesses. 3.6.12. Strategic Implications There is an assumption that the world is becoming homogenised; yet national and sub-regional cultures do exist. This makes global branding a tough challenge and one that is handled differently from organisation to organisation. Some companies pursue strategies based upon the identification of common elements among countries, whilst others find it more profitable to adapt and adjust according to specific conditions in various markets. There are five basic propositions that a global brand manager has to take note of while developing strategy at the global level. Many marketers operate in global markets with a strategy still rooted in the domestic market. The strategy needs to embrace the opportunities and the costs of working in multiple countries. The marketer has to look for his competitive advantage outside the country of origin. What will allow one to compete and win in a strange country? Are the product and the brand in particular needed in another culture? Only careful consideration of these questions will create the right platform for a global branding strategy.
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3.6.13. Cultural Variations & Non Verbal Communication. In a culture we have many variations in non-verbal communications. Each culture assigns a meaning to non-verbal signs utilised by it. There are some variables in non-verbal communication. These are: a) Use of time b) Use of space c) Friendship d) Agreements e) Things f) Symbols g) Etiquette Time Time is a resource which is distributed equally amongst everybody. Every person has the same amount of time at his disposal. What view individuals and societies take of time makes them different. Some can be classified under monochromic culture and others in polychromic culture. Some of the important differences between monochromic a polychromic culture are give in the table below. Table 3.6 Differences between Monochronic and Polychronic Culture
The meaning of time may be different in different cultures. Some people take time in making decisions according to the importance of decisions. Some insist on coming to the point directly in business transactions and are well prepared. Some keep appointments by the minute, others make people wait for a long time.
CONSUMER BEHAVIOUR
Space Space may be related to prestige rather than the need. The higher the office, the bigger the office space and so on. Americans have the offices of executives on the top floor and tend to separate the office of subordinates. Japanese have their discount stores on the upper floor. Some cultures and individuals maintain a fair distance while transacting, others co-mingle easily. Americans maintain a fair distance while interacting with associates. Arabs stand very close to each other. Friendship Friendship plays an important role in business transactions. Good personal relationship and feelings matter most in a long term agreement. Social contacts developed by parties gain priority over technical specifications. Americans make friends easily, and drop them easily as well, because of both social and geographical mobility. Some cultures like Indian or Latin Americans have lasting relationships that endure for a long time and so does the business. Personal ties, personal trust leads to cooperation and a lot of transaction can take place between parties. Some want to transact business only with those whom they get along and, making money is secondary. Agreements All business when transacted is done under some agreements. These agreements may be written or just on an understanding between the two parties. Most people enter into an agreement, but friendship and kinship are also given a lot of importance. Verbal commitments are also binding in some cultures, where signing a contract is just a mere formality. Things Different cultures attach different meaning to things. Things include products as well as gifts given in certain business and social situations. An appropriate product in the form of a gift is to be carefully chosen. The gifts can be big or small. They can be given openly or presented privately. This depends on the practices followed in that particular country. Some want to make a show of the gift, by giving it in front of others. Others are secretive about it. Symbols and Colors Different countries attach different meanings to symbols, numbers and colors. Symbols can be flowers, triangles, pictures and animals, etc. Some numbers are considered lucky, and others not so lucky, or even unlucky, like 13, 4, etc. Colors have different interpretations. Pink is associated with a female, and blue with the male in the US, whereas it is just the opposite in Holland.
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A list of colors and their interpretations is given below: White: Symbol of mourning or death in the Far East, happiness, purity and peace in the United States. Purple: Associated with death in many Latin American countries. Blue: Symbolises feminity in Holland and masculinity in the United States, Sweden, India, etc. Red: Color for brides and children in India. Sign of masculinity in the UK and France, negative in Nigeria, Germany and positive in Denmark, Rumania and Argentina. Yellow: Sign of death in Mexico, infidelity in France, celebrations in many countries including India. White lilies: Suggestion of death in England. Symbol of Numbers 7: Lucky in India, USA, Morocco, Nicaragua and Czechoslovakia. 13: Unlucky in many countries including India. 4: Symbol of death in Japan. Packing in 4s is avoided. Triangle: Negative in Hong Kong and Taiwan, positive in Columbia. Owl: Wisdom in the United States, bad luck in India. Deer: Speed, grace in the United States; Homosexuality in Brazil. Etiquette These are accepted norms of behavior. Some behavior may be rude or abusive in one culture and quite acceptable in other cultures, e.g. sitting with legs crossed or sitting in a manner that shows the sole of a shoe. In Japan it is considered impolite to say no directly to a business offer. They put it differently, by saying it is very difficult, which means no. The exchange of business cards in Japan is essential, and indicates the level of your status in your business. Similarly, there are many different habits and ways of doing things socially that affect the making of advertisement. Eating with the fork in the right hand and the left hand kept under the table is quite common in America, whereas, in European culture, the fork should be in the left hand and the right hand holding the knife or spoon. These non-verbal communications in different countries or different languages have a direct bearing on the marketing activity and must be taken care of. As people recognize verbal languages, they act accordingly. In a similar manner, non-verbal communication must also be recognized and understood so that there is less misinterpretation. The advertisement of the communication we want to give should be appropriate and match with the culture of the country.
CONSUMER BEHAVIOUR
3.7. SUMMARY A group in its broadest sense includes two or more individuals who share a set of norms values or beliefs and have certain implicit or explicit relationships such that their behaviors are interdependent. Some groups require membership; other do not. Groups that have frequent personal contact are called primary groups; those with limited interpersonal contact are called secondary groups. Group influence varies across situations. Informational influence occurs when individuals simply acquire information shared by group members. Normative influence happens when an individual conforms to group expectations to gain approval or avoid disapproval. Identification influence exists when an individual identifies with the group norms as a part of his or her self-concept and identity. The household is the basic purchasing and consuming unit and is, therefore of treat importance to marketing managers of most products. Family households also are the primary mechanism whereby cultural and social-class values and behavior patterns are passed on to the next generation. The household life cycle is the classification of the household into stages through which it passes over time based on the age and marital status of the adults and the presence and age of children. The household life cycle is a valuable marketing tool because members within each stage or category face similar consumption problem. Thus they represent potential market segments. Family decision making involves consideration of questions such as who buys, who decides, and who uses. Family decision making is complex and involves emotion and interpersonal relations as well as product evaluation and acquisition. Culture is defined as the complex whole that includes knowledge, beliefs, art, law, morals, customs, and any other capabilities acquired by humans as members of society. It includes almost everything that influences an individuals thought processes and behaviors. Cultural values are classified into three categories: other, environment, and self. Other oriented values reflect a societys view of the appropriate relationships between individuals and groups within that society. Relevant values of this nature include individual/collective, extended/limited family, diversity/uniformity, masculine/feminine, competitive/cooperative, and you/age. Differences in verbal communication systems are immediately obvious across cultures and must be taken into account by marketers wishing to do business in those cultures. Probably more important, however, and certainly more difficult to recognize are nonverbal communication systems. Major examples of nonverbal communication variables that affect marketers are time, space, friendship, agreement, things, symbols, and etiquette.
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3.8 REVIEW QUESTIONS What reference groups would be relevant to the decision to purchase the product or activity (based on students on your campus)? Describe two groups which you belong. For each, give two examples of instances when the group has exerted (a) informational, (b) normative. Describe a consumption subculture to which you belong. How does it affect your consumption behavior? How do marketers attempt to influence your behavior with respect to this subculture? How would the marketing strategies for the following differ by stage of the HLC? (Assume each stage is the target market) Health Club Life Insurance Energy drink Pick two stages in the household life cycle. Describe how your marketing strategy for the following would differ depending on which group was your primary target market. Sports car Mouthwash Italian Restaurant Why should we study foreign cultures if we do not plan to engage in international or export marketing? Is a countrys culture more likely to be reflected in its art museums or its television commercials? Why? Why do non-verbal communication systems vary across cultures? To what extent do you think teenagers are truly becoming a single, global culture? What are the marketing implications of the differences in the masculine/feminine orientation across countries?
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CONSUMER DECISION PROCESS AND POST PURCHASE BEHAVIOUR

4.1 OVERVIEW There are many people around us whom we perceive as experts in one thing or the other. We seek advice from them in their respective area of expertise. Such people are known as Opinion Leaders and people seeking advice from opinion leaders and known as opinion seekers. A family friend who knows a lot about cars and also runs a garage can prove to be a better source of information when a bike is to be purchased than a close friend who is very knowledgeable about computers. Therefore, opinion leadership is a social word- of- mouth communication between the opinion giver and opinion seeker. Sometimes, the recipient of the information from the opinion leader may not be an active seeker, but only a receiver of such information in regularly discussion. Such a person is known as an opinion receiver. Word of out or interpersonal communication implies sharing information through direct communication between people. It can be fact to face, over the hone, via the net or through mails. 4.2 LEARNING OBJECTIVES After studying this unit, you should understand The dynamics of Opinion Leadership Identify an Opinion Leader Understand communication and opinion leadership Understand the concept of diffusion and Innovation Understand the different types of innovations Understand the factors affecting innovation adoption Understand post purchase consumer behaviour and models Understand post purchase dissonance Understand the concept of consumer loyalty and types of loyalty programmes
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4.3 OPINION LEADERSHIP What is opinion Leadership? Opinion Leadership is the process by which one person (opinion leader) informally influences the actions or attitudes of others, who may be opinion seekers or merely opinion recipients. The definition of opinion leadership emphasises on informal influence. This informal flow of opinion related influence between two or more people is referred to wordof-mouth communication. Benefits of word-of-mouth
There are three situations in which opinion leadership takes place: When an individual actively seeks advice from others When an individual voluntarily provides information to others When information is generated in the course of normal interaction of a group
4.4 DYNAMICS OF OPINION LEADERSHIP c
Credibility Opinion seekers regard opinion leaders as trustworthy and a credible source of information pertaining to a particular product or brand the opinion leaders have no hidden commercial motives, like cash rewards, in promoting a brand. Also opinion seekers seek their help in decision-making because they have expertise or usage experience with a product or brand, which considerably reduces the perceived risk of the opinion seeker. The information given by the opinion leader can be either positive or negative, based on personal experience, and this further strengthens their credibility. Information and Advice Opinion leaders are a source for product or brand specific information as well as advice. They might just share casual information about a certain product that they have
CONSUMER BEHAVIOUR
used, they might even aggressively advice o0pinion seekers whether to buy it o not. The information passed can be related to which product or brand to purchase and from where. Category-specific Opinion leaders can have expertise in one product category, but can reverse the role to opinion seekers in case of another product category in which they are not knowledgeable. A person known for his/her cooking talent may be an expert in the what and how of packed edible food products, spices, food nutrition, etc, but when he or she has to buy a bike, is more likely to seek information from another person whom he/she regards as knowledgeable about bikes. Therefore, an opinion leader in one product may be an opinion seeker in another product. Two-way communication Opinion leadership phenomena are face-to-face communication between opinion givers and opinion seekers. Both parties communicate with their respective experience with each other. Some scholars, thus, believe that the difference between opinion giver and opinion seekers is somewhat artificial as the person who is knowledgeable about a certain product and gives related advice to opinion seekers, is also most likely to listen to others comments regarding the product. 4.5 MOTIVATION BEHIND OPINION LEADERSHIP The opinion leadership process happens due to the following underlying motives of both parties the opinion leader and opinion seeker and receiver. Opinion Leader There are four main motives behind the role of opinion leader self involvement, product involvement, social involvement and message involvement. Self involvement: Giving advice to others provides big gratification to the opinion leaders in terms of the attention they receive. Also, since they can display heir expertise and experience in the subject mater, it makes them feel superior o others in terms of knowledge. The role of the opinion leader also involves good feeling of helping others take a decision and increasing the knowledge of opinion seekers and receivers. Sometimes, the motive behind opinion leadership could be to reduce post-purchase dissatisfaction with a product or brand. In such cases, the opinion leader will propagate the advantages of the product, thereby trying to reassure himself that his purchase decision was right. For example, unable to make up his mind on which brand of refrigerator to buy, Mr. Sampath sought the advice of others, and ended up buying an expensive brand. After the purchase, he began to feel a little dissatisfied with the choice he made. However, he gave a favourable picture of the brand to others, just o reassure himself that he had made he right choice.
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Product involvement: Product involvement opinion leaders may feel the necessity to talk to others (opinion receivers) about the product if it is eie4hter too good or too bad. The information transmitted would be positive if they are satisfied with the product or brand and negative, if they are dissatisfied with it. Social involvement: Social involvement opinion leaders like o share their product expertise with people in general as an expression of bonding. It is important to note that in this case, the opinion leader does not feel the urge to talk about the product/brand due to positive or negative experience, as in the case of product involvement. Message involvement: With an increasing number of advertisements being targeted at consumers these advertisements often become the topic of discussion. In case of message-involvement, advertisements and slogans are the basis of group discussions. Such conversations often use poplar slogans like Surfs Dhoondhte reh jaoge or Maggi Noodles bus 2 minute. Opinion Seeker and Receiver The main motive for an opinion seeker is looking for information is o reduce the perceived risk associated with the product purchase. It also reduces the task of searching for information through other sources. Sometimes opinion is sought with the sole purpose of buying a product to win the approval of an opinion leader. For the opinion receiver, the interaction with an opinion leader provides a lot of new and/or existing product knowledge as well as information related to their purchase, use, etc. 4.6 TYPES OF OPINION LEADERS Opinion leaders, in general, are people who have expertise in one subject/product. Activity and have the capability of influencing others. They may or may not be he users of the product and/or brand that they recommend to others. Opinion leaders, who do adopt a product early in its life cycle, are called innovative consumers. Opinion leaders are also mostly likely to be opinion seekers in the product category in which they have high involvement. They are generally self-confident (which makes them quite convincing to opinion seekers), wiling to try new products and also to talk about these products to others. They are socially active and generally have more influence over the people in same age group and social circle as theirs. Opinion leaders can be of varying types based on their knowledge, and influence on the purchase decision of the opinion receiver and/or opinion seeker. There are some special types of opinion leaders, like generalised opinion leaders, market mavens, surrogate buyers and purchase pals.
CONSUMER BEHAVIOUR
Generalised Opinion Leader Generalised Opinion Leaders re maters of various subjects (say, all kinds of consumer durable products, books, etc.) and are very hard to find. Usually, opinion leaders are knowledgeable about one product category and have high involvement in some related areas. Market Maven Market mavens belong to a special category of opinion leaders who have market involvement, rather than product involvement of the normal opinion leaders. They are people who actively seek market information which they feel may be useful fro friends and relatives and are a great source of information like which place offers the best deals, where there are discounts at that time of the year, what new products/brands are in the market, which outlets to visit for which product, the new outlet in town, etc. Figure Depicting the Profile of an Opinion Leader
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Surrogate buyer Surrogate buyer is he tem used for the professionals hired by actual purchasers to filet he huge amount of store, product and brand information available, evaluate the product options available and make recommendations. Sometimes, they also make transactions on behalf of their employer. Surrogate buyers play a wide variety of roles like tax consultants, wardrobe consultants, interior designers, stock brokers, etc. The reasons for hiring a surrogate buyer can range from personal reasons like high perceived risk, lack of time, lack of expertise or product knowledge, or low interest in shopping to environmental issue like limited product availability.
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4.7 COMPARISON OF OPINION LEADERS AND SURROGATE BUYER

S. Opinion Leader No. 1. Informal relationship with end-user of information 2. Information can be active or passively exchanged 3. Usually, more socially active than end-user and belongs to the same age and social group Surrogate Buyer Formal (occupational) relationship with end-user of information Active information exchange Not necessarily more socially active than end-user and usually does not belongs to the same age and social group Gets compensated for his/her services High accountability, therefore, greater effort in option screening and evaluation
4. 5.
No hidden motive of commercial gain Limited accountability, therefore, less effort in option screening and evaluation
6.
Usually more than one opinion Usually, only one surrogate buyer leader can be consulted is consulted due to cost of consultation involved Same person can be opinion leader Usually, expert in in may related areas. product/service category one
7.
Purchase pals Purchase pals are people who accompany an individual on shopping trips. Purchase pals are considered to be quality influential opinion leaders at the point of purchase (in store) in consumer decisions. The major benefit of purchase pals is that they help reduce the stress and anxiety an individual experiences while make a purchase, especially in a high involvement expensive product. The other benefit is information support they provide like better product knowledge, better bargaining skills and better knowledge of outlets, prices and products. Thus the choice of purchase pals depend on the relationship they have with the individual and the type of purchase they make. They can have two types of relationships with the individual they accompany either a strong tie relationship or a weak tie relationship. Strong tie purchase pals are generally family members and close friend who are preferred when shopping for products which have high social risk. i.e., the risk of social ridicule (say while shopping for ones wedding dress). The strong tie purchase pals provide moral support and help the individual choose products that suit his or her taste. Weak tie purchase pals are generally non-family members and they are preferred while making purchase of
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products which have high perceived functional risk. - i.e., risk of non-performance (say, an expensive electronic gadget). 4.8 IDENTIFYING AN OPINION LEADER Opinion leaders are easier to define than to find. Still more difficult in measuring their impact on the opinion seekers. Moreover, the circle of influence of opinion leaders is generally small compared to celebrity endorsers, who can catch the attention of the entire segment. There are several techniques that are used to identify opinion leaders self designating method, socio-metric method, key informant method and objective method. Self Designating Method This is a frequently used opinion leader identification method used by marketers. It measures the individuals self perception of his/her ability o influence others. In this method, individuals are asked to answer singe or multiple questions about themselves. Generally, he multiple question approach is preferred as it is more reliable. The major limitation of this method is that respondents can give biased answers. Another point to note is that anyone giving advice is not considered as an opinion leader rather opinion leader is a person whose advice is regarded highly amongst the seekers and is followed too. Socio-Metric Method This method focuses on measurement of the group network and product or brand, based interpersonal communication within a group. Respondents are asked to identify people to whom they have provided information regarding the product/brand and/or people from whom they have received product related information. The responses are cross checked with the individuals named by the respondents, thus giving authentic results Although this method is precise, it is expensive and difficult to conduct due to the time involved in tracking the whole network of opinion leaders and receivers. Key Informant Method In this method, a key informant, a person who is a keen observer of the concerned group, is asked to identify potential opinion leaders with respect to a specific product category. The informant may or may not be a member of that group, for example a teacher who knows the students within the class who are regarded highly by fellow students. Although, it is quite inexpensive and less time consuming than other methods, it is generally difficult to identify a key informant. Objective Method In this method, some individuals act as opinion leaders with respect to a product and the impact of resultant word-of-mouth communication on the sales of the product is traced
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and measured. This method is quite useful in measuring the impact of word-of-mouth on a new product trial, such as a special invitation to select socialites and student groups to the opening of a multiplex and then tracking down their influence on others. This method measures an individuals influence on others in a controlled environment but it needs a carefully established design for the experiment. Also mapping the spread of word-ofmouth can be difficult. Creating a Buzz A buzz has been described as explosive self-generating demand by the consumers. Be it the success of movies like Matrix or buzz or consumer hype generated by positive word-of-mouth interaction can play a vital role in the success of a product. A large number of target consumers are affected by the power of the buzz, at least partially. Entertainment and fashion products are usually more affected by a buzz than products related to finance, electronics, insurance, etc. Companies can cleverly devise tactics to make even low visibility products the talk of the town. 4.9 TACTICS ADOPTED BY MARKETERS TO GENERATE A BUZZ Some of the tactics adopted by marketers to generate a buzz are: Influencing the opinion leaders, say inviting socialites, popular columnists and celebrities to an initial movie screening. The movie Crouching Tiger, Hidden Dragon marketed by Sony Entertainment carefully planned the audience for the initial screening. This made the foreign movie a huge success in the U.S. Rationing the supply by releasing limited edition of a product, which gives product exclusivity; say like launching a limited edition of a classic car model. Marketers can even employ the channel constraint to create buzz, say for that limited edition car or a one-day sale by a store. Exploiting the icons by making use of celebrity endorsements. Celebrity endorsements does not necessarily mean advertisements featuring celebrities, but celebrities (movie stars, popular TV stars, sports icons, etc) using the product in highly visible social events, talk shows, etc. Being in the category top lists helps create tremendous interest in the product and quick rise in sales. The most noted top 10 movies of the week, the top 10 best selling fiction and non-fiction books, the top 10 business schools, etc. Nurture the grass roots by encouraging community feeling associated with a brand or product. It is important to note that imitations of product can cash in on the buzz effect created by a new product if they know when to lunch their counter product against the original. Marketers often rely much more on mass media advertising to attract potential consumers.
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4.10 PROGRAMMES DESIGNED TO STIMULATE OPINION LEADERSHIP Advertising and promotional programmes designed to persuade consumers to tell your friends how much you like our product are one way in which marketers encourage consumer discussions of their products or services. The objective of a promotional strategy of stimulation is to run advertisements or a direct marketing programme that is sufficiently interesting and informative to provoke consumers into discussing the benefits of the product with others. Advertisements Simulating Opinion Leadership A firms advertisements can also be designed to simulate product discussions by portraying people in the act of informal communication. Word-of-Mouth May Be Uncontrollable Informal communication is difficult to control. Negative comments, frequently in the form of rumors that are untrue, can sweep through the marketplace to the detriment of a product. Indeed, a study by the White House Office of Consumer Affairs found that 90 percent or more of unhappy customers would not do business again with the company that is the source of their dissatisfaction. Each dissatisfied customer will share his or her grievance with at least nine other people, and 13 percent of unhappy customers will tell more than 20 people about the negative experience. Some common rumor themes are: The product was produced under unsanitary conditions. The product contained an unwholesome or culturally unacceptable Ingredient. The product functioned as an undesirable depressant or stimulant. The product included a cancer-causing element or agent. The firm was owned or influenced by an unfriendly or misguided foreign country, governmental agency, or religious cult.
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Some marketers have used toll-free telephone numbers in an attempt to head off negative word-of-mouth, displaying an 800 number prominently on their products labels. A particularly challenging form of negative word-of-mouth can be generated today over the Internet, when a dissatisfied consumer decides to post his or her story on a bulletin board for all to see. Creation of Opinion Leaders Marketing strategists agree that promotional efforts would be significantly improved if they could segment their markets into opinion leaders and opinion receivers
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4.11 THE DIFFUSION CONCEPT According to Rogers Diffusion is the process by which an innovation is communicated through certain channels over time among the members of a social system. Diffusion is a macro process concerned with the spread of a new product an innovation from its source to the consuming public. Adoption is a micro process that focuses on the stages through which an individual consumer passes when deciding to accept or reject a new product. Diffusion of innovations is the process by which acceptance of an innovation (new products or new service or new idea) is spread by communication (mass media, sales people, informal conversation) to members of the target market over a period of time In other words, the study of the diffusion of innovation is the study of how, why, and at what rate new ideas and technology spread through cultures. It applies, for example, to the acceptance of new technological products like the wristwatch and the personal computer, foods like tomato sauce, music styles like opera, dressing styles like the blue jeans and so on Diffusion of innovation explains how an innovation reaches the consumer and reasons for its acceptance or rejection by them. Diffusion is the process by which an innovation is communicated through certain channels over time among the members of the social system. The diffusion process, therefore explains the ways in which an innovation reaches a wide consumer base. Diffusion of innovation theory predicts that media as well as interpersonal contacts provide information and influence opinion and judgment. Studying how innovation occurs, E.M. Rogers (1995) argued that it consists of four stages: invention, diffusion (or communication) through the social system, time and consequences. The information flows through networks. The nature of networks and the roles opinion leaders play in them determine the likelihood that the innovation will be adopted. Innovation diffusion research has attempted to explain the variables that influence how and why users adopt a new information medium, such as the Internet. Opinion leaders exert influence on audience behaviour via their personal contact, but additional intermediaries called change agents and gatekeepers are also included in the process of diffusion. Five adopter categories are: (1) innovators, (2) early adopters, (3) early majority, (4) late majority, and (5) laggards. These categories follow a standard deviation-curve, very little innovators adopt the innovation in the beginning (2,5%), early adopters making up for 13,5% a short time later, the early majority 34%, the late majority 34% and after some time finally the laggards make up for 16%. Diffusion is the process by which an innovation is communicated through certain channels over a period of time among the members of a social system. An innovation is an idea, practice, or object that is perceived to be new by an individual or other unit of
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adoption. Communication is a process in which participants create and share information with one another to reach a mutual understanding. 4.12 ELEMENTS TO THE DIFFUSION OF INNOVATION There are four main elements to the diffusion of innovations. They are: Innovation - Any item, thought, or process that is viewed to be new by the consumer Communication the process of the new idea traveling from one person to another or from one channel to the individual. Social System the group of individuals that together complete a specific goal (adoption) Time how long it takes for the group to adopt an innovation as well as the rate of adoption for individual
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Conceptual Model
Diffusion of Innovation Model. Source: Rogers (1995) 4.13 INNOVATION Various approaches which have been taken to define a new product or a new service include: a. Firm-oriented definitions: A firm oriented approach treats the newness of a product from the perspective of the company producing or marketing it. When the product is new to the firm it is considered to be new.
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b. Product oriented definitions: Product-oriented approach focuses on the features inherent in the product itself and on the effects these features. Three types of product innovations could be Continuous innovation having the least disruptive influence on established patterns involving the introduction of a modified product, rather than a totally new product. E.g., latest version of Microsoft Office; dynamically continuous innovation which may involve the creation of a new product or the modification of an existing product e.g., disposable diapers, CD players; discontinuous innovations requiring consumers to adopt new behaviour patterns e.g., TV, fax machines, Internet c. Market oriented definitions: Judges the newness of a product in terms of how much exposure consumers have to the new product. The definitions could be: A product id considered new if it has been purchased by a relatively small (fixed) percentage of the potential market. A product is considered new if it has been in the market for a relatively short (specified) period of time.
d. Consumer oriented definitions: A new product is any product that a potential consumer judges to be new. All new products introduced in the market may not be innovative. An innovation is an idea, practice, or object perceived as new by an individual or other unit of adoption. The key words here are perception and new. New product can be an improved version of an existing product (Microsoft Windows Millennium in place of Windows 97) or an entirely new product category (mobile telephony). A product will no be considered an innovation until and unless it is perceived to be new. The product might be perceived new by (i) the company launching the product (ii) the market or (iii) the individual consumer. The process (build to order computers) product (cell phones with camera) channels (online gift sites), customer experiences (designing own car) etc, may be new for the company, but may or may not be perceived as new by the final consumer. When studying the diffusion of innovations it is important to understand that you are not just looking at the spread of an innovation through a society but rather the spread of different kinds of innovations through a society. As stated earlier, an innovation is an item, thought, or process that is new to a certain area but not necessarily to the world. 4.14 TYPES OF INNOVATION There are three main types of innovations that are diffused in different ways. cy be harmful to the diffusion process.
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4.15 ATTRIBUTES OF INNOVATION
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Other factors affecting adoption are the type of social system (modern or traditional) type of decision (individual or group), marketing effort (correct market segmentation and commercial channels) need fulfillment/problem solving (the more obvious the problem solved by the innovation, more rapid the adoption) the perceived risk (the lower the perceived risk; the higher the probability of faster adoption). 4.16 CONSUMER RESISTANCE TO INNOVATION Not all innovations that are introduced to the market become successful. The lack of adoption in case of a cosmetic is adoption not because of consumer resistance, but due to the failure of the company to meet consumers perception of newness. Innovation resistance is the resistance offered by the consumer to an innovation either because it poses potential changes from a satisfactory status quo or because I conflict with their belief structure The resistance to innovation will increase if the relative advantage,
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compatibility, trialability and operability are perceived as slow and complexity is perceived as high by consumers. One more attribute of innovation flexibility or capacity for modification becomes very important if there is consumer resistance to an innovation. If there is resistance to a modified innovation, the company can modify the innovated products to make it more acceptable to the consumer, thus increasing its changes of success. The modification will have to be based on the cause of the resistance. If a new kind of computer mouse is being resisted, the marketer will have to enquire about the causes. Say if the cause is the even though performance is better than earlier models, the design or shape of the mouse makes the user uncomfortable. In this case, the marketer will need to modify the design and then re-launch the model for the consumers adoption or rejection. To counter the problem of consumer resistance to innovation many innovating companies like 3M use the lead user approach. In this approach, a lead team comprising of managers and technical staff, work together to devise profitable innovations while some other companies rely on the feedback given by their consumers. Both these approaches to churn out profitable innovations can also play an important role in identification of the innovations limitations and alternative uses. This not only reduces the probability of resistance but also increase s the potential market as the company focuses on the alternative use. Sometimes the failure of an innovation due to factors like narrow target market) also forces company to search for alternative uses of the innovation. An innovation intended for a particular market segment instead finds acceptance with some other market group. Innovation resistance is greater in the case of discontinuous innovations which greatly disrupt the consumers beliefs and past experience. The resistance can vary in degree inertia (disinclined to adopt), active resistance (perceived risk is high and tendency to postpone adoption), and very active resistance (innovation perceived as unsuitable and can result in anti-adoption drive) and exists across product classes from IT to consumer durables to medicines. 4.17 COMMUNICATION It was first thought that the communication process of the diffusion of innovations was only a one-step process, from the mass media channels to the individual with little or no interaction between the individuals. This obviously is not the case. Not only do individuals communicate with each other, some individuals pass along their influence as well as their knowledge to other individuals. Compunction proves a platform through which information flows. There are two types of communication flows marketers to consumers (through mass media and sales person) and among consumers (though word of mouth and opinion leaders). Apart from
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these traditional channels of information for consumers, other sources available are product dedicated websites, (www.indiacr.com), company websites (www.3M.com), product related magazines and journals (Dataquest, PC World, etc.), consumer shows and exhibitions, TV shows, dedicated to innovations (Asian Sky Shop) and Sponsored TV programmes, beauty pageants, national level awards, and game shows, and company logs on apparel, bags, etc. have also become major sources of information to consumers and are a rich source of brand building exercise for companies. Opinion leaders are individuals in a social system that others come to for information and guidance. With the understanding of opinion leaders in society it is clear to see that the original one-step process invalid. Now the process takes us through mass media channels to opinion leaders then to the individuals. This two-step flow of communication is probably not complete as well, but the important idea to arrive at is that no matter how many steps are involved there will always be a two-step exchange of knowledge/influence at any given step during the diffusion process. With the addition of steps to the communication process, the idea of personal influence comes into play. Personal influence refers to any communication between two individuals where one individual creates a change in consumer behaviour in the other. A more practical way of stating personal influence is peer pressure. Looking at the three different types of selectivity shows why personal influence can be a stronger factor in the diffusion process than mass media. Selective exposure
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Selective exposure refers to the idea that an individual will be more susceptible to channels of communication, that already agree with their current attitudes and feelings (a democrat will listen to democratic media and not republican so they will never hear the other side). Selective perception It refers to the idea that an individual will view new ideas in relation to their old ones. Selective retention
It refers to the idea that an individual will mainly remember a new idea if directly relates to their own situation or remedy a specific problem. Social Systems Social interaction is an important need for all and this is why we live in a social system with people sharing similar values and believe. A social system is a set of interrelated unit ha are engaged in joint problem solving to accomplish a common goal. Communities of farmers, doctors, housewives are all examples of a social system. All he members of a
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social system have their own social and cultural environment in which they interact with each other. Each social system has a social hierarchy (e.g., opinion leaders, opinion seekers) and communication network (sub-groupings of similar kind of people). The social hierarchy and communication network within a social system determine the direction of diffusion (upward, downward or across) and rate of adoption. The social norms i.e., established behavioural patterns of he members of the social system are also a determinant in the adoption of an innovation. According to Rogers traditional norms are characterised by: A less developed or complex technology Low levels of literacy and education Little communication between the social system and outsiders Lack of economic rationality One-dimensional in adapting and viewing others
According to Rogers modern norms are characterised by: A developed technology with complex jobs Strong importance placed on education Acceptance of free thought and new ideas Strong preparation and high importance on economic considerations Ability to see and understand other peoples situations
Not only does modern system accept and adapt to innovation faster and easier than traditional system but the individual is more likely to be innovative in thinking and doing in a modern society. The identification of social hierarchy and communication network, within a social system provides the marketers the basis for planning the introduction of the innovation in the social system. As free world trade is being emphasised, MNCs have received a great
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boost and now the marketers target market segment is not necessarily restricted to consumer within one county. 4.18 BARRIERS TO ADOPTION AND MARKETING STRATEGIES TO OVERCOME THEM
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Image barrier (Stereotyped image of origins of an innovation) A non-fat ice-cream from Reliance group may be a big shocking to Indian consumers initially A well known brand name, create a unique brand image and make fun of negative images. 4.19 TIME Time is an extremely important element of the diffusion process. Time has a bearing on: The adoption process Innovativeness of the consumers and The innovation rate of adoption.
In medical school when students are learning about the human body they first have to understand it at a cellular level. Like biology, to truly understand the diffusion of innovations, one has to understand the adoption process of the individual consumer. As stated earlier, the difference between the diffusion process and the adoption process is the who. The diffusion process deals with people or groups while the adoption process focuses on the individual person. Relevance of time in Diffusion of Innovation
Area of Relevance Adoption Process How time Affects The average time taken from initial awareness to adoption or rejection by a consumer Example Sneha and Anita are neighbours who have bough home theatre systems at different points of time but both had seen the launch ad first in the newspaper on the same date. Sneha took 3 weeks to buy the model while Anita took 12 weeks. The whole time taken for adoption was different. The average time taken here is 7.5 weeks. If the industry categorisation of adopters is time of purchase after the launch innovators (8 weeks) early adopters (8 16 weeks) early majority (16 36 weeks), late majority (36 52 weeks) and laggards (over 52 eels) then Sneha is an innovator while Anita is an early adopter. If the home theatre system was adopted by the target market in 52 weeks, while the surround sound TV took 100 weeks, then we can say that the speed of the adoption of home theatre system is faster than that of surround sound TV.
Consumers innovativeness
Based on time of adoption by a consumer, the adopters are classified from innovators to laggards.
Rate of Adoption
The speed with which an innovator spreads within the social system. The more the time taken the slower the adoption, and viceversa.
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4.20 ADOPTION PROCESS To realise how an innovation diffuses through a society you must first understand how one person adopts an innovation. The adoption process is the steps a consumer take as they accept a new product, idea, or service. The process can be broken down into five stages. Keep in mind that these stages occur in all fields where adoption of innovation occurs. The first stage of the adoption process is awareness. At this stage the innovation is introduced to the person but there is no true knowledge of the product. Because of this lack of information the person does not feel the need to run out and find out more information, much less consider consuming it. The awareness stage merely sets the groundwork for the following stages. It is argued that a person often stumbles upon the innovation on accident during the awareness stage it will provide little incentive to get more information. Others feel that for a person to become aware, the innovation must fill a particular need in their life for them to notice. The second stage is interest. Here the person decides to invest time and energy into finding out more about the innovation. At this point the person feels good about the innovation but does not really know how or if it can be useful in their own life. The interest stage is purely to gather knowledge, not to decide whether to adopt. The third stage is evaluation. Here the person firsts begins to make a decision about the innovation. How could I use it? Do I really need it? Would it be to my advantage if I had it? These are all question the consumers ask themselves during the evaluation stage. Then if the innovation appears to be positive for their life they will try it out. If the innovation has a negative connotation to the individual they may seek the advice and knowledge of their peers. This leads into the next stage called the trial stage. Here the individual physically gives the innovation a chance by trying it out for a limited basis. What they are looking to find out during this trial stage is how the innovation can fit into their needs and desires. Research proves that most people will not adopt an innovation without personally testing it first to see if it really works. The final stage is the adoption stage. Here the individual uses information that they have gathered in the interest and evaluation stages and with the outcome of the trial stage decides to adopt the innovation. At this point in the adoption process the individual not only adopts the innovation but embraces it for the future. There is, however, another possible stage to adoption process. After the individual adopts the innovation they may decide to reject it for whatever reason. This decision to reject the innovation after agreeing to adopt it is called discontinuance.
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4.21 STAGES IN ADOPTION PROCESS
The length of time taken by a consumer from first exposure to adoption is called the adoption or innovation-decision period. It is important to note that when there are a larger number of people who have an influence on the purchase decision, the adoption period is longer. 4.22 ADOPTERS Now it is time to turn our attention to the adopters side of the diffusion process. Although this is not one of the four main elements of the diffusion of innovation it does have importance to the process. Like the innovations side, there are certain characteristics that break adopters down into categories, which help us understand who they are and how they consume. It is very clear that people adopt innovations at different times and for different reasons. An example of this for everyone who ever attended high school is fads.
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Although fads are not necessarily innovations it is a good example to begin to see the idea of adopters. When a fad starts to become popular, not everyone is immediately involved. Only a few people adopt the fad in the beginning. As time goes by, more and more people adopt the fad until the majority is included. The point to be made with this example is not only do people adopt a fad at different a time, each group affects the following group. Also it is important to note that not everyone is involved. Complete adoption is not required for the diffusion process to work. There are five main categories of adopters. Innovators These are the risk takers. They are the ones who put themselves up in front. Generally they are well educated and have a high income to absorb a mistake. They are the smallest in size of only two and half percent. They enjoy the rush of taking a risk but they also are willing to accept the consequences of failure. Early Adopters This group are the next thirteen and a half percent. They are highly educated and wealthy like the innovators but are more visible and respected among their peers. Early adopters play a key role in the adoption process determining the time an innovation will be adopted by others and to what extent. Because of this reason they are the best target market for new innovations. Early Majority They constitute thirty-four percent of adopters. They do not take the risk of being the first to adopt, like the innovators and early adopters, but do accept an innovation before the average person. They generally take a long time to fully adopt an innovation. They are above average in education and income but are followers in their social groups. Late Majority They jump on right after the average person. Their education and income are limited and they are not willing to take a chance unless the majority has already fully adopted the innovation. Reasons for the late majority to adopt are either economic or peer pressure but are constantly weary. This group also contains thirty-four percent. Laggards This is the final adoption group and it consists of the final sixteen percent. They are more in-tuned with the past than the future. They are skeptical of all new ideas and frequently by the time they adopt an innovation there is a new one already beginning to take its place. Their educations are small and generally laggards are socially surrounded by other laggards. These five categories have developed through years of research and observation in the diffusion process in many different fields. Although there are exceptions in each group, this gives a good general breakdown of adopters of innovations.
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4.23 RATE OF ADOPTION The rate of adoption is the speed with which an innovation spreads within the social system (target market). The rate of adoption can vary (low, moderate and high) with the type of innovation (discontinuous, dynamically continuous, and continuous innovation) and the product category (slow, moving, moderately moving and high moving). The figure given below shows the varying rates of diffusion of innovation. There is an inverse relationship between the rate of adoption and type of innovation, say a highly discontinuous innovation will tend to have a slower adoption rte and a longer adoption period, while a continuous innovation will tend to have a faster adoption rate and a shorter adoption period. 4.24 CONSUMER DECISION MAKING PROCESS The most important environment in which firms operate is their customer environment because the basic belief of marketing oriented company that the customer is the centre around which the business revolves. Therefore, marketing people need to understand the processes that their customers go through when making decision. The consumer decision making process involves series of related and sequential stages of activities. The process begins with the discovery and recognition of an unsatisfied need or want. It becomes a drive. Consumer begins search for information. This search gives rise to various alternatives and finally the purchase decision is made. Then buyer evaluates the post purchase behaviour to know the level of satisfaction. The fundamental basis for marketing concept involves the matching of the skills and resources of the organisation, profit or non-profit related, to the needs of the customer. Marketing management relies on an understanding of how customers make decisions and their likely reactions to the different elements of the marketing mix in this context, consumer behaviour not only refers to the physical activity of purchasing but also to related pre[purchase and post-purchase activities. Loudon and Della Bitta define consumer behaviour as the decision process and physical activity individuals engage in when evaluating, acquiring, using and disposing of goods and services. One of the most useful applied distinctions in consumer behaviour is between consumer behaviour studied from a micro perspective and a macro perspective. At the micro-level, the focus is very much on the reactions of the individual consumers with applications that
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are relevant to advertising mangers, salespeople, or product designers of individual firms or organisations. At the macro-level, consumer behaviour involves the study of the influence of consumption on the economic and social conditions within society. The collective behaviour of consumers influences our total quality of life, directing the demand and supply of products and services. The anticipation and forecasting of consumer behaviour at that level can be used for organisational planning and product development, as well as formation of public policy to improve the efficiency of the market system. Reflecting on the literature in consumer behaviour allied closely to marketing, it is possible to distinguish here approximate phases f development: 1. A segmentation era, primarily associated with the work before the mid-1960s 2. A period from mid 1960s through to the end of the 1970s which was dominated by the development of knowledge on consumer decision making 3. A period of diversification and enrichment in the 1980s and 1990s. In the 1950s and through to the mid 1960s much of consumer behaviour research involved the evaluation of consumer characteristics for market segmentation. It was at this time that consumer behaviour researchers investigated the application of personality theories and classification of motives taken from psychology and the family life-cycle and social class taken from sociology. These were applied with very different degrees of success in cross-sectional studies of markets in order to explain variations in consumer demand for many different classes of products and also for different choices of brands. One of the studies from that period which had a very profound influence on consumer behaviour and marketing is Rogers work on the diffusion of innovations. He segmented the potential market for a new product according to the time of adoption and developed a five stage classification within which to describe potential customers innovation, early adopters, the early majority, the later majority and laggards. Another important facet of Rogers work was his characterisation of the adoption process. During consumers adoption of innovations, Rogers described the individual as moving through the following series of stages in their decision to purchase: 1. Awareness 2. Interest 3. Evaluation 4. Trial 5. Adoption This was one of the first attempts to describe a sequential process which illustrated the stages of the consumed decision, as will be seen in the later discussions. The steps described by Rogers are typical of the framework that has been used to underpin the models of consumer decision making.
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In 1968 Engel, Kollat and Blackwell model was one of a series to be developed in the late 1960s and early 1970s. Other particularly important contributions ere offered by Howard and Sheth, Nicosa and towards the end of the 1970s, Bettman provide another substantial offering with his information processing model of consumer decision making. Taking an historical perspective on this period, it is probably difficult to under-emphasise the importance of developments in attitude theory as applied to thinking and research in consumer behaviour. Two of the other important developments in the 1970s were the emergence of work on the family as a decision-making unit, and the foundation of consumer psychographics and lifestyles as segmentation techniques. Although husband/wife influence had been investigated earlier, the 1970s saw major developments in that area. The work placed the investigation of family decision making into a parallel context with individual decision making based around the type of sequence described by Rogers. The recognition of children in the family decision process and the nature of consumer socialisation also developed during this period. In the area of market segmentation, the most important developments of this period were the related concepts of psychographics and lifestyles. Retrospectively it is possible to view their development as an outgrowth of disillusionment with personality and other variables as a good basis for market segmentation. The development of mainframe computers and canned packages of multivariate techniques enabled consumer behaviour researchers and marketers to adopt what has been called a backward approach to market segmentation. Using huge questionnaires they were able to collect large quantities of data representation the activities, interests and opinions of consumers. Factor and cluster analysis techniques enabled this pot pourri of information to be refined into apparently stable and meaningful portraits of consumer groups. The latest period of development and enrichment is primarily reflected in the consumer behaviour research of the 1980s and 1990s. Looking back, the dominant paradigm of the 1970s is seen to be one borrowed from cognitive approaches t psychology. Since that time some particularly strong challenges have been made to this approach. Gradually the scope of consumer behaviour has expanded as other social and economic trends have developed that affect marketers. For example, consumer behaviour researchers have expanded their focus to consider phenomena such as shoplifting, the effect of homelessness on consumption and compulsive buying. Also emerging through the 1980s were two major and related contributions to theories of how consumers make decisions. First, there has been the evolution of an alternative low involvement approach to consumer decision making with a different set and sequences of stages to that outlined by Rogers. Second, consumer behaviour researchers have placed an increased emphasis on the role o affective as opposed to cognitive influences.
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4.25 CONSUMER DECISION MAKING THE COMPLEX APPROACH The complex approach primarily reflects the early cognitive based theories of the subject starting with this approach we can give a general overview of consumed decision making which can be adapted to take more recent variations into account. A good way to appreciate the overall complexities of consumer decision making is to review one of the comprehensive models that have been proposed. One of the most popular and enduring of these models is that offered by Engel, Blackwell and Miniard. As indicated above, the basis for this model was first proposed by Engel, Kollat and Blackwell in 1968 and it has been regularly revised and updated to account for new evidence about the behaviour of consumers. It should be noted that evaluation on scientific criteria (e.g., explanations, predictions, generality and heuristic power) have not always been kind to these types co comprehensive models of the consumer decision making process. Consumer Decision Rules These are generally referred to as information processing strategies. These are procedures that help consumers to evaluate various options and reduce the risk of making complex decisions by providing the guidelines. Decision rules have been broadly classified into two categories: 1. Compensatory Decision Rules: Consumers evaluate brand or model in terms of each attribute and compute a weighted score for each brand. The computed score reflects the brands relative merit as a potential purchase choice. The assumption is that consumer will select the brand that scores highest among alternative brands. The unique feature of this rule is that it balances the positive evaluation of a brand on one attribute to balance out a negative evaluation on some other attribute. For example, positive attribute like high fuel efficiency is balanced with the negative evaluation of high maintenance cost. 2. Non-compensatory Decision Rules: In contrast to the above rule non-compensatory rules do not allow consumers to balance positive evaluation of a brand on one attribute against negative evaluation on some other attribute. There are three types of non-compensatory rules. They are: Conjunctive Decision Rule: In conjunctive decision rule the consumer establishes a different, minimally acceptable level as a cut off point for each attribute. In this the option is eliminated for further consideration if a specific brand or model falls below the cut off point on any attribute. Disjunctive Rule: It is the mirror image of conjunctive rule. Here the consumer establishes a separate minimally acceptable cut off level for each attribute. In this case if an option meets or exceeds the cut off establishes for any one attribute it is accepted.
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Lexicographic Decision Rule: In this rule the consumer initially ranks the attributes in terms of perceived relevance or importance. Later he compares different alternatives in terms of the single attribute that is considered most important. On this top ranked alternative, regardless of the score on any other attribute, if one option scores sufficiently high it is selected and the process ends. Levels of Consumer Decision Making The consumer decision making process is complex with varying degree. All purchase decisions do not require extensive effort. On continuum of effort ranging from very high to very low, it can be distinguished into three specific levels of consumer decision making: 1. Extensive Problem Solving ( EPS ) 2. Limited Problem Solving ( LPS ) 3. Routine Problem Solving ( RPS ) Extensive Problem Solving ( EPS): When consumers buy a new or unfamiliar product it usually involves the need to obtain substantial information and a long time to choose. They must form the concept of a new product category and determine the criteria to be used in choosing the product or brand. Limited Problem Solving (LPS): Sometimes consumers are familiar with both product category and various brands in that category, but they have not fully established brand preferences. They search for additional information helped them to discriminate among various brands. Routine Problem Solving (RPS): When consumers have already purchased a product or brand, they require little or no information to choose the product. Consumers involve in habitual and automatic purchases 4.26 CONSUMER BEHAVIOUR AND MARKETING IMPLICATIONS The basic belief of marketing-oriented company is that the customer is the hub around which the business revolves. Therefore, understanding what makes people in general buy and what makes your customer in particular buy is a vital part of business success. Market itself means customer, around whom all marketing strategies are formulated and implemented. In order to meet competition at the market place, the marketing managers are using various methods to add value to the final product which will reach the hands of the consumers. It means in ever changing marketing environment, there is a growing concern or awareness among marketers to go for a careful study of the consumer behaviour around which all marketing activities are made. Following are the key marketing implications of consumer behaviour.
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Consumer Behaviour and Marketing Strategies Understanding the consumer behaviour is the basic for marketing strategy formulation. Consumers reaction to this strategy determines the organisation success or failure. In this competitive environment Organisations can survive only by offering more customer value - difference between all the benefits derived from a total product and all the costs of acquiring those benefits than competitors. Providing superior customer value requires the organisation to do a better job of anticipating and reacting to the customer needs than the competitor. Marketing strategy is basically the answer to the question: How will company provide superior customer value to its target market? The answer to this question requires formulation of marketing - mix product, price, place and promotion - strategies. The right combination of these elements meets customer expectation and provides customer value. For example, marketer of a bike must know the customers performance expectations, desired service, Price willing to pay, information he seeks and after-sales service to provide superior customer value. Consumer Behaviour and Market Segmentation The most important marketing decision a firm makes is the selection of one or more segments to focus their marketing effort. Marketers do not create segments but they find it in the market place. Market segmentation is the study of market place in order to discover viable group of consumers who are homogeneous in their approach in selecting and using goods or services. Since market segment has unique needs, a firm that develops a product focusing solely on the needs of that segment will be able to meet the target group desire and provides more customer value than competitor. For example, right segment for Femina magazine is educated urban women. The success of this magazine depends on their understanding of the urban woman. Consumer Behaviour and Product Positioning Product positioning is placing the product, service, company, or shop in the mind of consumer or target group. Through positioning marketers seek the right fit between a product and desired customer benefits. The right positioning means understanding the consumer perception process in general and perception of companys product in particular. For example, Samsung brand is perceived as premium brand by few customers and valuedriven brand by others in the market, but marketer must find out what makes their target market to perceive differently and position it accordingly. Consumer Behaviour and Marketing Research Studying consumer behaviour enables marketing researchers to predict how consumers will react to promotional messages and to understand why they make the purchase decision
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they do. Marketers realised that if they know more about the consumer decision making criteria, they can design marketing strategies and promotional messages that will influence consumers more effectively. The importance of consumer behaviour made marketers to think of a separate branch in marketing research - Consumer research, to deal exclusively for consumer related issues. The current focus of consumer research is on study of underlying needs and motives in taking purchase decisions, consumer learning process and attitude formation process. Consumer Behaviour and Non-Profit and Societal Marketing A sound knowledge of consumer behaviour can help the organisations that sell ideas and concepts of social relevance. Institutions that promote family planning, AIDS free society, governmental agencies, religion orders and universities also appeal to the public for their support in order to satisfy some want or need in society. The knowledge about potential contributors, what motivate their generosity, how these motives can be effectively appealed is useful for the organisations involved in these activities. Consumer Behaviour and Governmental Decision Making To major areas where consumer behaviour study helps government is in policy making on various services, and in designing consumer protection legislation. The knowledge of peoples attitudes, beliefs, perceptions and habits provides adequate understanding of consumers 4.27 CONSUMER BEHAVIOUR MODELS A model is very often referred to as an abstract representation of a process or relationship. We tend to hold various models in our minds, which allow us to make sense of the world, and also help to predict the likely course of events. To put it simply, models help us in the development of theories, understanding complex relationships, and providing the framework for discussions and research work. In this section we shall make efforts to examine the various models having relevance to the consumer decision process. The primary concern is to use the models to understand consumer behaviour. Consumer behaviourists as well as marketers are interested in understanding how and why certain decisions are made. Consumer Decision-Making Since the 1960s, the study of consumer behaviour has focused largely upon consumer decision-making processes. Influenced by cognitive psychology, a number of so-called modal models (or box-and-arrow models) have been proposed, presenting the various stages the consumer goes through when choosing a product to buy or store to shop in, presented in a flow-chart format (e.g. Nicosia, 1966; Engel et al., 1995). A rather stylised summary of these modal models might look something like this
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In the left-hand column above, we can see that the decision process begins with the consumer recognising that he or she needs or wants to buy an item. Attention is then devoted to the task in hand and information gathered. The consumer evaluates the options available, makes his or her choice and purchases the product. At any stage in the process, events encountered at one stage may cause the consumer to revert to a previous stage; for example, during evaluation, none of the options available may prove satisfactory and the consumer may therefore decide to reassess the initial need and begin the process again for a completely different alternative solution. Conversely, with very common or repeat purchases, particular stages (e.g. information search) may be passed through without conscious attention being applied (i.e. may be automatised) because the information required is already available in memory. Finally, note how the decision process doesnt end with purchase - the extent to which a purchase is deemed successful or unsuccessful will feed back to influence future purchase decisions. To the right of the diagram, we see environmental factors, which may influence the decision-making process at any stage. This category would include a whole array of variables, ranging from exposure to advertising and promotional materials through to store atmosphere, crowding and the opinions of significant others. The diagram is a summary of the models available which, however complex they may appear, all hypothesize the same linear decision-making process. There is no one single universally accepted model, each having its own particular strengths and weaknesses. In a way, this is probably a reflection of the many different consumer motivations highlighted above - particular models being stronger than others for specific types of shopping. There are two main problems with modal models such as this when it comes to their usefulness to the marketer. Firstly, the box-and-arrow approach is rather descriptive. It tells us the decision-making stages the customer negotiates, but tells us very little about
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how the marketer can actually influence these stages to make his or her product/service the preferred option. The second weakness of this approach is closely related to the first. Note how the environment is merely lumped together to the right of the diagram. When we consider all of the factors this encompasses (store location, layout, advertising, prevailing socio-economic conditions, etc.), this seems woefully inadequate. Moreover, the location of the environment box separate to the decision-making process gives the impression of the environment as simply being something out there, divorced from the individual shopper. The reality, of course, is that consumers are a part of the environment, interacting with environmental factors and influencing each other. A more accurate model of consumer decision-making would probably locate the environment box as follows:
As you can see, this revised model locates the decision-making process within the environment box, recognising that the individual is part of the environment. Consumer Decision Making Models Types of consumer behaviour models: Simple models Black Box models Personal variable models Personal Variable/Post Purchase Satisfaction model
Comprehensive models Engel, Blackwell and Miniard Engel, Kollat and Blackwell
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Howard-Sheth Nicosia
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Perhaps the most useful set of categories is that of low, medium or high level models. In this case the level refers to the level of complexity - so a low level model would be a relatively simple representation of the phenomenon while a high level model of the same event would be much more complex and detailed and include more variables. One of the most cited models is that of the Black Box. Black box models focus solely on inputs and outputs and do not consider internal variables. They suggest that a given stimulus will prompt a particular response, within this processing centre; memory, goals and expectations are considered. Simple black box models are based on identifiable observable and measurable variables, however they are unable to predict or explain behaviour. Over time more comprehensives models have been proposed. One of the earliest decision making models is the 1966 Nicosia Model. The model is split into four key fields: 1. The source of a message to the consumers attitude 2. The search for and evaluation of alternatives 3. The act of purchase 4. Storage and the use of the purchased product. The model attempted to demonstrate how the company influences the consumer through its promotional and advertising activities. However, criticisms have been raised about this model, include its descriptive content, its brevity that it has never been fully tested and is now considered historical. Engel et al, developed a model to explain consumer behaviour and highlighted five stages of the decision making process: 1. Motivation and recognition of need 2. Information search 3. Evaluate alternatives 4. Purchase 5. Outcomes Motivation, often referred to as need recognition, is individual to every consumer, and focuses on the three key determinants, information stored in the memory, individual influences and environmental factors. Consumers will consider the gap between the ideal state and the current perceived state, thereby deciding whether to progress forward to the next stage of the process, information search. Search takes two forms internal and external. The dependence on the two search modes will vary in relation to the need recognised and the individual situation. Although
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information search is primarily conducted internally, with the extreme level of involvement necessary to make a university choice it is likely that an external search would be used. It could be suggested that when students enter the university decision making process they adopt a satisfying approach. Research has suggested that students make university decisions on incomplete information. This is likely as students are busy, with work and exams and eventually get overloaded with information, so stop searching. Furthermore, as educational choice is generally a one-off, the search is likely to be quite extensive. This is supported by another research which reports that, buyer decision making process vary with the type of decision, and that the more complex the decision, the more buyer deliberation. Obviously university choice is one of the most important decisions that needs to be made in a students life with extensive decision making taking place, where a significant level of effort is put into identifying key criteria and moving through the decision making process. Furthermore, if there are widely different alternatives from which to choose from, then consumers are likely to get more involved in the decision making process. However, consumers are not always rational and do not consider all the alternatives. When evaluating alternatives, belief, attitudes and intentions are considered. This will then reduce the alternatives to the most suitable options available. Alternative evaluation will also be affected by individual differences, such as motivation, attitudes and knowledge as well as environmental influences. It is likely that potential students base their evaluation on a limited number of key criteria as opposed to looking at whole university offerings. At the final purchase stage new factors may change the initial decision. For instance in an academic decision the issue of A level exam grades is likely to play an important role. Outcome can either be satisfaction or dissatisfaction. When satisfaction is prevalent then the recognised need has been met and satisfied. However, if this is not the case postpurchase cognitive dissonance may occur where different attitudes have to be weighed up as part of a decision, and the negative features of the chosen alternative start to be apparent, this then causes dissatisfaction. Consumers can try to ignore this, change the decision made, or concentrate on the good points of the decision made to try and reduce the dissatisfied feeling. Models of Consumer Behaviour 1. Economic model: Economic model of consumer behaviour is one-dimensional. This means that buying decisions of a person are governed by the concept of utility. Being a rational man he will make his purchase decisions with the intention of maximising the utility/benefits. Economic model is based on certain predictions of buying behaviour (a) price effectlesser the price of the product, more will be the quantity purchased (b) Lesser the price of the substitute product, lesser will be the quantity of the original product bought (substitution effect) (c) More the purchasing power, more will be the quantity purchased (income effect).
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2. Learning model: Classical psychologists have been interested in the formation and satisfaction of needs and tastes. They argued that living beings were influenced by both innate needs such as the primary needs of hunger, thirst, shelter and learned needs like fear & guilt. A drive or internal stimulus which when directed towards a drive-reducing object becomes a motive. The various products or service will act as a stimulus to satisfy drives. For example, if you are a hungry you will be driven towards food, which after consumption will reduce the drive and provide and provide satisfaction. 3. Psychoanalytical model: This model is based on the work of psychologists who were concerned with personality. They were of the view that human needs and motives operated at the conscious as well as subconscious levels. Sigmund Freud developed this theory. According to him human behaviour or personality for that matter is the outcome of three components, viz., (a) id which is the source of all psychic energy which drives us as action (b) super ego which is the internal representation of what is approved by the society (c) ego which is the conscious directing id impulses to find gratification in a socially acceptable manner. Thus we can say that human behaviour is directed by a complex set of deep-seated motives. This means that buyers will be influenced by symbolic factors in buying a product. Motivational research has been involved in investing motives of consumer behaviour so as to develop suitable marketing implications accordingly. Marketers have been using this approach to generate ideas for developing productdesign, features, advertising and other promotional techniques. 4. The sociological model: According to this model the individual buyer is a part of the institution called society. Since he is living in a society, gets influenced by it and in turn also influences it in its path of development. He is playing many roles as a part of various formal and informal associations or organisations i.e., as a family member, as an employee of a firm, as a member of a professional forum and as an active member of an informal cultural organisation. Engel, Blackwell and Miniard Model What the Engel, Blackwell and Miniard model does offer is a comprehensive illustration of the variables influencing consumers and an appreciation of the flexible and dynamic nature of the consumer decision-making process. As can be seen, from the figure given on the next page, the model is arranged in four columns. The essential stages of the decision process are diagrammed in sequence down
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the third column. Starting from need recognition, the consumer is seen to move through search processes to evaluation of alternatives, purchase and satisfaction or dissatisfaction outcomes. These five stages reflect the same inherent hierarchy underling Rogers sequence of adoption outline earlier. Column one is concerned with the innovation environment fro the decision, and of particular relevance to marketers are the elements of the promotional mix that form the market dominated stimuli and which feed into the information processing part of the model in column two. This second column depicts the processes of perception and learning which govern the acquisition and retention of information and line with the need recognition and information search phases of the decision. Other psychological variables are defined
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in the alternative evaluation stage, and the model makes he central place of attitudes absolutely explicit since it can be equated to preferences governing behaviour intentions and subsequent purchases. The final column lists the influencing variables which impact on the consumer decision. Understanding how these variables impact on the decision process provides a basic rationale for their importance to market segmentation strategies. Howard-Sheth Model Another of the important early contributions to consumer decision making was made by John Howard in 1963. The Howard-Sheth model of buying behaviour attempts to explain the complexity of the consumer decision making process in case of incomplete information. This model serves two purposes: It indicates how complex the whole question of consumer behaviour is. It provides the framework for including various concepts like learning, perception, attitudes, etc., which play a role in influencing consumer behaviour.
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Inputs: These are the stimuli (information cues) which affect the potential consumers choices. There are three types of information cues which influence the potential consumers decagons making process cues related to the physical attributes of the product (significative cues); the verbal and non-verbal elements of product/brand marketing message (symbolic cues); and information provided by the potential consumers social circle (social cues).
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Information Sources
Commercial Noncommercial
Personal social a) Salesmen b) Service personal a) Family b) Reference groups c) Social class
Impersonal a) Product (Significative) b) Advertising (Symbolic) a) Print med (New Stories) b) Independent testing such as consumer reports
Perceptual Constructs These variables are concerned with processing done by the potential consumers with respect to al the information available to them. Consumers may not mentally register all the information available (attention). Consumers may actively seek information (overt search) but all the information meaning may not be clear to them (stimulus ambiguity). Moreover, consumer will process this attended information with their own reference point leading to bias (perceptual bias). Learning Constructs The perceptual constructs will influence the learning constructs which have direct linkages with the product itself. These learning constructs are objectives of purchase (motives); criteria for evaluation of product / brand (choice criteria); awareness of product/ brand attributes (brand comprehension); attitude towards product/brand; consumers confidence in his/her ability to make a knowledgeable choice, consumers buying intentions; purchase; and post purchase feedback (satisfaction). Output This is the final consumer decision making process which is actually followed by the consumers after processing the information. Although the Howard-Sheth model of buyer behaviour is quite helpful in understanding consumer decision-making, it fails to clearly define all the aspect of the model. Moreover, this model is quite complex and difficult to understand. Exogenous or external Variables: This theory also includes a number of variables, which are not explained but have a bearing on some or all of the constructs discussed above and indirectly influences the output or consumer response. Social and organisational setting: Man is basically a social animal. Because of his interactions with various groups and society, they look to each other for guidance regarding what to buy, how to buy/dress, etc.
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Social class: In order to conform to the norms of the social class to which he/she belongs, the individual will be engaged in a behaviour, which will be acceptable to the Social class to which it belongs Culture: refers to the shared, somewhat consistent pattern of behaviour of a group of people. Each culture has a set of beliefs, values, etc. So the pattern of buyer behaviour will be based on a pattern of behaviour shared in a specific subset of a larger culture-a subculture trait. Purchasing power/ Financial status: The money/income available for purchasing goods and services during some specific time period also plays a role in influencing the consumption pattern and thereby his buying behaviour.
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The Nicosia Model The buyer behaviour model is taken from the marketing mans point of view. It is also called systems model as the human is analysed as a system, with stimuli as the input to the system and the human behaviour as an output of the system. Francesco Nicosia, an expert in consumer motivation and behaviour has developed this in 1966. He tried to explain buyer behaviour by establishing a link between the organisation and its prospective consumer. Here the messages from the company initially influence the predisposition of the consumer towards the product and service. Based on the situation, the consumer will have a certain attitude towards the product. This may result in a search for the product or an evaluation of the product attributes by the consumer. If this step satisfies the consumer, it may result in a positive response, with a decision to buy the product or else the reverse may occur. The Nicosia model divides the above activity explanation into four basic areas: Area 1: Field one has two sub areas-the consumer attributes and the firms attributes. The advertising message from the company will reach the consumers attributes. Certain attributes may develop sometimes depending upon the way the message is received by the consumer. The newly developed attribute becomes the input for area 2. Area 2: This area is related to the search and evaluation undertaken by the consumer of the advertised product and also to verify if other alternatives are variable. If the above step motivates to buy the product / service, it becomes the input for the third area. Area 3: This area explains as how the consumer actually buys the product.
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Area 4: This is related to the uses of the purchase items. This can also be used as an out put to receive feedback on sales results to the firm. Thus models of buyer behaviour are generally based on certain factors internal to the consumer e.g., learning, personality, attitudes and perceptions. The external factors may be in the form of group, cultural and inter-personal influences and effects advertising and communications. The action of individuals is the result of both internal / external factors and interactions to the consumer decision making processes. The modern concepts of the buying behaviour state that the behaviour is the result of interaction between people centered factors and situation centered factors. The marketer is expected to be aware of the person centered factors such as buyer motivation, learning, perceptions, attitudes, values and beliefs. Similarly, marketers must be aware of social environment and internal personal interactions influencing the buyer behaviour. Outside Variables Personality Social Class Financial Status and Trial Culture Importance of Purchase Time Pressure
The heterogeneity among people across the world makes understanding consumer buying behaviour an intricate and challenging task. Product motives and patronage motives play a crucial role in consumer purchases. Like individuals organisations also make many buying decisions. The major factors that distinguish it from consumer decision are Market structure and Demand, Buyer characteristics, and Decision process and buying patterns. The degree of involvement has a lot of impact on search of information, Information processing, and Transmission of information. The various models of consumer involvement help marketers to study purchase behaviour across product segments. Consumers usually go through five stages in arriving at a purchase decision. In the first stage, the customer identifies an unsatisfied need. In the second stage consumer collect information about the product and brands. In a third stage, the consumer evaluates all the alternatives with the help of available information. Later in stage four, the customer makes a purchase decision. And finally in the fifth stage, consumer experiences post-purchase satisfaction or dissatisfaction. Organisational buyer has different decision making criteria. Decision making rules Compensatory and Non-compensatory simplify the complex nature of decision making to consumers. Understanding consumer behaviour is the basis of the formulation of marketing strategies. Consumer behaviour studies help in designing
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effective marketing strategies like, Marketing-mix Strategy, Market Segmentation Strategy, Product Positioning Strategy, and Marketing Research. As consumer behaviour is very complex to understand, consumer models aid marketer to put their effort to understand in right direction. The models Economic. Learning, Psychoanalytic, sociological, Howard-Sheth and Nicosia enables marketers to understand and predict consumer behaviour in the market place. 4.28 POST PURCHASE CONSUMDER BEHAVIOUR After making the purchase, the consumer sometimes experiences post purchase dissonance, which may even lead to nonuse and subsequent exchange or return of the product. In case the consumer decides to use the product (or keep it, even when he/she does not use it due to lack of any exchange or return policies) it is usually followed by the product being disposed off. Post-purchase evaluation is followed by satisfaction, nonsatisfaction or dissatisfaction. In case of dissatisfaction, consumer may take action that can vary from waning family and friends against the product to taking legal action. Consumers post-purchase dissonance Dissonance is a psychologically uncomfortable state and post-purchase dissonance is the state of anxiety the consumer experience after making a purchase, generally it is the result of difficult purchase decisions. It is important to note that in case the alternative being considered for purchase are perfect substitute for each other, no post-purchase dissonance will occur after purchasing any one of such alternatives. However, in the absence of perfect substitutes, some amount of post-purchase dissonance is unavoidable. In case, all the alternatives are desirable, consumers might experience strong negative emotions while making a choice, which may result in postponing or completely dropping the purchase A high level of post purchase dissonance can result if: It is difficult for the consumer to arrive at the purchase decision because of the importance of the decision and/or the number of alternatives available All the alternatives being considered are almost equally desirably by the consumer The decision cannot be undone, i.e., the purchase does not entail any exchange, refund, guarantee, etc. The product/brand is new I the market and /or belongs to a less known marketer.
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POST PURCHASE CONSUMER BEHAVIOUR
Consumers are also likely to regret it if they miss out on a better alternative say, in terms of performance, prices, etc. Consumers can compare the benefits derived from different alternatives in two ways through upward comparison (comparing actual outcome to a better outcome) and through downward comparison (comparing actual outcomes to a worse outcome). Research has also suggested that the degree of regret is negatively related to the degree of satisfaction. As the degree of regret for making a particular decision increases, the degree of satisfaction with the results o the decision (in this case, the product/ brand choice) decreases. In case of upward comparison, consumers feel regretful about their decisions, and thus, less satisfied. A stock market investor, for example, who has, the choice of buying shares of company A, company B and company C, decides to buy shares of company A. If after buying he shares, the price of the shares of company B and C increase sharply while that of company A increases only marginally, the investor is likely to be less satisfied with his decision. Research has also indicated that consumers decisions are often guided by the urge to reduce the feeling of regret with their decisions instead of increasing the value attained from a product.
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Post-purchase dissonance can be highly discomforting for the consumers and obviously, consumers will try to minimise it. To reduce post-purchase dissonance, consumers can even decide to return the product or exchange it for something which they are more confident about. While experiencing post-purchase dissonance, consumers become extremely aware of the product information, they even actively look for it. Marketers can use this increased receptiveness for product information to address the recent purchases, to reduce their dissonance and increase their level of satisfaction by sending thank you notes, such as Thanks for choosing us as a part of your family. We are sure that it is the start of a strong relationship between us. We hope to satisfy you in all relevant ways. We would appreciate if you can help us know how we can serve you better. Sometimes, the purchase of some products induces consumption guilty among consumers. An obese woman, for example, may like not eat oily food and sweets, but may feel guilty about doing so, due to concern over her weight. While targeting such consumer, marketers of these products can focus on reducing the guilt associated with the consumption by say, introducing lower calorie versions of the products. An example is Diet Pepsi. Product Usage Some amount of post-purchase dissonance is always associated with all purchases. However, in the case of extended decision-making, the level of post-purchase dissonance is higher than in the case of habitual or limited decision-making. After a consumer buys a product he/she may choose to use it or not use it. The reasons for both are as follows: When product is used Even though there is certainty of some post-purchase dissonance, this does not stop mot consumers from suing the product. However, the knowledge of how consumers make use of the product is important for marketers. It is important to note here that consumers do not always use the products as the marketers intended them to be used. Product usage knowledge is, therefore quite fruitful for marketers, as new uses for the old product can drive up sales and increase the consumer base. The various other uses of the product, other than what the marketer originally intended it for can also add to the value of the product or the consumers. Many food product companies, for example, invite consumers to write about new ways of using their products. This they do by way of organising recipe contests, etc, which not only create consumers and brand interaction, but also provide marketers with new methods of suing their products. Unintended product usage can also give marketers new product ideas. Colgate-Palmolive, for example, discovered that many women in Columbia were using remains of soap bars to make utensil
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cleaning paste. This gave them idea for developing a new utensils cleaning product, now known as Axion. When product is not used There are many instances of consumers buying products for their use, but failing to use them, be it he cyclic machine or the fancy dress somehow just was not appealing after the very first use. Product nonuse refers to the purchased product not being used at all or being used for a very short duration. It is important to note here that product nonuse does not include none use to lifecycle changes (say, bicycle purchased for a school student in his lat year may not be sued when the boy is in college) and forced purchase (say, the school uniform) or (and) undesirable gifts, say a mother buying a dress for her daughter, which the daughter does not particularly like, because is low priced). Research has suggested that price discounts are a very common reason for consumers ending up buying something that they just do not use later. Marketers often perceive a product purchased as a product consumer. However, as we have seen, this is not always the case. It is highly likely that non-used products will have less repurchases and purchasers may even dissuade others from buying the non-used product. The purchase of a microwave oven, for example, might have been for cooking purpose, but consumers may end up using it as an expensive food heating device. Marketers therefore should also focus on encouraging consumption (say, by suggesting new ways or occasion of use) instead of directing all their resources at only making consumers purchase their products. The concept of loyalty is not a new concept; it was in practice since many centuries. In past, ancient Roman Empire had often used the concept of loyalty for their army. Today marketers are trying to capture market share and profits with the help of a loyal customer base. 4.29 CONSUMER LOYALTY Loyalty is, in simpler terms, a reliance on a particular brand or company even though numerous satisfactory alternatives may exist. Loyalty helps build relationships. It requires that companies view customers as people first and consumers second. Trust, commitment, ethical practices, fulfillment of promises, mutual exchange, emotional bonding, personalisation and customer orientation have been reported to be the key elements in the relationship building process The concept of loyalty first appeared in the 1940s. In its earliest days loyalty was proposed as a uni-dimensional construct, which was related to the measurement perspective taken by the researcher. Two separate loyalty concepts evolved. namely, brand preference (Guest, 1944, 1955) and share of market which was later referred to as
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attitudinal loyalty and behavioural loyalty respectively. Nearly 30 years after loyalty first appeared in the academic literature, researchers proposed that loyalty may be more complex and that it may comprise both attitudinal and behavioural aspects. This two-dimensional concept has since been combined and referred to as composite loyalty. The composite definition of loyalty considers that loyalty should always comprise favourable attitudes; intentions and repeat-purchase (see Jacoby and Chestnut, Loyalty evolves and that there are stages of loyalty. In a personal sense loyalty is a feeling or an attitude of devoted attachment and affection. This feeling of loyalty tends to imply that a person feels an obligation to stay with a brand in good and bad times. Loyalty is the key to the longevity of any brand and one type of loyalty, namely word of mouth has recently been correlated with company growth. It is possible that each and every customer has loyalty qualities or states in varying degrees, and that customers have a different mix of loyalty qualities or states. Marketers can activate different loyal states or qualities in different ways. For example, word of mouth behaviours may be encouraged through reward programmes while attitudinal loyalty may be encouraged through emotive advertising. As the concept of loyalty is dynamic, managers need to study how these intentions evolve through different phases of a brand life cycle. Loyalty intentions are a function of perceived value early in the life cycle. Over time, more affective attitudes toward the brand and the relationship with the company come to mediate the effects of value on intentions. From the introduction to the growth stage of a life cycle, managers must adapt from improving value per se to measuring and managing relationships and brands directly. Providing customers with perceived value or satisfaction is widely recognised as a means of improving loyalty intentions and actual retention. However, research demonstrates that these relationships are potentially complex and dynamic and that the drivers of intentions change and evolve over time 4.30 TYPES OF LOYALTY PROGRAMMES Loyalty in Airline industry: Nearly every airline has a point reward system. The system itself is no longer a differentiator. So customers would really remain loyal to an airline which assures safety, efficient and pleasing service and recognition of their preferences. People fly on those airlines where the brand experience is unique. The Indian airlines industry is no exception to loyalty programme. Passengers flying certain airlines get special privileges on specific trips and at certain hotels. Special rates are offered by Indian Airlines or Jet Airways, the main criterion being flying frequency on basic room tariffs at tie-up hotels. The programmes should be mutually beneficial to both parties as they have access to each others database. The Taj hotel group has tied up with prominent
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international airlines like British Airways, Virgin-Atlantic, Emirates and Sri Lankan Airways, to provide members of their frequent flyer programmes with a host of special benefits. It has tied up recently with two more airline frequent flyer programmes Singapore Airlines Kris Flyer programme and Delta Airlines Sky Miles programme. For starters, members will earn between 250 and 500 miles on their respective frequent flyer programme, each time they stay at a participating Taj hotel. Thenumber of miles earned varies as per the hotel they stay in. Apart from earning miles, members of the frequent flyer programmes will also enjoy special discounts (including room discounts between 10 to 15 per cent on printed tariff) room upgrades and value add-ons whenever they stay at a Taj hotel. Loyalty in Telecom Industry Telecom and energy services pre-deregulation are examples of repeat customer business driven by lack of choice. When new choices became available, customers eagerly seek out alternatives if theyre not satisfied with their current provider. Tata Indicom, Indias premier telecom service provider has launched its Smart PCO Loyalty Programme 2006-07, a one-year programme for its PCA operators. The announcement coincided with honoring the loyal PCO operators for 2005-06. This programme is aimed at building loyalty and trust among the existing Tata Indicom operators, while appreciating and commending their commitment and performance. Prizes were given away by noted film star Sneha to felicitate the winners. Maruti 800, Bajaj Pulsar bikes and home theatres, all totally worth Rs 60 lakh, were given away as prizes. The Smart PCO Loyalty Programme 2006-07 has been christened as Smart PCOCricket Kudhukolam Loyalty Programme 2006-07 where the operator who has a PCO with STD or CCB (coin collection box) connections is eligible for entry. Whosoever achieved the minimum level of norms prescribed by the organisation has been assured of a prize with the highest performer winning an all-paid trip to the World Cup Cricket tournament in the Caribbean Islands in March 2007. Indica Xeta, Bajaj Pulsar, Hero Honda CD 100 and gold coins worth Rs 1,00,000 are the other prizes to be won by the Tata Indicom loyalists. Likewise reliance India, Hutch, IDEA, BSNL have different schemes for loyalty. Total number of subscribers 129.5 million till 2006. All these players are following different schemes for their subscribers and doing up selling & cross selling activities. In India also now different board exam results are going to be declared by SMS and it makes the path smoother not only for students, but also for their parents. State and national government warn the general public regarding the natural calamities by tieing up with different service provider through SMS. AIRCEL, the cellular company that operates in the Chennai and Tamil Nadu circles, has launched an SMSbased facility where its subscribers can get acupressure tips for various ailments Called MobiHealth, the service provides tips for various ailments ranging from the common cold to obesity . Hutchison Essar to deliver m-coupons, which can be cashed across 40 retail outlets such as Barista, Dominos Pizza, Lifestyle and Kaya Skin Clinic.
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Similarly, Airtel has joined with Enpocket, a global leader in intelligent mobile marketing, to give advertisers a convenient, effective way to reach a major cross-section of the countrys population. Television contest and radio mirchi contest are addition to this telecom loyalty scheme. Loyalty in Indian Railway Department The Indian Railways is turning customer savvy. The organisation is offering regular train travellers reward points on train travel. The points are awarded for all categories of AC travel with the exception of AC III tier, provided the tickets are booked through the Indian Railways Web site for internet booking - managed by Indian Railways Catering and Tourism Corporation (IRCTC). Indian Railways has launched its first ever loyalty programme, which would be executed through SBI Cards, called Shubhyatra and the co-branded SBI Railway Card. Among other normal credit card benefits, and also function as free platform tickets. The Shubhyatra card can be used to acquire loyalty points for all bookings irrespective of the bank used for making payments. IRCTC has tied up with about 17 banks through which passengers can pay while booking their tickets through the internet. It pioneered the online rail ticket booking in India through its website www.irctc.co.in, and, booking Railway tickets through various unconventional modes like, Mobile phones, SMS etc., Users of this service get their tickets at their door step without any hassle and earn reward points on their travel and use them to buy a ticket in those very segments. About 30 per cent of the totals of 10,000 tickets sold every day through IRCTC on an average are in those AC categories that could earn reward points. Moreover, the reward points earned on this card through other retail purchases can also be used to buy train tickets. This card has some other benefits such as the waiver of membership fees of Shubhyatra and 1.8 per cent surcharge on ticket bookings, flexi-payment options through equal monthly instalments, personal accident insurance of up to Rs 10 lakh, among others. Loyalty in banking industry The importance of maximising customer lifetime value is widely recognised. A 1994 study by showed that a 5 per cent increase in retention rate brought a 30 per cent increase in profits to a banks retail chain; the same increase in retention rate caused an 85 per cent increase in bank deposit profits and a 75 per cent increase in credit card profits. The value of micromarketing was recently demonstrated by one financial institution. From the database, the name and address files were matched, the files were cleaned and the data enhanced. Natural customer segments and attributes such as time with bank and whether a single or multi-product holder were identified. Customer clusters were then formed; for instance, conservative savers and profligate risk takers. After considering recent behavioural patterns, cross-sell propensity models and pre-approving applications, a mail
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shot offering a loan was sent out. The usual response rate of 2 per cent rose to 20 per cent; the number of loans booked was five times higher than usual and the companys market share for that product grew by six per cent. SBI Card has a joint venture with GE money for becoming the second largest credit card player in the country by crossing 3 million card mark through innovative products. Retail chain also collaborate with banking card for example the loyalty card of Vishal mega mart with SBI card. ICICI bank has tied up with Airtel for mobile money facility. The top Indian banks like ICICI ,HDFC ,UTI, Standard Charted, City bank and Public banks go for up-selling and cross selling of their respective services for retention of existing customers. I-mint Indias largest Coalition Loyalty I-mint is Indias first and truly national coalition loyalty and consumer rewards programme, where Indias leading brands Airtel, HPCL, ICICI Bank, Indian Airlines, Lifestyle and MakeMyTrip.com have joined hands to be available over 20 cities and at 20,000 select i-mint outlets in first year of august 2006. I-mint allow consumers to reap benefits through the largest ecosystem of business partners on a single rewards platform. Shop while you earn is now possible with i-mint. The programme offers opportunity to earn points from more than one partner on each transaction. Further, another exciting proposition of i-mint is its rewards catalogue. Shoppers and consumers will get an opportunity to avail over 300 exciting rewards from partners as well as from other merchants, across various categories and at all point levels. To increase point accumulation pace further, customers can aggregate and transfer points within family members. Coalition loyalty programmes have been a success in other parts of the world. These companies have taken into account all the needs and aspirations of an Indian consumer and have created a quality product to suit all lifestyles. While there has been a great deal of attention on loyalty technology and practices in recent times, the market is in a very early stage of evolution. Indian firms were either unaware, or unconvinced about the benefits and applicability of CRM. The annual growth rate for the CRM Software market in India varies between 25- 30% Apart from the high-level corporate objectives, detailed programme design must be deeply rooted in a thorough analysis of consumer spending patterns and behaviours. This analysis provides loyalty programme designers with a sense of which customer behaviours they will be able to and will want to influence. For example, if 90% of customers only make one purchase, then the loyalty programmes sole objective may be to drive the second purchase. More specifically, in order to guide programme strategy, marketers should understand customer data along the following dimensions: By frequency: How often are customers making repeat purchases? In a 12 month period, what percentage of customers is buying only once? Twice? Three or more times? What percentage of revenue does each of these segments represent?
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By revenue: How concentrated is revenue in the top customer tier? What percentage of total revenue does the top 10% represent? The top 25%? By engagement: How do customers segment by non-transactional engagement activities, such as posting reviews or to blogs or subscribing to a company newsletter? Which of these activities are indicative of higher member value (in terms of increased revenue and/or decreased costs)? Armed with analysis across these three dimensions, marketers have the critical data they need to design successful loyalty programmes. Pick a Programme Based on Purchase Frequency Using the table below, marketers should match their customer purchase frequency behaviour, ranging from low to high frequency, to the corresponding loyalty programme objective and design. Overall, the greater the frequency of customer purchases within a year the further out the programme threshold should be set. This, in effect, minimises the erosion of margin while allocating reward funds to drive customers toward higher total customer spend levels.
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4.31 HOW LOYALTY CAN BE IMPLEMENTED In order to implement the loyalty programme in an organisation, one needs to follow five steps listed below: Step 1: Observation This is the stage of accumulating all information possible about customers from many disparate sources, including: Purchase records and history Costs associated with servicing each customer. Demographic information. The share of Wallet or of spending that each customer gives.
The demographic information vary from B2B to B2C in the following manner. Useful demographic information
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Step2: Calculating inertial CLV (Customer lifetime value) Determining contribution to profit from each customer (projected purchases minus anticipated costs of serving), It is called as inertial CLV as the figure represents the current status. At the same time it provides a convenient metric by which customers can be segmented for the next step. Step 3: Selection After using the inertial CLV the customers are differentiated into three customer types like the Desired Customers, Breakeven Customers and costly Customers. The ratio of costly customer should not be more than 15% in the organisation, otherwise it may affect the bottom line. So there has to be good balance between these three categories of customers to maintain a good financial health of the organisation. Step 4: Prioritisation In this stage company should divide each of these three customer groups in to pairs like low share of spending and high share of spending and determine which customers to focus for developmental efforts after knowing their share of current spending. The strategies followed in this stage are as: Improving companies financial gains by reducing servicing cost for low-share costly customers and moving them to the status of low-share break-even customers. Improving financial condition of the company by increasing low- share costly customers share of spending and by advancing them to high- share Breakeven Customers. Improving financial condition of the company by controlling offers for lowshare Break-even customers, reducing servicing costs and moving them to low- share Desired Customers. Improving financial condition of the company by increasing share- of spending and controlling servicing cost of low-share Break-even customers and advancing them to high-share Desired Customers. Improving financial condition of the company by increasing the share of spending of low-share Desired Customers and evolving them into high-share Desired Customers. Divest the low-share Costly customers and low-share Breakeven Customers whose purchasing behaviour can not be improved.
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Step 5: Leveraging In the above each strategy requires moving as many customers as possible from one status to another, but still there are some leveraging tool which must be taken into consideration like Brand equity, value equity, relationship Equity and satisfaction. Attitudes of customers towards brand, its communications, its associations with community events etc. constitute brand equity. Similarly perceptions about quality, price and convenience constitute value equity. Various types of loyalty programmes comprise relationship equity and satisfaction with the brand make up satisfaction these are the leveraging tools. The company needs to find the deficits vis-a-vis its competitor to determine how to leverage each of the equity in its favour? What is a Loyalty Card? Many loyalty programmes utilise a so-called Loyalty card. So what is a loyalty card? A loyalty card is a plastic card with a magnetic strip at the back, or a small chip at the front of the card. The magnetic strip or chip contains information that is used to identify the buyer at every transaction. This way, the buyer is linked to the transaction at the swipe of his card. Now every transaction of a buyer is known, the company that issued the card can offer rewards for repeated business: for instance, points can be rewarded for every Rs. 100 spent. When the buyer has collected enough points, these can be traded in for real gifts. So the loyalty card is used to track repeat transactions of a card holder, so the card issuer can reward him or her for the repeat business. One can wonder, however, how loyal a customer is if he must be bribed for repeat business... 4.32 SUMMARY Opinion Leadership is the process by which one person (opinion leader) informally influences the actions or attitudes of others, who may be opinion seekers or merely opinion recipients. The definition of opinion leadership emphasises on informal influence. This informal flow of opinion related influence between two or more people is There are three situations in which opinion leadership takes place: (i) When an individual actively seeks advice from others (ii) When an individual voluntarily provides information to others and (iii) When information is generated in the course of normal interaction of a group There are three situations in which opinion leadership takes place (i) When an individual actively seeks advice from others (ii) When an individual voluntarily
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provides information to others (iii) When information is generated in the course of normal interaction of a group Opinion leaders are easier to define than to find. Still more difficult in measuring their impact on the opinion seekers. Moreover, the circle of influence of opinion leaders is generally small compared to celebrity endorsers, who can catch the attention of the entire segment. There are several techniques that are used to identify opinion leaders self designating method, socio-metric method, key informant method and objective method. Diffusion is the process by which an innovation is communicated through certain channels over time among the members of a social system. Diffusion is a macro process concerned with the spread of a new product an innovation from its source to the consuming public. Adoption is a micro process that focuses on the stages through which an individual consumer passes when deciding to accept or reject a new product. Diffusion of innovations is the process by which acceptance of an innovation (new products or new service or new idea) is spread by communication (mass media, sales people, informal conversation) to members of the target market over a period of time There are four main elements to the diffusion of innovations. They are: Innovation - Any item, thought, or process that is viewed to be new by the consumer, Communication the process of the new idea traveling from one person to another or from one channel to the individual., Social System the group of individuals that together complete a specific goal (adoption) and Time how long it takes for the group to adopt an innovation as well as the rate of adoption for individual Various approaches which have been taken to define a new product or a new service include: Firm-oriented definitions (ii) Product oriented definitions (iii) Market oriented definitions (iv) Consumer oriented definitions The attributes of innovation are relative advantage, compatibility, complexity, trialability and (v) Observability / communicability There are five main categories of adopters. They are Innovators, Early Adopters, Early Majority, Late Majority and Laggards . The rate of adoption is as shown below :
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The most important environment in which firms operate is their customer environment influences. The consumer decision making process is complex with varying degree. All purchase decisions do not require extensive effort. On continuum of effort ranging from very high to very low, it can be distinguished into three specific levels of consumer decision making: Extensive Problem Solving ( EPS ), Limited Problem Solving ( LPS ) and Routine Problem Solving ( RPS ) Types of consumer behaviour models are Simple models which include Black Box models Personal variable models and Personal Variable/Post Purchase Satisfaction model; Comprehensive models which include Engel, Blackwell and Miniard, ?Engel, Kollat and Blackwell, Howard-Sheth and Nicosia Dissonance is a psychologically uncomfortable state and post-purchase dissonance is the state of anxiety the consumer experience after making a purchase, generally it is the result of difficult purchase decisions. It is important to note that in case the alternative being considered for purchase are perfect substitute for each other, no post-purchase dissonance will occur after purchasing any one of such alternatives. However, in the absence of perfect substitutes, some amount of post-purchase dissonance is unavoidable. In case, all the alternatives are desirable, consumers might experience strong negative emotions while making a choice, which may result in postponing or completely dropping the purchase A high level of post purchase dissonance can result if (i) it is difficult for the consumer to arrive at the purchase decision because of the importance of the decision and/or the number of alternatives available (ii) all the alternatives being considered are almost equally desirably by the consumer (iii) the decision cannot be undone, i.e., the purchase does not entail any exchange, refund, guarantee, etc. (iv) the product/brand is new I the market and /or belongs to a less known marketer. Loyalty is, in simpler terms, a reliance on a particular brand or company even though numerous satisfactory alternatives may exist. Loyalty helps build relationships. It requires that companies view customers as people first and consumers second. Trust, commitment, ethical practices, fulfillment of promises, mutual exchange, emotional bonding, personalisation and customer orientation have been reported to be the key elements in the relationship building process
4.33 REVIEW QUESTIONS Short Questions 1. Explain Opinion leadership. 2. Distinguish between opinion leaders and opinion seekers] 3. What are the characteristics of an opinion leader? 4. Give an account of the profile of opinion leaders. 5. Why is an opinion leader a more important source of product information than an advertisement for the same product?
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6. Describe about the frequency and overlap of opinions in information flow. 7. How do opinion leadership does define the marketing strategy of a firm? 8. Explain diffusion of innovations. 9. Describe the various elements in the process of diffusion. 10. Explain the influence of product characteristics on diffusion. 11. Explain the various categories of adopters of products. 12. Discuss the market strategies due to diffusion and innovation 13. What do you mean by consumer dissonance? 14. What is meant by consumer loyalty? 15. give examples of programmes designed to increase consumer loyalty. Long Questions 1. Explain the nature of consumer behaviour 2. Justify the statement-The evaluation of marketing concept from mere Selling concept to Consumer-oriented marketing has resulted in buyer behaviour becoming an independent discipline. 3. What is a motive indicate the various roles it play in influencing Purchase behaviour? 4. How can a consumer arrive at a decision? Explain various stages in it. 5. Explain the various models of consumer decision making 6. Mention the different types of innovations 7. Explain the factors affecting innovation adoption 8. Explain the different categories of adopters together with the rate of their adoption. 9. Mention the barriers to adoption and identify marketing strategies to overcome the same. Illustrate your answer with suitable examples 10. Mention the need to analyse post purchase consumer behaviour from a marketers perspective
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UNIT V
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ADDITIONAL DIMENSIONS
5.1 OVERVIEW In the good olden days the principle of Caveat emptor, which meant buyer beware governed the relationship between seller and the buyer. In the era of open markets buyer and seller came face to face, seller exhibited his goods, buyer thoroughly examined them and then purchased them. It was assumed that he would use all care and skill while entering into transaction. The maxim relieved the seller of the obligation to make disclosure about the quality of the product. In addition, the personal relation between the buyer and the seller was one of the major factors in their relations. But with the growth of trade and its globalization the rule no more holds true. It is now impossible for the buyer to examine the goods before hand and most of the transactions are concluded by correspondence. Further on account of complex structure of the modern goods, it is only the producer / seller who can assure the quality of goods. 5.2 LEARNING OBJECTIVES After reading this chapter you should be table to: Understand the concept of consumerism and its components Understand the concept of consumer protection Know the objectives of UN guidelines for Consumer Protection Understand the objectives of the Consumer Protection Act, 1986 Understand Consumer rights and the methods of consumer protection Know the remedies available for an aggrieved consumer Understand consumer disputes redressal agencies Understand difficulties and challenges of predicting consumer behaviour Understand the concept of online consumer behviour Understand the concept of organisational and industrial buyer behavior
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Understand the differences in organizational markets Understand the differences between consumer behaviour vs organisational buying Understand the concept of buy classes Understand the concept of buying centre
5.3 INTRODUCTION With manufacturing activity becoming more organized, the producers / sellers are becoming stronger and organised whereas the buyers are still weak and unorganized. In the age of revolutionized information technology and with the emergence of e-commerce related innovations the consumers are further deprived to a great extent. As a result buyer is being misled, duped and deceived day in and day out. Mahatma Gandhi, the father of nation, attached great importance to what he described as the poor consumer, who according to him should be the principal beneficiary of the consumer movement. He said A Consumer is the most important visitor on our premises. He is not dependent on us we are on him. He is not an interruption to our work; he is the purpose of it. We are not doing a favour to a consumer by giving him an opportunity. He is doing us a favour by giving an opportunity to serve him. In spite of these views consumerism is still in its infancy in our country, thanks to the sellers market and the government monopoly in most services. Consumer awareness is low due to the apathy and lack of education among the masses. No one has told them about their rights - to be informed about product quality, price, protection against unsafe products, access to variety of goods at competitive prices, consumer education etc. What consumerism lacks here is education and information resources, testing facilities, competent leadership, price control mechanism, and adequate quasi-judicial machinery. The providers of goods and services have been reluctant to give due consideration to consumer interest protection. In present situation, consumer protection, though as old as consumer exploitation, has assumed greater importance and relevance. Consumerism is a recent and universal phenomenon. It is a social movement. Consumerism is all about protection of the interests of the consumers. According to McMillan Dictionary (1985) Consumerism is concerned with protecting consumers from all organisations with which there is exchanged relationship. It encompasses the set of activities of government, business, independent organisations and concerned consumers that are designed to protect the rights of consumers. The Chambers Dictionary (1993) defines Consumerism as the protection of the interests of the buyers of goods and services against defective or dangerous goods etc. Consumerism is a movement or policies aimed at regulating the products or services, methods or standards of manufacturers, sellers and advertisers in the interest of buyers, such regulation maybe institutional, statutory or embodied in a voluntary code occupied by a particular industry or it may result more indirectly from the influence of consumer organisations
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As commonly understood consumerism refers to wide range of activities of government business and independent organisations designed to protect rights of the consumers. Consumerism is a process through which the consumers seek redress, restitution and remedy for their dissatisfaction and frustration with the help of their all organised or unorganised efforts and activities. It is, in-fact a social movement seeking to protect the rights of consumers in relation to the producers of goods and providers of services. In-fact consumerism today is an all-pervasive term meaning nothing more than peoples search for getting better value for their money. Consumer is the focal point of any business. Consumers satisfaction will benefit not only business but government and society as well. So consumerism should not be considered as consumers war against business. It is a collective consciousness on the part of consumers, business, government and civil society to enhance consumers satisfaction and social welfare which will in turn benefit all of them and finally make the society a better place to live in. 5.4 COMPONENTS OF CONSUMERISM There are various components of consumerism. First and foremost is self-protection by consumers. Consumer must be aware of his rights, raise voice against exploitation and seek redressal of his grievances. Consumers consciousness determines the effectiveness of consumerism. It is the duty of the consumer to identify his rights and to protect them. Voluntary Consumer Organisations engaged in organising consumers and encouraging them to safeguard their interests is another important element of consumer movement. The success of consumerism lies in the realisation of the business that there is no substitute for voluntary self-regulations. Little attention from the business will not only serve consumers interest but will also benefit them. Some businesses in India have come together to adopt a code of conduct for regulating their own activities. Regulation of business through legislation is one of the important means of protecting the consumers. Consumerism has over the time developed into a sound force designed to aid and protect the consumer by exerting, legal, moral and economic pressure on producers and providers in some of the developed countries. Consumerism is likely to dominate the Indian market, thanks to the economic reforms ushered in and the several agreements signed under the World Trade Organisation. The transition will be from a predominantly sellers market to a buyers market where the choice exercised by the consumer will be influenced by the level of consumer awareness achieved. Consumer Protection By consumerism we mean the process of realising the rights of the consumer as envisaged in the Consumer Protection Act (1986) and ensuring right standards for the goods and services for which one makes a payment. This objective can be achieved in a reasonable time frame only when all concerned act together and play their role. The players
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are the consumers represented by different voluntary non-government consumer organisations, the government, the regulatory authorities for goods and services in a competitive economy, the consumer courts, organisations representing trade, industry and service providers, the law-makers and those in charge of implementation of the laws and rules. This unethical, illegal and unilateral declaration has to be viewed in the light of the practice in developed countries where the seller declares, In case you are not fully satisfied with our product, you can bring the same to us within a month for either replacement or return of your money. This will clearly indicate the level of consumer consciousness. However, things are changing - slowly but steadily - and the momentum has increased considerably since the establishment of consumer courts and due to the efforts of a number of consumer organisations and the media. The next millennium will witness a high degree of consumer awareness and the concepts of comparative costs, consumer preference/ resistance/ abstinence and consumer choice will become vital aspects of the economy. An analysis of the data from the consumer courts in different States shows that there is a direct relationship between literacy and consumer awareness. Statistics relating to Kerala and Bihar will justify this. The question to be considered is what can the Government do to improve the position? The Government wears three hats to deal with cases of three different categories. The first one is dealing with the ministries and departments of government. Recently, the Standing Committee of Parliament on Health said Government hospitals should be brought under the purview of the Consumer Court. To this, we had pointed out the latest ruling of the Supreme Court which lays down that the Consumer Protection Act will apply only when the consumer pays for the goods and services and on this count the government hospital, where the services are not charged on the consumer, will not come under the Act. For such cases the government has developed the concept of Citizens Charter. All government departments dealing with the public are to publish a Citizens Charter clearly indicating the services offered and the procedure to be followed. All the information has to be made available in a single window. This programme is in its incipient stage and has a long way to go to achieve the desired levels of consumer satisfaction. The general reaction of the consumer to this is: what happens if what is stated in the Citizen Charter is not adhered to? Unless and until this is clarified, the responsibility fixed and those held accountable are dealt with, the purpose will not be achieved. The second area is where the services/ utilities are provided and charged either by the government department or the agencies under its control. At present, a number of regulatory authorities have been constituted and the country is entering a new regime of regulatory economies in the services sector. It is heartening to note that the regulatory bodies like the Telecom Regulatory Authority of India (TRAI) have given importance to the interests of consumers and this has been publicly declared as one of the main objectives.
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In the field of telecom, power, transport and water supply, the consumers today are going through a number of problems not knowing how to get their grievances redressed. The number of cases relating to these sectors is increasing in the consumer courts. It must be possible for the government to take steps to see that the areas of grievances are identified and remedial steps taken through proper systematisation of procedure and working style. There are a number of areas where the procedure has to be made simple and consumer-friendly. For example, when it was felt that the quality of bottled water purchased by the consumer has to be ensured by fixing standards, it came out that even though it is necessary and desirable, under the existing laws it cannot be done. The Ministry of Law pointed out and rightly so, that water is not food as per the provisions in the Food Adulteration Act. The process of getting statutory notification in the interest of the consumer in this case, where all concerned are agreeable, is likely to take 12 to 18 months. In such a situation the only answer is to prevail upon the manufacturers to go for voluntary ISI (Indian Standards Institution) certification. This method is working in the case of bottled water, thanks to the cooperation of producers and the clear preference expressed by the active consumer groups. Similarly in the area of investor protection in spite of several steps taken by the regulatory authorities such as the Reserve Bank of India and the Securities and Exchange Board of India, the case of exploitation of consumers is increasing. This is an area of grave concern and requires concerted action by the regulators, government and the consumer organisations. We must find a way out to save the consumers from the unscrupulous functioning of Non-banking finance companies. The third category is the protection of consumers from the private sector dealing with goods and services. It is not to be construed that the entire business sector is keen on exploiting the consumers. These are established business firms which really care for consumer satisfaction, their own reputation and goodwill. Voluntary bodies like the Fair Business Practices Forum are functioning effectively and are quick in removing the grievances of the consumers. These can go a long way in reducing the number of cases in the consumer courts. If the Government is to take a pro-active role in increasing consumer awareness, encourage consumer education, training and research and administer the infrastructural need of the consumer courts - then it should have enough funds. It is not easy to get adequate budget allocations for obvious reasons. The best way appears to be to work out methods by which the Central Consumer Welfare Fund is augmented and a similar fund is set up at State level also. It is gratifying to note that action has been initiated in this direction and there is every reason to hope that the future will be better. The consumer has to be aware of his rights and play a key role. The success of consumerism is a strong function of consumer awareness and the assistance the movement
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gets from the government. The consumer movement got a boost and moral support from the late U.S. President John F. Kennedy in the historic declaration in Congress on March 15, 1962, declaring four basic consumer rights (choice, information, safety and the right to be heard). Subsequently, March 15 every year is celebrated as World Consumer Rights Day. However this annual ritual observation does not appear to have produced the desired results. A sub-continent like India with regional imbalances and diversity of languages requires not one but several Ralph Nadars. A recent survey has revealed that a number of consumers in the urban as well as rural areas are not very much aware of the consumer movement and the rights of the consumers. It is in this context that it is considered relevant to quote the objectives adopted by the General Assembly of United Nations in 1985. The U.N. guidelines for consumer protection are meant to achieve the following objectives: a) To assist countries in achieving or maintaining adequate protection for their population as consumers; b) To facilitate production and distribution patterns responsive to the needs and desires of consumers; c) To encourage high levels of ethical conduct for those engaged in the production and distribution of goods and services to consumers; d) To assist countries in curbing abusive business practices by all enterprises at the national and international levels which adversely affect consumers; e) To facilitate the development of independent consumer groups; f) To further international cooperation in the field of consumer protection; g) To encourage the development of market conditions which provide consumers with greater choice at lower prices. It is interesting to note that in spite of U.N. recognition, encouragement from the developed countries and the pro-active role played by the Government, the consumer in India still does not get his due. It is time that he wakes up and realises his rights. Even the great Hanuman required someone older and wiser to remind him of his potential strength. It will be useful if voluntary consumer organisations take up this role and make way for the realisation of the objectives of the U.N. guidelines and the Consumer Protection Act. In the next millennium, every consumer in his own interest has to realise his role and importance in the right perspective. Each citizen in a democracy derives his power at the time of elections and exercises it through the ballot. In a competitive economic environment the consumer has to exercise his choice either in favour of or against the goods and services. His choice is going to be vital and final. He should realise his importance and prepare himself to exercise his rights with responsibility. It is very often stated Customer is sovereign
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and consumer is the King. If that is really so, why do we have the Consumer Protection Act? Why is there a need for protecting the King? Should it not be rightly called Consumer Sovereignty Act? It is for the consumers to decide. After all the dictum in democracy is, the citizens get a government they deserve. Similarly the consumers in society get a position in the market depending upon what they do or do not do. It is agreed on all hands that consumer empowerment in India has a long way to go. 5.5 THE CONSUMER PROTECTION ACT 1986 An act to provide for better protection of the interests of consumers and for that purpose to make provision for the establishment of consumer councils and other authorities for the settlement of consumer disputes and for matters connected therewith. Industrial development in the field of manufactured goods has led to the influx of various consumer goods into the Indian market to cater to the needs of the consumers and a variety of services such as banking, financing, insurance, transport, housing construction, entertainment have been made available to the consumers. In order to protect the consumers from exploitation and to save them from adulterated and substandard goods and deficient services the Consumer Protection Act came into force on 15th April, 1986 and it applies to the whole of India except the State of Jammu and Kashmir. Objective of the Act The Consumer Protection Act 1986 is a social welfare legislation which was enacted as a result of widespread consumer protection movement. The main object of the legislature in the enactment of this act is to provide for the better protection of the interests of the consumer and to make provisions for establishment of consumer councils and other authorities for settlement of consumer disputes and matter therewith connected. In order to promote and protect the rights and interests of consumers, quasi judicial machinery is sought to be set up at district, state and central levels. These quasi judicial bodies have to observe the principles of natural justice and have been empowered to give reliefs, of specific nature and also to impose penalties for non compliance of the orders given by such bodies. The main object of these bodies is to provide speedy and simple redressal to consumer disputes. It is one of the benevolent pieces of legislation intended to protect the consumers at large from exploitation. How the act was enacted? The act was passed in Lok Sabha on 9th December,1986 and Rajya Sabha on 10th December, 1986 and assented by the President of India on 24th December, 1986 and was published in the Gazette of India on 26th December, 1986.
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The Act provides following remedies to an aggrieved consumer: Removal of defects in goods or deficiency in service. Replacement of defective goods with new goods of similar description which shall be free from any defect. Return of price paid by the consumer. Payment of compensation for any loss or injury suffered by the consumer. Discontinue the restrictive, or unfair trade practice, and not to repeat it. Withdraw the hazardous goods from being offered for sale and not to offer them for sale. Provide for adequate cost to the aggrieved party.
The Consumer Production Act provides for a three tier system of redressal agencies: one at district level known as District Forum, second at state level known as State Commission, and third at national level known as National Commission. A complaint is to be made to the district forum of the concerned district where the value of goods and services and compensation, if any, is up to Rs. 20 lakhs, to the State Commission between Rs . 20 lakhs and Rs. 100 lakhs, and to the National Commission for more than Rs. 100 lakhs. Interestingly, there is provision for appeals against the orders of a particular redressal forum by the aggrieved party before the next higher echelon and even from the findings of the National Commission before the Supreme Court. Invariably, consumers are a vulnerable lot for exploitation, more so in a developing country with the prevalence of mass poverty and illiteracy. India too is no exception to it. Instances like overcharging, black marketing, adulteration, profiteering, lack of proper services in trains, telecommunication, water supply, airlines, etc are not uncommon here. From time to time, the government has attempted to safeguard consumers interests through legislations and the CPA 1986 is considered as the most progressive statute for consumer protection. Procedural simplicity and speedy and inexpensive redressal of consumer grievances as contained in the CPA are really unique and have few parallels in the world. Implementation of the Act reveals that interests of consumers are better protected than ever before. However, consumer awareness through consumer education and actions by the government, consumer activists, and associations are needed the most to make consumer protection movement a success in the country. Jurisdiction - where to file complaint - Consumer courts as per value / area of claim. The Consumer courts are 3 tiered. 1. District Consumer Disputes Redressal Forums At the lowest level are the District Forums and these are established in each District and have jurisdiction to entertain complaints where the value of goods or services and the
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compensation if any, claimed does not exceed Rs.20,00,000 (TWENTY LAKHS), and a complaint can be filed in a District Forum within the local limits of which a. The opposite party resides or b. Carries on his business or works for gain or c. Where the cause of action arises. ADDRESSES: DELHI, MAHARASTRA AND KARNATAKA 2. State Consumer Disputes Redressal Commission The State Consumer Disputes Redress Commission is established in each state and these have jurisdiction to entertain complaints where the value of goods or services and the compensation if any, claimed exceeds Rs.20,00,000 (TWENTY LAKHS) but does not exceed Rs.1, 00,00,000 (ONE CRORE). ADDRESSES: STATEWISE 3. National Consumer Disputes Redressal Commission The National Consumer Disputes Redressal Commission has jurisdiction to entertain complaints where the value of the goods or services and compensation if any claimed exceeds Rs.1, 00,00,000 (ONE CRORE). Consumer Protection Councils Sections 4,5,6,7 & 8 of the Act makes provision for the establishment of Consumer Protection Councils. The State Government is authorized by the Act to establish by notification, councils at the Central, State & District levels to be known as Central Consumer Protection Council, Consumer Protection Council & District Consumer Protection Council respectively. It also lays down the objects of the said councils. It also makes provisions for appointment of Chairman & other official and non-official members of the said council. Consumer Disputes Redressal Agencies This part of the Act contains 22 sections i.e. Sections 9 to18, 18-A, 19 to 23, 24-A, 24-, 25, 26 and 27. This part provides for establishment of consumer disputes redressal forum at district level, state level and central levels known as District Forum, State Commission and National Commission. It also makes provisions regarding the composition, jurisdiction, procedure to be followed by the District forum, State commission & National commission. Any person aggrieved by an order of the District forum may appeal to the State commission & an order of the State commission can be challenged before the National Commission. Any person aggrieved by the order of the National Commission can resort to the Supreme Court as the last remedy.
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It also provides for a limitation period for preferring appeals to the State Commission, National Commission and Supreme Court. District forum, State Commission or National Commission shall not entertain any appeal filed after expiry of 2 years from the date on which the cause of action has arisen. However, the forums have the power to condone the delay in preferring appeals within such time limit if sufficient cause is shown for not filing the appeal within the prescribed time limit. What is sufficient cause will depend on the facts and circumstances of every particular case. It also makes provisions regarding enforcement of the orders of the District forum, State Commission and National Commission and penalties to be levied under the Act. Consumers play a vital role in the economic system of a nation because in the absence of effective demand that emanates from them, the economy virtually collapses. Mahatma Gandhi said, A consumer is the most important visitor on our premises. He is not dependent on us, we are on him. He is not an interruption to our work; he is the purpose of it. We are not doing a favour to a consumer by giving him an opportunity. He is doing us a favour by giving us opportunity to serve him. But, of late, unfortunately cheating by way of overcharging, black marketing, misleading advertisements, etc has become the common practice of greedy sellers and manufacturers to make unreasonable profits. In this context, it is the duty of the government to confer some rights on consumers to safeguard their interests. 5.6 CONSUMER RIGHTS 1. Right to Safety: The right to be protected against goods which are hazardous to life and property. 2. Right to Information: The right to be informed about the quality, quantity, purity, price and standards of goods. 3. Right to Choose: The right to be assured access to a variety of products at competitive prices, without any pressure to impose a sale, i.e., freedom of choice. 4. Right to be Heard: The right to be heard and assured that consumer interests will receive due consideration at appropriate forums. 5. Right to Seek Redressal: The right to get relief against unfair trade practice or exploitation. 6. Right to Education: The right to be educated about rights of a consumer. 5.7 PROTECTION OF CONSUMER RIGHTS Consumer protection means safeguarding the rights and interests of consumers. It includes all the measures aimed at protecting the rights and interests of consumers. Consumers need protection due to the following reasons: 1. Illiteracy and Ignorance: Consumers in India are mostly illiterate and ignorant. They do not understand their rights. A system is required to protect them from unscrupulous businessmen.
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2. Unorganised Consumers: In India consumers are widely dispersed and are not united. They are at the mercy of businessmen. On the other hand, producers and traders are organized and powerful. 3. Spurious Goods: There is increasing supply of duplicate products. It is very difficult for an ordinary consumer to distinguish between a genuine product and its imitation. It is necessary to protect consumers from such exploitation by ensuring compliance with prescribed norms of quality and safety. 4. Deceptive Advertising: Some businessmen give misleading information about quality, safety and utility of products. Consumers are misled by false advertisement and do not know the real quality of advertised goods. A mechanism is needed to prevent misleading advertisements. 5. Malpractices of Businessmen: Fraudulent, unethical and monopolistic trade practices on the part of businessmen lead to exploitation of consumers. Consumers often get defective, inferior and substandard goods and poor service. Certain measures are required to protect the consumers against such malpractices. 6. Freedom of Enterprise: Businessmen must ensure satisfaction of consumers. In the long run, survival and growth of business is not possible without the support and goodwill of consumers. If business does not protect consumers interests, Government intervention and regulatory measures will grow to curb unfair trade practices. 7. Legitimacy for Existence: Business exists to satisfy the needs and desires of consumers. Goods are produced with the purpose of selling them. Goods will, in the long run, sell only when they meet the needs of consumers. 8. Trusteeship: Businessmen are trustees of the societys wealth. Therefore, they should use this wealth for the benefit of people. 5.8 METHODS OF CONSUMER PROTECTION There are four main methods of protecting the interests of consumers: 1. Business Self-regulation: The business community itself can help in achieving consumer protection and satisfaction through self -discipline. Businessmen can regulate their own behaviour and actions by adopting higher ethical standards. Trade associations and chambers of commerce can check unfair trade practices used by some businessmen. 2. Consumer Self-help: Every consumer must be alert as self-help is the best help. He should educate himself and know his rights. He should not allow unscrupulous businessmen to cheat him. 3. ConsumersAssociations: Consumers should form voluntary associations. These associations can educate and awaken consumers. They can take organized action and put pressure on businessmen to adopt fair trade practices.
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4. Government Regulations: The State can ensure consumer protection through legislative, executive and judicial actions. The laws enacted by the Government must be strictly enforced by the executive. Government of India has enacted several laws to protect the interests and rights of consumers. Some of these laws are as follows: The Essential Commodities Act, 1955 which aims to regulate and control the production, supply and distribution and prices of essential commodities. The Prevention of Food Adulteration Act, 1954 which aims to check adulteration in food items and eatables. The Drugs and Cosmetics Act, 1940 which seeks to ensure purity and quality in drugs and cosmetics. The Standards of Weights and Measures Act, 1956 which aims at ensuring that consumers get the right weight and measurement in products. The Household Electrical Appliances (Quality Control) Order, 1976 which seeks to ensure safety and quality in the manufacture of electrical appliances. The Consumer Protection Act, 1986 which seeks to provide speedy and inexpensive redressal to the grievances of consumers.
5.9 DIFFICULTIES AND CHALLENGES OF PREDICTING CONSUMER BEHAVIOUR Basic objective of the studying consumer behavior is that the firm needs to know who buys their product. How they buy? When and where they buy? Why they buy? How they respond to marketing stimuli. Because they study consumer behavior what is Consumer Behavior about? How, why, where and when consumers make purchase decisions? Considers who influences the decisions? What is Consumer Behavior about? All these are important questions, which are to be known to the companies so that they can design, and implement marketing strategies to satisfy the customers. Consumers determine the sales and profits of a firm by their purchase decisions, thus the economic viability of the firm. What is Disposable income and what is Discretionary income what is the stage of family life cycle stage because these all these factors influence the consumer behaviors which are very important to the marketers. Consumer behavior is the procedure throughout the final purchaser makes buy assessments. This can be defined as Consumer Behavior Defined as of the processes involved when individuals or groups select, purchase, use, or dispose of products, services, ideas, or experiences to satisfy needs and desires (Solomon, 1996). Those actions directly involved in obtaining, consuming and disposing of products and services, including the decision processes that precede and follow those actions. Consumer behavior examines mental and emotional processes in addition to the physical activities.
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The study of consumers helps firms and organizations improve their marketing strategies by understanding issues such as how The psychology of how consumers think, feel, reason, and select between different alternatives (e.g., brands, products); The psychology of how the consumer is influenced by his or her environment (e.g., culture, family, signs, media); The behavior of consumers while shopping or making other marketing decisions; Limitations in consumer knowledge or information processing abilities influence decisions and marketing outcome; How consumer motivation and decision strategies differ between products that differ in their level of importance or interest that they entail for the consumer; and How marketers can adapt and improve their marketing campaigns and marketing strategies to more effectively reach the consumer.
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One official definition of consumer behavior is The study of individuals, groups, or organizations and the processes they use to select, secure, use, and dispose of products, services, experiences, or ideas to satisfy needs and the impacts that these processes have on the consumer and society. Although it is not necessary to memorize this definition, it brings up some useful points: Behavior occurs either for the individual, or in the context of a group (e.g., friends influence what kinds of clothes a person wears) or an organization (people on the job make decisions as to which products the firm should use). Consumer behavior involves the use and disposal of products as well as the study of how they are purchased. Product use is often of great interest to the marketer, because this may influence how a product is best positioned or how we can encourage increased consumption. Since many environmental problems result from product disposal (e.g., motor oil being sent into sewage systems to save the recycling fee, or garbage piling up at landfills) this is also an area of interest. Consumer behavior involves services and ideas as well as tangible products. The impact of consumer behavior on society is also of relevance. For example, aggressive marketing of high fat foods, or aggressive marketing of easy credit, may have serious repercussions for the national health and economy.
However it should be remembered that doing the above is difficulty given the fact that many psychological factors are at play and no two individuals think and act in the same way. 5.10 ONLINE CONSUMER BEHVIOUR Every business has one thing in common i.e. it depends on customers to be successful. Customers make or break some business. In order to be profitable, businesses need to first attract, then hold and in the end maintain its clientele. Customer support service is the
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department which looks into these all important tasks of making sure that your customers do not go elsewhere. Customer Support in Online Business: The basic principles remain the same in both online and offline businesses but priorities do change. One area which becomes crucial in online business is Customer Support Service. One can fill your website with as many details, descriptions, FAQs, specifications and instructions as you want, and still the customers will be willing to communicate with the company representative before they make some purchase. Not to mention its importance in dealing with the after sale queries. Staff should be fully capable of managing angry customers because the word of mouth spreads faster in cyber world. Mostly three types of supports are used for online consumers; you can choose all three or any of them. Email Support Live Chat Telephone Helpline
E-mail Support The most widely used, most convenient and a must for any online business regardless of its nature. You provide them with your e-mail address so they can write their complaints, concerns or comments in detail. They dont need to wait for business hours and it gives the business and the customers, a chance to explain their position in a detailed manner. Live Chat More and more businesses are now providing Live Chat option for their customers. Customers are not required to log into some specific messenger or anything like that. All they need to do is, click on the live chat icon and a new chat window will open, where they can type their message, which will be replied by the business representative accordingly. There are many free services available at internet to facilitate you in providing this feature to your customers. Telephone Helpline Large businesses all over the world depend on telephone help lines as their primary source to provide 24 hours support to their customers. This method is a little bit costly and not really necessary for small businesses. However, this can be very effective if you are able to afford such service. Also this is the most express response your customer can get from you.
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5.11 ORGANISATIONAL AND INDUSTRIAL BUYER BEHAVIOUR Procurement is a function that is gaining in importance. Managements have realized that a good procurement department helps in the growth of the company and increases the profits considerably. The procurement function has both task-oriented objectives and nontask objectives, and is usually governed by a clearly articulated purchase policy. The buying decision process starts with identifying the buying needs, followed by identifying the product characteristics. At this point, the buyer takes a make or buy decision. If the decision is to buy, then the buying process continues with the search for vendors followed by qualifying them. The vendors are then requested to send in their proposals and quotations relating to the purchase requirement. While evaluating the quotations, the buyer may revisit the make or buy decision if the vendor quotations do not meet requirements. If a particular vendors quotations are up to the buyers expectations, then the contract is awarded to the vendors. Payment and delivery terms are finalized and an order routine is mutually agreed upon. The vendors are also regularly monitored for their performance. A firm purchases goods under three situations. In a new task, the firm buys a totally new product or an existing product for the first time. This involves extensive information and supplier search. The second situation is straight re-buy. Here the firm purchases the same material from the same supplier without any alterations in the contract. And the last situation is modified re-buy. It involves modifications in the form of change in supplier, change in terms of the contract, etc. A buying center involves people from across the departments of the firm to make the buying decisions for the firm. The buying center is influenced by the individual and group factors. Hence the decisions taken by the buying center will bear these influences. Value analysis is used in the firm to assess the value of the product to be purchased and consequently to take make or buy decisions. It helps the firm to reduce unnecessary costs in the purchase of the product or materials. Vendor evaluation helps in choosing the right vendor. Vendor rating is performed to appraise vendors from time to time with respect to the products supplied and services rendered; it is done on the parameters of price, quality, delivery, and service. There are different factors that influence organizational buying behavior such as environmental factors, organizational factors, group factors, and individual factors.
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What do organizations purchase for? Organizational consumers purchase for: Further production, Usage in operating the organization, and/or Resale to other consumers
Whereas, Final (or ultimate) consumers normally purchase for: Personal, Family, or Household use
Industrial/organizational markets Let us now look at the various participants and types of players in the Industrial markets: Producer Manufacturers Service producers Wholesalers Retailers Federal State County Local Charitable Educational Community Other non-business
Reseller
Government
Institutional
Let us take the example of a telephone; think about the hundreds of components that are used in producing it. Each one of those component parts had to be sold to the telephone manufacturer. The part had to be designed such that it met the needs of the buyer, it had to be promoted in a way to make the buyer aware that it was available, it had to be distributed at the times and in the quantities that the buyer needed, and all of this had to be done in such a way that the part could be produced and delivered at a competitive price. There are
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hundreds of parts, wires, screws, glues, paints, and such that are marketed before the telephone is itself finally produced, marketed, and sold to a final household consumer. This manufacturer must also purchase supplies that are not part of the product but are used in running the manufacturing operation. It must purchase computers, printer and photocopier paper, desks and chairs, services to mow the lawn, etc. How is it that this manufacturer makes buying decisions that are similar in nature to household buyers? How is it that this manufacturer makes buying decisions that are different in nature from those of household buyers? 5.12 PARTICIPANTS IN INDUSTRIAL MARKETING
Extractive Industries Manufacturing Industries Consuming and user industries or units Mining and Construction Forestry Agriculture Fisheries Farming Manufacturer selling to other manufacturers (includes importers middlemen, Government & its enterprises etc) Households Government Family of business and industrial users Exporters
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5.13 DIFFERENCES IN ORGANIZATIONAL MARKETS We know that Organizational markets are different in nature from household consumer markets. Let us see how they are different! Use goods for further production, operations, or resale. Household, or final, consumers purchase products for personal consumption. Purchase equipment, raw materials, and semi-finished goods. Household purchasers almost always purchase finished goods for personal consumption. Demand is derived from that of final consumers. If you own a machine shop that makes bushings that are used in washing machine motors, then the demand for your products (bushings) is derived from final consumer demand for washing machines. If the economy is poor, and demand for washing machines is down, then so too will be the demand for washing machine motors and for the bearings that are used in them. Multiplier effect / accelerator principle: However, there will probably not be a one to one correspondence between these. If retailers find that demand for washing machines is declining, they might be conservative in placing new orders with wholesalers, perhaps ordering slightly less than what they actually believe demand to be. Wholesalers, in seeing their orders decline, might also be conservative in placing orders to manufacturers, ordering slightly less than what they actually believe
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demand to be. Manufacturers, seeing their orders decline, might order slightly fewer motors, and the motor manufacturers might conservatively order slightly fewer bushings than they actually expect to need. Demand for your bushings might experience wider swings, either up or down, than the changes in demand at the final consumer end of the supply chain. This makes organizational markets, especially if you produce some of the small parts at the beginning of the supply chain, very volatile. Can make items themselves. Competition in organizational markets comes not only from suppliers of similar goods and services, but can come from suppliers goods, services, or delivery, then it can choose to make those products itself.
5.14 DIFFERENCES IN ORGANIZATIONAL TRANSACTIONS Buying specialists are often used. It is usually seen that organizations often employ people who are professional purchasing agents. Just as sales agents are professional specialists at finding organizations that need the products that their employer produces, purchasing agents are specialists are professional specialists at finding what their employer needs. Whatever stereotypes you might have from experiences with salespeople in consumer sales, any negative stereotypes of salesperson behavior probably would not be appropriate in dealing with professional buyers. Often use multiple buying responsibilities. A household purchaser is often the sole decision maker. Making a sale to an organization, however, often requires selling to several entities within the buying center. For example, you might be using a desktop computer at work, but the decision as to what specifications were needed might have been set by someone in the computer department, the decision to buy might have been made by your department manager, bids taken by someone in the purchasing department, and the final authorization made by the company president. Often use multiple suppliers. It is often desirable to have a long-term relationship with more than one supplier, even if a second supplier has higher prices for otherwise similar terms and conditions. If problems in quality or delivery are experienced with a supplier, production can still be maintained if the second supplier can be used to replace the first. The ideals of a cozy, trusting relationship that has been promised with strategic alliances in the popular business literature does not always work if it leaves one party vulnerable as a sole supplier or buyer. More likely to require exact specifications. A household purchaser might select a particular model of desktop computer for no other reason than it has a pleasing color. An organizational purchaser is more likely to set specifications regarding processor speed, memory, hard drive size, and such before taking bids on price. Often lease equipment and space. As a household consumer, you would probably prefer to own your own car, furniture, and home. These are things that represent personal expression, status, and wealth. Your objectives as a business
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manager, however, are very different. You might prefer to lease public warehouse space to provide the flexibility to change locations when the market demands, to lease trucks so that you can leave the problems of maintenance and disposition to someone else, etc. More frequently employ competitive bidding and negotiation. Household consumers (especially those of us in urban settings) are more likely to accept as final a price that is placed on a product in a retail setting or to accept a price that is given to us by a service provider. As a business manager, your employer is more likely to require that you accept, say, three bids for a service or to negotiate various terms and conditions associated with product specifications, delivery, and price.
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5.15 CONSUMER BEHAVIOUR VS ORGANISATIONAL BUYING In contrast to consumers, organisational buyers represent those buying goods and services on behalf of an organisation for the purpose of the furtherance of organisational objectives. Before highlighting some of the differences between the two, however, it is important to caution against over stressing the differences. For instance, some authors argue that buying goods on behalf of ones employers makes buyers more caution and rational than when purchasing consumer goods privately. Closer examination of the evidence, however, suggests the differences are almost exclusively related to price and very small anyway. So, be aware that there can be differences, but they are by no means always universal - a single employee feeling poorly motivated towards his/her job on one day, for example, may well be far less cautious than on other days when all is well in the workplace! The most obvious difference between consumer and organisational buying is that the underlying motivation is different; i.e. personal consumption versus business usage. There are other contrasts, however:Setting for Buying: For consumers, the buying unit is within the household, whereas for the organisational buyer, the setting is within the firm. This means that the industrial marketer targeting the organisational buyer must take account of factors such as buying procedures, levels of authority, and so on, factors not relevant in consumer marketing. Technical/Commercial Knowledge: Usually, the organisational purchaser will be a trained professional, more knowledgeable than the average consumer purchaser. This can often necessitate a completely different sales approach. Contact with Buyers/Distribution Channels: Organisational markets are usually more geographically concentrated than consumer markets. Factors such as proximity to available labour, raw materials, and transportation
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facilities often dictate an industrys location. In addition, compared to consumer markets, there can be far fewer potential customers. Taken together, these variables mean that the industrial marketer must normally maintain far more direct and personal contact with his or her potential clients. Number of Decision-Makers: In consumer purchasing, the number of people involved in the decision-making process can be very small; i.e. an individual, a couple, a family, etc. In organisational buying, however, a great many people can be involved in the purchasing process. This can mean differences in both the number of people marketing communications must attempt to convince and that quite different decisions might emerge as a result of group dynamics than might initially be anticipated on the basis of individual discussions. Derived Demand: Organisational buyers often continually adjust their buying decisions on the basis of projected sales figures, buying more units when forecast sales are higher. The result can be a sort of pendulum effect, with a knock-on effect throughout the buying chain as each chain member adjusts its buying patterns accordingly. Reciprocal Demand: Sometimes, a buyer can also be a seller at the same time. A software company producing a package for an insurance company, for instance, might also purchase its insurance services from what is effectively one of its own customers. Both companies want to sell to each other, affecting each others eventual buying decisions to a varying degree. Usually industrial buying is seen not as single events, but as organisational decisionmaking processes where multiple individuals decide on a purchase. Their framework consists of a matrix of buy classes and buy phases. 5.16 BUY CLASSES 1. New Tasks The first-time buyer seeks a wide variety of information to explore alternative purchasing solutions to his organisational problem. The greater the cost or perceived risks related to the purchase, the greater the need for information and the larger the number of participants in the buying centre. 2. Modified Rebuy The buyer wants to replace a product the organisation uses. The decision making may involve plans to modify the product specifications, prices, terms or suppliers as when managers of the company believe that such a change will enhance quality or reduce cost.
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In such circumstances, the buying centre proved to require fewer participants and allow for a quicker decision process than in a new task buy class. 3. Straight Rebuy The buyer routinely reorders a product with no modifications. The buyer retains the supplier as long as the level of satisfaction with the delivery, quality and price is maintained. New suppliers are considered only when these conditions change. The challenge for the new supplier is to offer better conditions or draw the buyers attention to greater benefits than in the current offering. Based on field research, Robinson, Faris and Wind divided the buyer purchase process into eight sequential, distinct but interrelated phases 1. Recognition of the organisational problem or need; 2. Determination of the characteristics of the item and the quantity needed; 3. Description of the characteristics of the item and the quantity needed; 4. Search for and qualification of potential sources; 5. Acquisition and analysis of proposals; 6. Evaluation of the proposals and selection of suppliers; 7. Selection of an order routine; 8. Performance feedback and evaluation. The buying process can vary from highly formalised to an approximation depending on the nature of the buying organisation, the size of the deal and the buying situation. The relationship between the buyer and seller is initiated in phases 1 and 2. Assessing the buyers needs and determining gaps between the current and desired situation is important. Buyers need assistance in forming realistic perceptions of both the current and the desired situation. Need gaps create the motive behind any purchase. The relationship needs to be developed during phases 3 to 7. A sales person must be aware that a buyer not only has functional needs, but psychological, social, knowledge and situational needs as well. These components should be addressed in meetings in order to obtain commitment. The purchase can be a one-time transaction of a repetitive nature. When there are multiple deliveries, the supplier and buyer must agree on an order routine. As buy phases are completed, the process of creeping commitment occurs and reduces the likelihood of new suppliers gaining access to the buying situation. During the performance feedback and evaluation phase, the relationship between the seller and buyer can develop into a longer term engagement. Buyer loyalty and customer satisfaction are primarily determined by the sales activities during this last phase. The model
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explains the likely interaction between buyer and seller activities given the purchase needs of an organisation. It helps sales personnel deliver the correct message at the right time. Suppliers need to fill out this matrix for their firms specific situation. For each cell in the matrix (buy situation and buy phase), the following questions must be answered: Is this combination of situation and phase relevant? Which organisation members influence this purchase decision? What are the used performance indicators? What are the information sources?
5.17 BUYING CENTER Recall that there are often multiple decision makers involved in organizational purchases. This requires that the marketer is aware of the needs of the various constituencies involved in making decisions. Additionally, there can be constituencies in an organization who do not have decision-making authority, but who nonetheless might have some influence over the purchase and consumption process. Users: If you are a secretary, you might have had the experience of arriving to work one day to find a new typewriter on your desk, whether or not you even wanted it. A salesperson would not call on you if you had no influence over what product was purchased. However, if you and your co-workers submit numerous complaints about missing or problematic features of the new replacements, the salesperson might be faced with a very expensive customer service problem to solve. A user is the end consumer of a product. Influencers: Perhaps in this case, the office manager was consulted with regard to features or specifications to set in the purchase of new typewriters. Although the office manager might have no decision-making authority with regard to the purchase, whatever specifications s/he requests could be used without change in making the purchase. A salesperson might need to be aware of these influencers - a special trick is to get the influencer to write a specification list that happens to match the sellers product features! An influencer is someone who has influence over what is purchased. Deciders: In this case, some middle manager, ignorant of the needs of secretaries, might have made the decision as to when and what to purchase. The point of this statement is that the marketer or seller must be aware of how it is that decisions are made and often must focus some or all efforts at whomever it is that makes decisions in the organization. Note, however, that decision-making authority does not necessarily mean that this person exerts any influence on what is purchased. The company president might be the only person who signs all purchase requisitions, and therefore has ultimate decision authority, but might otherwise merely sign some requisitions without question or involvement. A decider is someone who ultimately has authority if or what to purchase.
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Buyers: The final purchase transaction might be left to a purchasing agent who otherwise has no involvement in decision-making. A sales agent for an office equipment supply house might help an organization to decide what brand of typewriters would be best, but that organization could then allow the purchasing agent to find the best deal on that brand, and the best deal with regard to price might come from a competing office supply house. A responsibility of salespeople, then, is often to maintain good, trusting, and long-term relationships with the purchasing agents in prospective buying organizations, whether or not they have purchased in the past. A buyer is someone who arranges the transaction. Gatekeepers: Why do salespeople often give secretaries little gifts of chocolates or flowers or an occasional free lunch? A secretary can be nice or nasty in passing information in either direction. The prospective buyers secretaries can be helpful in providing names, telephone numbers, and office hours of key members of a buying center in an organization. They can also be helpful in passing messages from the salesperson to members of the organization. A gatekeeper could include anyone in the organization who can control the flow of information. Some books use the term Decision Making Unit to describe the notion of the buying center, and some additionally include the entity of initiator. An initiator would be a person who initiates the idea or a purchase.
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Note that the idea of the Buying Center is conceptual - there is no such department in any organization! 5.18 CONSUMER BEHAVIOUR IN INDIA CONTEXT EMERGING ISSUES India has come to be known as a nation producing value-enhanced, superior, trained human power. Indians have made their mark in the fields of information technology, biotechnology, pure sciences and economics. With the globalisation of the job market, demand and acceptance of Indian skills worldwide has opened up opportunities for new jobs within the country, particularly back office operations of multinational corporations. Furthermore, the domestic service e sector itself is witnessing robust growth. The emerging flat world is bringing about a confluence of cultures and new lifestyles across India. The new lifestyle trends are altering the fabric of Indian society and also modifying its social and financial behaviour. Shift in Consumer Tastes The shift in tastes and preferences of Indian consumers from traditional and conservative looking product lines to more varied, modern and liberal assortment of commodities can be attributed to some social and economic trends indicated below:
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Joint households making way for nuclear families. Increased mobility, especially for career advancement. Increase in the number of working women and a growing awareness among women to carve a career while managing a family. Increasing tendency to spend on fashion, health, fitness, education and more importantly self, attributed to increased incomes, societal factors and independence from parental pressures.
The emerging trends are more pronounced in metropolitan cities because of the availability of a broader range and better quality of products and services there. Overridden by guilt over protracted absence, fatigue or work pressures, the parent-centred family has changed its orbit and become child-centred. For most families, cultural values used to be imparted to children by grandparents, but with increased urbanisation, values are now self-acquired. Technology has taken the place of grandparents and mothers as custodians and teachers of culture. With joint families disintegrating, the social and financial responsibilities of the household have to be shared by husband and wife in the nuclear family. The joint family was a protection against untoward incidents. That natural protection now needs to be replaced by financial planning to protect families from economic shock and ensure steady incomes to manage old age needs. There is an increasing trend in literacy and education levels. There is a growing inclination to provide quality education for children. Gender discrimination Career opportunities and better education have offered women greater financial and emotional freedom; this is leveling the playing field at home. However, this change in social standing of women is evident more in urban India, especially in upper income groups. Also, gender discrimination persists in major sections of the society, which acts as a major impediment for women acquiring basic education and social skills. Rural Indias needs Technology has also made a significant impact on the lives of consumers. With television and the Internet extending their reach to rural India, people are better informed and their aspirations have changed. There is a need to understand the consumer behaviour and needs of rural India and develop products, distribution channels and communication media specially to address those needs.
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The changing face of Indian society is bringing with it new challenges and opportunities. It will be a new India where women and children will claim more importance, where rural folks will be more demanding and where products and service offerings will be tailored to suit this new set of consumers. 5.19 CHARACTERISTICS OF THE INDIAN CONSUMER BEHAVIOR The Indian consumers are noted for the high degree of value orientation. Such orientation to value has labeled Indians as one of the most discerning consumers in the world. Even, luxury brands have to design a unique pricing strategy in order to get a foothold in the Indian market. Indian consumers have a high degree of family orientation. This orientation in fact, extends to the extended family and friends as well. Brands with identities that support family values tend to be popular and accepted easily in the Indian market. Indian consumers are also associated with values of nurturing, care and affection. These values are far more dominant that values of ambition and achievement. Product which communicate feelings and emotions gel with the Indian consumers. Apart from psychology and economics, the role of history and tradition in shaping the Indian consumer behavior is quite unique. Perhaps, only in India, one sees traditional products along side modern products. For example, hair oils and tooth powder existing with shampoos and toothpaste. Different Segments of Indian Consumers The Socialites Socialites belong to the upper class. They prefer to shop in specialty stores, go to clubs on weekends, and spend a good amount on luxury goods. They are always looking for something different. They are the darlings of exclusive establishments. They go for high value, exclusive products. Socialites are also very branding conscious and would go only for the best known in the market. The Conservatives The Conservatives belong to the middle class. The conservative segment is the reflection of the true Indian culture. They are traditional in their outlook, cautious in their approach towards purchases; spend more time with family than in partying and focus more on savings than spending. Slow in decision making, they seek a lot of information before making any purchase. They look for durability and functionality but at the same time is also image conscious.
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They prefer high value consumer products, but often have to settle for the more affordable one. These habits in turn affect their purchasing habits where they are trying to go for the middle and upper middle level priced products. The Working Women The working woman segment is the one, which has seen a tremendous growth in the late nineties. This segment has opened the floodgates for the Indian retailers. The working woman today has grown out of her long-standing image of being the homemaker. Today, she is rubbing shoulders with men, proving herself to be equally good, if not better. Working women have their own mind in decision to purchase the products that appeal to them. Indias Rich Indias rich can be categorized into five major categories as follows: The Rich These people are upwardly mobile. Some of them in this category are Double Income No Kids (DINK) households. They spend more on leisure and entertainment-activities than on future looking investments. Across the category, backgrounds are distinctly middle class. They aspire, therefore, to attain the super-rich status. The Super Rich There are less DINK families here than in the rich category. The Super Rich are mainly professionals and devoted to consumerism. They buy many durables and are status conscious. The Ultra Rich There is no typical profile of the ultra-rich. There are some DINK households of middle-level executives. Some single earning households are of first generation entrepreneurs. Some rich farmers, who have been rich for a long time, belong to this category. The Sheer Rich They do not have a homogenous profile. There are joint families as well as nuclear families in this category. They consume services greatly. They own multiple cars and houses. They aspire to social status and power. The Obscenely Rich They are first-generation entrepreneurs who have made it big. Some of them are techies. A variety of people belong to this category. They are just equivalent to the rich in the developed countries. They crave for exclusivity in what they buy. Most premium brands are relevant to them.
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Rural Consumer About three quarters of the Indian population are in the rural areas and with the growing middle class, specially in the Indian cities; the spill over effect of the growing urban middle class is also felt in the rural areas. The Indian rural market has been growing at 3-4% per annum, adding more than 1 million new consumers every year and now accounts for close to 50% of the volume consumption of fast-moving consumer goods (FMCG) in India. The market size of the fast moving consumer goods sector is projected to more than double to US$ 23.25 billion by 2010 from the present US$ 11.16 billion. As a result, it is becoming an important market place for fast moving consumer goods as well as consumer durables. Increasing Awareness of Indian Consumers Over the years, as a result of the increasing literacy in the country, exposure to the west, satellite television, foreign magazines and newspapers, there is a significant increase of consumer awareness among the Indians. Today more and more consumers are selective on the quality of the products/services. This awareness has made the Indian consumers seek more and more reliable sources for purchases such as organized retail chains that have a corporate background and where the accountability is more pronounced. The consumer also seeks to purchase from a place where his/her feedback is more valued. Indian consumers are now more aware and discerning, and are knowledgeable about technology, products and the market and are beginning to demand benefits beyond just availability of a range of products that came from trusted manufacturers. The Indian consumers are price sensitive and prefer to buy value for money products. Marketing Strategies Online Marketing Currently, the products Indian consumers are buying through online are greeting cards, clothes, CDs/VCDs/DVDs, cassettes, books, magazines, medicine and educational material. The popular online shops in consumer include: www.ebay.in www.shopping.rediff.com www.reliablegreetings.com www.shopping.expomarkets.com
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Celebrity Influence This is an important tool which is able to influence Indian consumer buying behaviour. In India, celebrities are being increasingly used in marketing communication by marketers to lend personality to their products. With the visual media becoming more popular the use of celebrities in the TV media has increased. Celebrities create headlines. Their activities and movements are being closely watched and imitated. What they endorse sell like hot cakes. It is not surprising therefore that using celebrities in advertisements has become common practice. In India especially, it is not difficult to look for the reasons as to why companies are increasingly using celebrities. Indians always love their heroes and heroines. Consumers like advertisements more if they are admirers of the celebrities in the advertisements. When a consumer likes the celebrity in the advertisement, he or she is more likely to accept what the celebrity says about the advertised product and therefore will develop more positive feelings toward the advertisement and the brand itself. Famous celebrities are able to attract attention and retain attention by their mere presence in the advertisements. In the midst of the advertisement clutter, the advertisements that celebrities endorse also achieve high recall rates. When people see their favoured reference group members or celebrities in the advertisements, they pay more attention to them. Celebrities may also help reposition products. Products with sagging sales needs some boosting and in this Indian celebrities can help by way of they endorsing the product concerned. Quality Oriented Outlets Indian consumers looking for quality choose expensive brands as they feel that price is an indicator of quality. However, in the absence of well known brands in selected product range, consumers are likely to take cues from well established retail outlets hoping that these outlets carry quality products. Freebies Indian consumer buying behaviour is influenced by freebies. Freebies are consumer products given free of charge as gifts to purchases of selected products above a certain value. TVs, washing machines, refrigerators, and ready made clothes are some of the product categories in which freebies are given to Indian consumers. Freebies generally comprise tooth paste, soaps, detergent, cooking oil etc.
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Eco-Friendly Products The environmental awareness in India has started affecting marketing of products based upon their eco-friendliness. In general, Indian consumers are likely to buy environmentally responsible products and packs. The future key for marketing could be to select more ethical and ecological responsible products and packaging, which is also convenient for consumers, thus, balancing environmental concerns with commercial considerations. Consumers in India are taking lead in prompting manufacturers to adopt technologies to produce eco-friendly products. 5.20 CHANGING TRENDS IN INDIAN CONSUMER BEHAVIOUR Bulk Purchasing
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Urbanisation is taking place in India at a dramatic pace and is influencing the life style and buying behaviour of the consumers. The working urbanites are depending more on fast and ready-to-serve food, they take less pain in traditional method of cooking and cleaning. Bulk purchases from hyper stores seems to be the trend these days with purchasing becoming more of a once-a-week affair, rather than frequent visits to the neighbourhood market/store/vendor. The popular growing shopping trend among urbanities is purchasing from super markets to hyper stores. Trendy Lifestyles The current urban middle and upper class Indian consumer buying behaviour to a large extent has western influence. There is an increase in positive attitude towards western trends. The Indian consumer has become much more open-minded and experimental in his/her perspective. There is now an exponential growth of western trend reaching the Indian consumer by way of the media and Indians working abroad. Foreign brands have gained wide consumer acceptance in India, they include items such as; Beverages Packed food Ready to eat food Pre-cooked food Canned food Personal care products Audio/video products
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Garment and apparel Footwear Sportswear Toys Gift items
Foreign brands vie increasingly with domestic brands for the growing market in India. Foreign made furniture is well accepted by the Indian consumers. Malaysian, Chinese, Italian furniture are growing in popularity in India. Indian consumers have also developed lifestyles which have emerged from changing attitudes and mind sets; exposure to western influences and a need for self-gratification. Beauty parlours in cities, eateries, designer wear, watches, hi-tech products are a few instances which reflect these changes. Buyers Market In The Making
The sellers market is slowly moving towards becoming the buyers market. Since, Indias economic liberalization policies were initiated in 1991, many new product offerings have entered the Indian market and product variety has also increased manifold. Import licensing restrictions are being eliminated and tariffs significantly reduced and this has led to large range of consumer goods made available in India. Indian consumers have always preferred foreign goods and with the liberalization, they now have a choice of foreign products vis--vis the local products. Consumer Spending Behaviour
The way Indian consumers are spending their money on various items has changed in recent years. The share being spent on the basis (food and beverages) has fallen from 54.07 per cent in 1992-93 to 44.8 per cent in 2002-03. Other items have increased in importance, for example, medical and healthcare spending has increased from 3.5 per cent to 8.5 per cent of total expenditure over the same period, a compound growth rate of 19.71 per cent. Similarly spending on transport and communication has grown at 13.2 per cent. While the Compound Annual Growth Rate (CAGR) in total consumer spending has been around 12 per cent a year over the past decade, there have been sharp ups and downs. Consumer expenditure has been in tandem with the annual GDP growth. 5.21 SUMMARY Consumerism is a recent and universal phenomenon. It is a social movement. Consumerism is all about protection of the interests of the consumers. Consumerism is a movement or policies aimed at regulating the products or services, methods or
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standards of manufacturers, sellers and advertisers in the interest of buyers, such regulation maybe institutional, statutory or embodied in a voluntary code occupied by a particular industry or it may result more indirectly from the influence of consumer organizations. The U.N. guidelines for consumer protection are meant to achieve the following objectives: (a) to assist countries in achieving or maintaining adequate protection for their population as consumers; (b) to facilitate production and distribution patterns responsive to the needs and desires of consumers; (c) to encourage high levels of ethical conduct for those engaged in the production and distribution of goods and services to consumers; (d) to assist countries in curbing abusive business practices by all enterprises at the national and international levels which adversely affect consumers; (e) to facilitate the development of independent consumer groups; (f) to further international cooperation in the field of consumer protection; (g) to encourage the development of market conditions which provide consumers with greater choice at lower prices. In order to protect the consumers from exploitation and to save them from adulterated and substandard goods and deficient services the Consumer Protection Act came into force on 15th April, 1986 and it applies to the whole of India except the State of Jammu and Kashmir. The Consumer Protection Act 1986 is a social welfare legislation which was enacted as a result of widespread consumer protection movement. The main object of the legislature in the enactment of this act is to provide for the better protection of the interests of the consumer and to make provisions for establishment of consumer councils and other authorities for settlement of consumer disputes and matter therewith connected The act was passed in Lok Sabha on 9th December,1986 and Rajya Sabha on 10th December, 1986 and assented by the President of India on 24th December, 1986 and was published in the Gazette of India on 26th December, 1986. The Act provides following remedies to an aggrieved consumer: (a) removal of defects in goods or deficiency in service (b) replacement of defective goods with new goods of similar description which shall be free from any defect (c) return of price paid by the consumer (d) payment of compensation for any loss or injury suffered by the consumer (e) discontinue the restrictive, or unfair trade practice, and not to repeat it (f) withdraw the hazardous goods from being offered for sale and not to offer them for sale (g) provide for adequate cost to the aggrieved party. The Consumer Production Act provides for a three tier system of redressal agencies: one at district level known as District Forum, second at state level known as State Commission, and third at national level known as National Commission. A complaint is to be made to the district forum of the concerned district where the value of goods and services and compensation, if any, is up to Rs. 20 lakhs, to the State Commission between Rs . 20 lakhs and Rs. 100 lakhs, and to the National Commission for more than Rs. 100 lakhs. Interestingly, there is provision for appeals against the orders of a particular redressal forum by the aggrieved party before the
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next higher echelon and even from the findings of the National Commission before the Supreme Court. The consumer rights include (i) right to safety (b) right to information (iii) right to choose (iv) right to be heard (v) right to seek redressal (vi) right to education. Consumer protection means safeguarding the rights and interests of consumers. It includes all the measures aimed at protecting the rights and interests of consumers. Consumers need protection due to the following reasons: (i) illiteracy and ignorance (ii) unorganised consumers (iii) spurious goods (iv) deceptive advertising (v) malpractices of businessmen (vi) freedom of enterprise (vii) legitimacy for existence (viii) trusteeship There are four main methods of protecting the interests of consumers: (i) Business self-regulation (ii) consumer self-help (iii) consumers associations (iv) Government Regulations The State can ensure consumer protection through legislative, executive and judicial actions. The laws enacted by the Government must be strictly enforced by the executive. Government of India has enacted several laws to protect the interests and rights of consumers. Some of these laws are: The Essential Commodities Act, 1955 which aims to regulate and control the production, supply and distribution and prices of essential commodities, The Prevention of Food Adulteration Act, 1954 which aims to check adulteration in food items and eatables. The Drugs and Cosmetics Act, 1940 which seeks to ensure purity and quality in drugs and cosmetics, The Standards of Weights and Measures Act, 1956 which aims at ensuring that consumers get the right weight and measurement in products, The Household Electrical Appliances (Quality Control) Order, 1976 which seeks to ensure safety and quality in the manufacture of electrical appliances and The Consumer Protection Act, 1986 which seeks to provide speedy and inexpensive redressal to the grievances of consumers. The study of consumers helps firms and organizations improve their marketing strategies by understanding issues such as how the psychology of how consumers think, feel, reason, and select between different alternatives (e.g., brands, products); the psychology of how the consumer is influenced by his or her environment (e.g., culture, family, signs, media); the behavior of consumers while shopping or making other marketing decisions; limitations in consumer knowledge or information processing abilities influence decisions and marketing outcome; how consumer motivation and decision strategies differ between products that differ in their level of importance or interest that they entail for the consumer; and how marketers can adapt and improve their marketing campaigns and marketing strategies to more effectively reach the consumer. Mostly three types of supports are used for online consumers; you can choose all three or any of them which include Email Support, Live Chat and Telephone Helpline. The industrial or organizational buying decision process starts with identifying the buying needs, followed by identifying the product characteristics. At this point, the buyer takes a make or buy decision. If the decision is to buy, then the buying
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process continues with the search for vendors followed by qualifying them. The vendors are then requested to send in their proposals and quotations relating to the purchase requirement. Organizational consumers purchase for further production , usage in operating the organization, and/or resale to other consumers Organisational buyers often continually adjust their buying decisions on the basis of projected sales figures, buying more units when forecast sales are higher. The result can be a sort of pendulum effect, with a knock-on effect throughout the buying chain as each chain member adjusts its buying patterns accordingly. Usually industrial buying is seen not as single events, but as organisational decisionmaking processes where multiple individuals decide on a purchase. Their framework consists of a matrix of buy classes and buy phases which are new task, modified rebuy and straight rebuy. Often multiple decision makers are involved in organizational purchases. This requires that the marketer is aware of the needs of the various constituencies involved in making decisions. Additionally, there can be constituencies in an organization who do not have decision-making authority, but who nonetheless might have some influence over the purchase and consumption process. Urbanisation is taking place in India at a dramatic pace and is influencing the life style and buying behaviour of the consumers. The working urbanites are depending more on fast and ready-to-serve food, they take less pain in traditional method of cooking and cleaning. Bulk purchases from hyper stores seems to be the trend these days with purchasing becoming more of a once-a-week affair, rather than frequent visits to the neighbourhood market/store/vendor. The popular growing shopping trend among urbanities is purchasing from super markets to hyper stores.
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5.22 REVIEW QUESTIONS Short questions 1. Define consumerism 2. What are the components of consumerism? 3. What is meant by consumer protection? 4. What are the objectives of UN guidelines for consumer protection? 5. What is the objective of the consumer protection act, 1986? 6. What are the three tiers of the consumer courts with respect to consumer protection? 7. What is the work of consumer protection councils? 8. What are the various consumer disputes redressal agencies? 9. What are the different types of consumer rights? 10. What is meant by protection of consumer rights? 11. What are the different methods of consumer protection? 12. What do you mean by online consumer behaviour?
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13. What is meant by Organisational and industrial buyer behaviour? 14. Mention the participants in the industrial markets scenario 15. What are the differences between organisational and consumer marketing? 16. What are the different buy classes? 17. What is meant by a buying centre? Long Questions 1. Write a detailed note on Consumerism in India. 2. What are the rights and redressal mechanism available for a consumer in India? 3. Explain the applicability of the Indian Consumer Act, 1986. 4. Explain the different methods available for Consumer Protection. What is your opinion on the effectiveness of the same as far as the Indian experience is concerned? 5. Why is predicting consumer behaviour considered to be a difficult task? 6. Mention the different types of supports which could be used for understanding online consumer behavior. 7. Explain the differences between consumer and industrial marketing. Where do you think there is more scope for personal selling? 8. Why is organizational buying considered to be more complex than consumer buying? 9. Mention the different segments of Indian consumers 10. Explain the trends in Indian consumer behaviour together with reasons for the same.
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DBA 1722 CONSUMER BEHAVIOUR

IV SEMESTER COURSE MATERIAL

Centre for Distance Education

Author Dr. V.J SIVAKUMAR, .J. Dr. V.J. SIVAKUMAR,

Reviewer Ms. Ms. A. Shameem

Editorial Board Dr.T.V.Geetha .T.V Dr.T.V.Geetha

Dr.H.Peeru .H.Peer Dr.H.P eer u Mohamed

Dr.C Chellappan .C. Dr.C. Chella ppan

Dr.A.K .A.Kannan Dr.A.K annan

Copyrights Reserved (For Private Circulation only) ii

Dr.V.J. Sivakumar Author

DBA 1722 CONSUMER BEHAVIOUR

UNIT II CONSUMER AS AN INDIVIDUAL

2.5 2.6 2.7

2.8 2.9 2.10 2.11 2.12 2.13 2.14

2.4.3 2.4.4 2.4.5

UNIT III COSUMERS IN THEIR SOCIAL AND CULTURAL SETTINGS

UNIT IV CONSUMER DECISION PROCESS AND POST- PURCHASE BEHAVIOUR

UNIT V ADDITIONAL DIMENSIONS

155 155 156 157 161

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Table 2.1 Emotional Dimensions, Emotions and Emotional Indicators.

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Figure 2.3 Lifestyle and the Consumption Process

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