Consumer Behavior

Consumer behavior can be defined as: "The decision process and physical activity engaged
in when evaluating, acquiring, using or disposing of goods and services."
This definition raises a few queries in our minds-what or who are consumers? What is the
decision process that they engage in? Answers to these questions help define the broad
nature of consumer behavior.
Decision Process - We have defined consumer behaviour as the "decision process" and
"physical activity" engaged in by individuals. The physical activity which we focus upon in
the course of consumer behaviour is that of making the purchase, as explained in the
previous section. But there are a number of influences affecting the purchase and a number
of individuals maybe involved in exerting these influences. So the purchase action that is
visible to us maybe the result of a interplay of a number of complex and hidden variables
which may have influenced the ultimate purchase activity. The final purchase is just one
activity in the entire series of physical and mental activities that may have occurred in this
whole process. Some of these activities may precede the purchase while others may take
place later. But because all these activities exert influence on the purchase they are
considered a part of consumer behaviour, more specifically a part of the decision process.
Let us go back to the example of a father, we call Mr. Bannerjee. buying a TV for his family.
It is possible that the consumer behaviour involving mental processes and activities may
have taken place in the following sequence and manner. Mr. Bannerjee's teenage daughter,
sees a new colour TV at her friend's house. She then raises the issue of buying a colour TV to
replace then existing black and white TV. The family discusses the issue and agrees that it is
indeed time they bought a colour TV. The next day Mr. Bannerjee discusses the matter with
his friend and colleague, Mr. Chandra. He visits Mr. Chandra's home to see for himself the
quality of the EC colour TV that he has. Mrs. Bannerjee also finds out more about the
various brands, prices and quality of different brands, from her sister who recently
purchased a colour TV. Her sister has a Crown TV and recommends the same. Meanwhile
Mr. Bannerjee's daughter checks out the brands of TVs that her various friends have at their
respective homes and concludes that BPL is the best. In the next few days the entire
Bannerjee family makes it a point to carefully study any advertisements of colour TV that
appear in the newspaper, magazine or TV. At all social occasions they raise the question of
which is the best colour TV to buy amongst their friends and relatives and mentally, mark
the different positive and negative points of different brands. Within two weeks the
Bannerjees have collected enough information to take a decision to buy BPL, but they need
more specific information. So one evening they visit two dealer outlets in their neighbor
hood market to find out more about prices. They find that the BPL TV is rather expensive
and beyond their budget. So they settle for Crown which was recommended by quite a few
of their friends and the price is affordable too. Moreover, the dealer offered them a special
five per cent discount and a free antenna along with free installation. The information that
this company would soon he offering a VCR at a reasonable price clinched the decision in
favour of Crown.
The activity and thought process which resulted in the final purchase of TV started well
before the actual purchase took place and was spread over a period of two to three weeks.
This entire process forms part of consumer behaviour.
Depending on the nature of product or service in question, the mental decision process
accompanying the physical act of purchase may vary from very simple to extremely
complex, and from being instantaneous in nature to time consuming and elaborate. But
they all constitute consumer behaviour. Thus, not only the overt, observable physical
behaviour exhibited in the art of making a purchase, but all the accompanying, preceding
and following mental processes and activities also are an integral part of consumer
behaviour.
In case of the stock of regular brands of toilet soap being depleted at home, its purchase
needs no elaborate decision process or activity of comparison and evaluation. Rather the
purchase decision is almost an automatic one.

Application of Consumer Behavior in Marketing

Marketing is defined as "human activity directed at satisfying needs and wants through exchange
processes". Thus the beginning of marketing lies in identifying unsatisfied human needs and wants
and understanding the ensuing activity which people engage in to fulfill these. And that, as we have
described, is the realm of consumer behaviour. Consumer behaviour has a number of applications in
the area of marketing as described in the following paragraphs.

1. Analyzing Market Opportunity: Study of consumer behaviour helps in identifying needs and
wants which are unfulfilled. This is done by examining trends in income, consumer’s lifestyles and
emerging influences. The trend is towards increasing number of working wives. and greater
emphasis on leisure and convenience have signalled the emerging needs for household gadgets such
as vacuum cleaner, washing machine and mixer grinder. Tortoise Mosquito repellant coils and Good
Knight electrical repellants were marketed in response to a genuinely felt need of the people. Its
rapidly rising sales graph is an indication of how well the product has satisfied the consumer's need.

2. Selecting the Target Market: The study of the consumer trends would reveal distinct groups of
consumers with very distinct needs and wants. Knowing who these groups are, how they behave,
how they decide to buy enables the marketer to market products/services especially suited to their
needs. All this is made possible only by studying in depth the consumer and his purchase behaviour.

A study of potential consumers for shampoo revealed that there was a class of consumers who
would like to use shampoo only on special occasions and who otherwise use soap to wash their hair.
Further, this consumer class would not afford to spend more than three or four rupees on shampoo.
Having identified this target market, companies with leading brands launched their shampoos in
small sachets containing enough quantity for one wash and priced just at two or three rupees.

3. Determining the Product Mix: Having identified the unfulfilled need slot and having modified the
product to suit differing consumer tastes, the marketer now has to get down to the brass tacks of
marketing. He has to determine the right mix of product, price promotion and advertising. Again
consumer behaviour is extremely useful as it helps find answers to many perplexing questions.

Product: The marketer has the product that will satisfy hitherto unfulfilled consumer need, but he
must decide the size, shape and attributes of the product. He must figure out whether it is better to
have one single product or a number of models to choose from. Does the product require any
special kind of packaging? Does it need any guarantee or after sales service? What associated
products and services can be offered alongside?

Maggi Noodles were first launched in the most common flavours such as masala and capsicum.
Having succeeded with these, other flavours such as garlic and sambhar were launched with the
objective of appealing to specific regional tastes. However, these flavours did not succeed. Recently,
exotic flavour such as prawns has been launched. All these are attempts to modify the product by
adding special features, attributes which might enhance the product appeal to the consumers.

The study of consumer behaviour also guides the marketer in making decisions regarding packaging.
Pan Parag was first introduced in tins. But study of consumer behaviour revealed that people
wanted smaller packing which they could conveniently carry on their person and in response to this
the individual pouches were introduced. Further study of consumers revealed a problem with , these
pouches. Once opened and kept in the purse or pocket, the pan masala would spill out of the pouch
into the purse or pocket. To overcome this problem, Pan Parag has now launched a pouch with a zip .
You eat as much as you want, zip up the packet and put it in your pocket without fear of spillage and
wastage.

The study of consumer needs revealed the need for a water storage facility. in the kitchen and
bathroom but which didn't occupy floor space. In response to this need, Sintex added the overhead
indoor loft tank to their existing range of outdoor. roof top water storage tanks.

Price: What price should the marketer Charge for the product? Should it be the same as that of the
competing product or lower or higher ? Should the price be marked on the product or left to the
discretion of the retailer to charge what he can from the customer? Should any price discounts be
offered? What is the customer perception of a lower or higher price? Would a lower price stimulate
sales? Or is a lower price associated with poor quality?

These are the kinds of questions facing a marketer when taking a decision regarding pricing. The
marketer has to determine the price level which makes the image of the product and which also
maximises the sales revenue. For doing so he must understand the way his product is perceived by
consumers, the criticality of the price as a purchase decision variable and how an increase or
decrease in price would affect the sales. It is only through continuous study of consumer behaviour
in actual buying situations that the marketer can hope to find answers to these issues.

Distribution: Having determined the product size, shape, packaging and price, the next decision the
marketer has to make is regarding the distribution channel. What . type of retail outlets should sell
the products? Should it be sold through all the retail outlets or only through a selected few? Should
it be sold through existing outlets which also sell competing brands or should new outlets selling
exclusively your brand of product be created? How critical is the location of the retail outlets from
the consumers' viewpoint? Does the consumer look for the nearest convenient location or is he
willing to travel some distance for buying the product?

The answers to all these questions can only be found when the marketer has a good understanding
of the consumers' needs which are being fulfilled by his product and the manner in which consumers
arrive at the decision to buy. A few years ago, Eureka Forbes introduced a vacuum cleaner in the
Indian market. It was not only launch of a new brand, but rather a launch of a new product concept.
No retail outlets were selling vacuum cleaners very few consumers knew much about the product
and fewer still were willing to buy it. Under these circumstances, the company decided to sell the
product only through personal selling with the salesman calling on the consumer at his home. Here
'
the salesman had enough time to explain, demonstrate and convince the prospective customer
about the utility of the vacuum cleaner. In a retail outlet situation, all this would just not have been
possible. The retailer has neither the time nor the detailed knowledge required to sell such a new
product concept. This distribution strategy of Eureka Forbes, based on a very fine understanding of
the consumer behaviour, has yielded good sales results. The product concept is well accepted in the
urban markets and today the vacuum cleaner, in addition to personal selling is also sold through
some selected retail outlets.

Promotion: The marketer here is concerned with finding the most effective methods of promotion
which will make the product stand out amongst the clutter of so many other brands: and products,
which will help increase the sales objective and yet be within the budget. This is possible only when
the marketer knows who his target consumers are, where are they located, what media do they
have access to, what is their preferred media and what role does advertising play in influencing the
purchase decision?

Today, TV is the most powerful advertising medium in the country. And many brands spend the
greater part of their promotion and advertising budget on TV. Brands regularly advertised on TV
soon become well recognized names. But as a marketer you have to question the suitability of any
specific medium in case of your specific product and budget. Suppose your product is sold in only a
few geographical markets you may decide to avoid TV altogether and concentrate on point of
purchase promotion and local advertising through local newspaper, hoardings and wall paintings.

In so many cases of industrial product media advertising is very negligible, instead, brochures or
leaflets containing detailed product specification and information are directly mailed to the actual
consumer, and sometimes followed up by a salesman making a call to clinch the deal. This is
primarily because buyer behaviour and informational needs of industrial buyers are very different
from that of consumer buying. But you can make these decisions only when you know your
consumer and understand his behaviour.

Use in Non-profit and Social Marketing: The knowledge of consumer behaviour is also useful in the
marketing of non-profit or social or governmental services of institution such as hospitals, voluntary
agencies, law enforcement and tax collection agencies.

The income tax authorities have always been perceived in negative manner by the common man
who fears them and views them in a suspicious light. To overcome this poor image, advertisements
on TV and in newspapers and magazines are regularly released, wherein a friendly, helpful image is
sought to be projected. Moreover, there is greater dissemination of information regarding the rights
and responsibilities of the taxpayer. Similarly, Delhi Police is trying to overcome the problem of poor
image by projecting itself as always alert and available for help through regular newspaper
advertisements.

Factors Influencing Consumer Behavior

Consumer behaviour is affected by a host of variables, ranging from personal motivations,
needs, attitudes and values, personality characteristics, socio-economic and cultural
background, age, sex, professional status to social influences of various kinds exerted by
family, friends, colleagues and society as a whole. The combinations of these various factors
produce a different impact on each one of us as manifested in our different behaviour as
consumers. You may think that the best way of utilising your annual saving is to have a
holiday, but your wife thinks it is wisest to invest in a house, while your colleague considers
buying shares as the best way of spending savings. Thus you would find that each person
has his or her own standards of judgments and distinct behaviour in every aspect of his role
as a consumer. But at the same time, underlying the individual differences are similarities
which help explain behaviour of specific types or groups of people. It is these similarities
which make it possible for us to classify and analyse the behaviour of individual consumers.
Psychological factors such as individual consumer needs and motivations, perceptions,
attitudes, the learning process and personality characteristics are the similarities which
operate across different types of people and influence their behaviour. Amongst the social
influences affecting behaviour, we can classify the influences of family, friends, leaders and
the social class to which the 'consumer belongs. Figure II exhibits a detailed model of factors
influencing consumer behaviour. We shall discuss these factors one by one and see how
they influence the individual's behaviour as a consumer.
Psychological Factors

Consumer Needs and Motivations - We all have needs and we consume different goods and
services with the expectation that they will help fulfil these needs. When a need is
sufficiently pressing, it directs the person to seek its satisfaction. It is known as motive. All
our needs can be classified into two categories-primary and secondary. Primary needs or
motives are the physiological needs which we are born with,. such as the need for air,
water, food, clothing, shelter and sex. The secondary needs are our acquired needs which
we have developed in response to the society and environment in which we live. The
secondary needs are the result of the individuals' psychological make-up and his
relationship with other members of the society. The secondary needs may include the need
for power, prestige, esteem, affection, learning, status etc. Clothing is a primary need for all
of us; but the need for three piece tweed suit, or benaras brocade saree or silk kimono are
expressions of our acquired needs. The man wearing a three piece tweed suit may be
seeking to fulfil his status need or his ego need by impressing his friends and family:
All human needs can be classified into five hierarchical categories and this hierarchy is
universally applicable. The theory of hierarchy of needs was propounded by Abraham
Maslow. According to Maslow's hierarchy all needs can be ranked in order of importance
from the low biological needs to the higher level psychological needs. Each level of
unfulfilled need motivates the individual's 'behaviour, and as each successive level of need is
fulfilled people keep moving on to the next higher level of need. In figure III the different
levels of needs have been depicted as being water tight compartments, but in reality there
is always overlap amongst the different levels of needs, since no need is ever totally
satisfied. There is always scope for further fulfilment.
Maslow's hierarchy-of human needs helps us understand consumer motivations. It is useful
for the marketer who can identify what generic level need his product is capable of fulfilling
and accordingly position his product and back it up with relevant marketing inputs. Products
such as food and Clothing are bought to fulfill physiological needs; insurance, burglar
alarms, security services are purchased because they fulfill safety needs; most personal care
products such as soap, toothpaste, shaving cream, perfume are bought primarily because
they serve social needs, And luxury products such as jewellery, expensive clothing, fancy
house and cars are bought mainly to serve ego and self-actualisation needs. The same
product can be sold to entirely distinct customer segments provided the marketer can
correctly identify the need which the product is fulfilling. For instance, a bicycle may be
bought by different customer segments for entirely different reasons. One segment may buy
to use it as a means of commuting. For another segment a bicycle serves a
recreational/leisure need while for a third segment, it fulfils the need of a health aid. Still
another customer segment buys a bicycle for converting into a rickshaw or bicycle cart for
selling fruits, vegetables etc. A bicycle is also purchased for use in competitive sport.

Perception- The second major psychological factor that influences consumer behaviour is
perception. Perception can be described as "how we see the world around us". All the time
we are receiving messages through our five Sense organs viz., eyes, ears, nose, mouth and
skin. The different sights, sounds, smells, tastes and sensations that we feel are known as
stimuli. Each person recognises, selects, organises and interprets these stimuli in his own
individual manner based on his needs, values and expectations and this is known as
perception. Since each individual's needs, motives and expectations are unique therefore
each individual's perception is unique.

Perception helps to explain the phenomenon of why different individuals respond

differently to the same stimulus under the same condition. As a marketing manager, you are
providing stimulus to your consumers through the physical shape, colour, size, fragrance,
feel, taste of your product, its package, advertisements and commercials. Your interest is to
understand why and what different types of perceptions are associated with each of the
stimuli so that you can highlight that particular stimulus or combination of stimuli which
evokes the most favourable perception in the maximum number of consumers. For
example. generally consumers tend to perceive the quality of perfumes on the basis of
package, brand name, price and manufacturer's image.

Every day, every hour of our life we are being bombarded with a variety of stimuli. If we
were to analyse and interpret each one of these stimuli, it may drive us crazy. But we all
have an in-built screening system which helps us to `select' and `recognise' only the relevant
stimuli and ignore all the others. As a person involved in marketing, you would like to ensure
that the stimuli which you are providing are not ignored by the consumers, but rather they
are recognised, interpreted and retained in the consumer memory. In this context, there are
three aspects of perception which are of immediate interest to the marketer. These are
selective exposure, selective distortion and selective retention.

Selective exposure: You must have noticed that when you are on the look-out for
purchasing a specific product, be it camera, refrigerator, television or any other high value
product or service, you suddenly seem to notice more than the usual number of
advertisements pertaining to that specific product. This is because of your selective
exposure. People are more likely to notice stimuli which relate to their immediate needs.
For the marketer, the implication is that he has to carefully and accurately identify his
potential customers since other customers are not at all likely to notice the stimuli. Having
identified the potential customers, the marketer has to ensure that the stimuli are
interesting enough to attract and hold their attention.

Selective Distortion: Let us suppose you have decided to purchase a specific brand `A' of
pressure cooker. Since you have already made your decision you would seek only that
information which reinforces the correctness of your decision.

If you hear some positive remarks made about brand `B' you would tend to find some
shortcoming or flaw in that brand so that you do not feel that you have made a wrong
decision by buying brand `A'. When you attempt to fit information to suit your own ideas or
personal meaning, the process is known as selective distortion. Thus, a marketer may find
that his message is often not received in the intended manner but it is twisted in different
ways by different consumers.

Selective Retention: People forget much of the stimuli which they receive and only retain
that information which reinforces their values and decision. You are more likely to
remember the positive features of brand `A' pressure cooker since they help reassure you
that the decision which you had made was correct.

Personal Factors

A consumer's purchase decisions are also affected by his personal characteristics such as
age, sex, stage in family life-cycle, education, occupation, income, life-style, his overall
personality and overall self-concept. We shall now discuss some of the influences.

Demographic factors and life-cycle stage - The first factor influencing a buyer's decision is
his age. The need for different products and services changes with age. Babies and children
have special needs for products such as milk powder, baby foods and toys. Young adults
need clothes, recreational and educational facilities, transportation and a host of other age
and fashion related consumption needs.

There are certain physiological differences between men and women which result in their
having different consumption needs. Women need specialised medical facilities for
pregnancy and delivery. Their requirement of clothes and cosmetics is different from that of
men. Each gender thus has its own need for specific products and services.
Consumption behaviour is also influenced by the specific stage of the family life cycle. This
family life cycle may be applicable in India only in the urban upper middle classes.

Education and Occupation

Education widens a person's horizons, refines his tastes and makes his outlook more
cosmopolitan. An educated person, as compared to so is less educated, is more likely to
consume educational facilities, books, magazines and other knowledge oriented products
and services. For instance, in India, we find that educated families are more inclined
towards adopting family planning than families which have no educational background.

The occupation also shapes the consumption needs. People following specialised
occupations such as photography, music, dance, carpentry, etc. need special tools and
equipment. But, apart from this specific need, the status and role of a person within an
organisation affects his consumption behaviour. Chief executives would buy three-piece
suits of the best fabric., hand made leather briefcase and use services of airlines and five
star hotels. A junior manager or blue collar worker in the same organisation may also buy a
three-piece suit but he compromises on quality.

Income - The income which a person earns is an extremely important influence on his
consumption behaviour. He may aspire to buy certain goods and services but his income
may become a constraint. Income in this context really refers to the income available for
spending (i.e. income after tax, provident fund and other statutory deductions). The
person's attitude towards spending versus saving and his borrowing power are also
important influencing factors. Small size packaging in sachets for products such as tea,
shampoo, toothpaste are meant for the lower income customers who cannot afford a one
time large outlay of money on such products.

Products which are considered luxuries are more income sensitive than products which fall
in the category of necessities. If you are marketing a luxury product you must keep a close
watch on income and saving trends to avoid decrease in sales resulting from recession. To
avoid sales decline you may need to re-position the product, change the marketing mix or
both.

Personality - Personality is sum total of an individual's psychological traits, characteristics,

motives, habits, attitudes, beliefs and outlooks. Personality is the very essence of individual
differences. In consumer behaviour, personality is defined as those inner psychological
characteristics that both determine and reflect how a person responds to his environmental
stimuli. Personality is enduring and ensures that a person's responses are consistent over
time.

There has been a great deal of research into the concept of personality with the objective of
predicting consumer behaviour, in terms of product and brand choice. The assumption in all
personality related research has been that different types of personalities can be classified
and each type responds differently to the same stimuli, and personality can be used to
identify and predict that response. In case of products such as cigarettes, beer and cars,
personality has been used to segment the market. The runaway success of `Charms'
cigarettes used a urban young, modern, carefree personality for appealing to the potential
market segment of students and other young people. In contrast, surf detergent powder is
promoted with the help of `Lalitaji'-a middle class traditional, forthright and objective
housewife. These are just the right personality variables that would appeal to a potential
customer of surf.

Personality research to predict consumer behaviour has either focused on total personality
profile or a specific trait and attempted to find a correlation with product brand choice. But
both these approaches assume that individuals with a given personality profile or trait are
homogeneous in all other respects such as age, income, education, occupation etc. We have
seen how all these factors strongly influence a consumer's decisions. A much broader, more
comprehensive approach for characterising behavioural patterns is needed and this is
provided by the concept of life-style. 15 Determinations of Consumer Behaviour
Understanding Consumers

Life-Style - Life-styles are defined as patterns in which people live, as expressed by the
manner in which they spend money and time on various activities and interests. Life-style is
a function of our motivations, learning, attitudes, beliefs and opinion, social class,
demographic factors, personality etc. While reading this unit, you are playing the role of a
student. But at the same time you also have your career, family and social roles to play. The
manner in which you blend these different roles reflects your life-style.

Life-style is measured by a technique known as psychographics. It involves measuring

consumers' responses to Activities, Interests and Opinions (AIO), along with collecting
information on demographic factors. Different individual's responses are collected and
analysed to find distinctive life-style groups. Based on the AIO technique, different life-styles
have been identified and described. The different life-styles are then used for market
segmentation, product positioning and for developing promotion campaigns, including new
products.

Social Factors

Reference Groups - As a consumer, your decision to purchase and use certain products and
services, is influenced not only by psychological factors, your personality and life-style, but
also by the people around you with whom you interact and the various social groups to
which you belong. The groups with whom you interact directly or indirectly influence your
purchase decisions and thus their study is of great importance to marketers.

A group is defined as two or more people who interact to achieve individual or common
goals. The three categories of groups which are important for the marketer to understand
are:

Primary and secondary groups: A primary group is one with which an individual interacts on
a regular basis and whose opinion is of importance to him. Family, neighbours, close friends,
colleagues and co-workers are examples of primary groups. Secondary groups are those
with which an individual interacts only occasionally and does not consider their opinion very
important.
Formal and informal groups: Rotary: Lions, Jaycees are some of the well-known social
groups in our society. Labour unions, social clubs and societies are other types of formal
groups to which individuals may belong. A formal group has a highly defined structure,
specific roles and authority positions and specific goals.

In contrast, an informal group is loosely defined and may have no specified roles and goals.
Meeting your neighbors over lunch once a month for friendly exchange of news is an
instance of an informal group.

Membership and symbolic groups: A membership group is one to which a person belongs
or qualifies for membership. All workers in a factory qualify for membership to the labour
union. A symbolic group is one which an individual aspires to belong to, but is not likely to
be received as a member. A head clerk in an office may act as if he belongs to the top
management group by adopting their attitudes, values and modes of dress. Both
membership and symbolic groups influence consumer behaviour but membership groups
have a more direct influence. Primary, informal and small groups exert the maximum
influence on consumers and are of great interest for marketers.

Any of these groups can serve as a reference group for a consumer if it serves as a point of
reference or comparison in the formation of the values, attitudes and behaviour. Different
kinds of groups, whether small or large, formal or informal or symbolic qualify as a reference
group . The concept of reference group is a very wide one and includes both direct and
indirect individual or group influences.