CHAPTER III BUYERS BEHAVIOR

1.1 Meaning and need in Marketing

The job of marketer is to meet and satisfy target customers needs and wants but knowing customer" is not a simple task. Understanding the buying behaviour of the target market for its company products is the essential task for the marketing department. The job of the marketers is to think customer and to guide the company into developing offers, which are meaningful and attractive to target customers and creating solutions that deliver satisfaction to the customers, profits to customer and benefits to the stakeholders. Marketers must study the customer taste , preferences , wants, shopping and buying behaviour because such study provides the clues for developing the new products, price, product changes, messages and other marketing mix elements. An important part of the marketing process is to understand why a customer or buyer makes a purchase. Without such an understanding, businesses find it hard to respond to the customers needs and wants. Marketing theory traditionally splits analysis of buyer or customer behavior into two broad groups for analysis Consumer Buyers and Industrial Buyers Businesses now spend considerable sums trying to learn about what makes customers tick. The questions they try to understand are: Who buys? How do they buy? When do they buy? Where do they buy? Why do they buy? Buying Behaviour is the decision processes and acts of people involved in buying and using products. What we need understand

Why consumers make the purchases that they make? What factors influence consumer purchases? The changing factors in our society.

For a marketing manager, the challenge is to understand how customers might respond to the different elements of the marketing mix that are presented to them. If management can understand these customer responses better than the competition,

then it is a potentially significant source of competitive advantage.

1.1.1 Buying Roles in Buying Behaviour

In the buying behavior there are different roles played in each of consumer and business. Those are involved in the buying decisions. 1.1.1.1Consumer Buying Roles In the consumer buying there are different buying roles; i.e. Initiator: -- A Person who first suggest the idea of buying. Influencer: - A Person who influence the buying decision. Decider: - A Person who takes decisions regarding buying Buyer: - A Person who actually buys the products. User: - A Person who is the user of the product.

1.1.1.2 BUSINESS BUYING ROLES In the business buying there are different buying roles; i.e. Approver: -- A Person who approves the idea of buying. influencer: -- A Person who influence the buying decision. Decider: -- A Person who takes decisions regarding buying

Buyer: -- A Person who actually buys the products. User: -- A Person who is the user of the product.

1.2

TYPES OF BUYERS

There is a great difference between the purchasing of a computer and a car. Buying decisions making varies with the type of buying decision. The types of buying behaviour divided are separately divided as per of consumer and business buying. This is to be extensively divided in four types: Complex Buying Behaviour: -- When the consumers are highly involved in the purchase and aware of significant differences among brands. Complex buying behaviour is where the individual purchases a high value brand and seeks a lot of information before the purchase is made. Dissonance Reducing Buying Behaviour: -- when the consumer are highly involved in the purchase but sees little differences among brands. Dissonance reducing buying behaviour is when buyer are highly involved with the purchase of the product, because the purchase is expensive or infrequent. There is little difference between existing brands an example would be buying a diamond ring, there is perceived little difference between existing diamond brand manufacturers. Habitual Buying Behaviour: -- when the consumer are low involved in the purchase but sees absence of aware of differences among brands. Habitual buying behaviour is where the individual buys a product out of habit e.g. a daily newspaper, sugar or salt. Variety Seeking Buying Behavior: -- when the consumer are low involved in the purchase but sees significant of differences among brands. Variety seeking buying behaviour is where the individual likes to shop around and experiment with different products. So an individual may shop around for different breakfast cereals because he/she wants variety in the mornings!

1.3

FACTORS INFLUENCING BUYER BEHAVIOR

A consumer, making a purchase decision will be affected by the following three factors:

1.3.1
a

Personal Factor

Age : Age in one of the important personal factor which affects buying behaviour of an individual. An individuals taste , preference depends largely on age.

Occupation : Occupation represents profession or work one engaged in. This ultimately decides on ones buying power. Occupation decides his earning as well as spending capacity in the economy. Differences in the income ultimately decides his purchasing power This enables company to decides its market segmentation and marketing mix.

Personality-All the internal traits and behaviors that make a person unique, uniqueness arrives from a person's heredity and personal experience. Examples include: 1. Workaholism 2. Compulsiveness 3. Self confidence 4. Friendliness 5. Adaptability 6. Ambitiousness 7. Dogmatism 8. Authoritarianism 9. Introversion 10. Extroversion 11. Aggressiveness 12. Competitiveness.

Traits effect the way people behave. Marketers try to match the store image to the perceived image of their customers. d Lifestyles-Lifestyles are the consistent patterns people follow in their lives. Eg: healthy foods for a healthy lifestyle.

1.3.2
a

Personal Factors

Motives-A motive is an internal energizing force that orients a person's activities toward motives satisfying then they a can need better or achieving develop a a goal. mix. Actions are effected by a set of motives, not just one. If marketers can identify marketing MASLOW hierarchy of needs!! Physiological Safety Love and Belonging Esteem Self Actualization Need to determine what level of the hierarchy the consumers are at to determine what motivates their purchases.

Perception-What do you see? Perception is the process of selecting, organizing and interpreting information inputs to produce meaning. Information inputs are the sensations received through sight, taste, hearing, smell and touch. Interpreting information is based on what is already familiar, on knowledge that is stored in the memory.

Ability and Knowledge-Need to understand individuals capacity to learn. Learning, changes in a person's behavior caused by information and experience. Therefore to change consumers' behavior about your product, need to give them new information about product...free sample etc. When making buying decisions, buyers must process information. Knowledge is the familiarity with the product and expertise. Inexperience buyers often use prices as an indicator of quality more than those who have knowledge of a product. Learning is the process through which a relatively permanent change in behavior results from the consequences of past behavior.

Attitudes-Knowledge and positive and negative feelings about an object or activitymaybe tangible or intangible, living or non- living.....Drive perceptions Individual learns attitudes through experience and interaction with other people.Consumer attitudes toward a firm and its products greatly influence the success or failure of the firm's marketing strategy. Attitudes and attitude change are influenced by consumers personality and lifestyle.There is a difference between attitude and intention to buy (ability to buy).

1.3.3

Social Factors

Consumer wants, learning, motives etc. are influenced by opinion leaders, person's family, reference groups, social class and culture. a Opinion leaders-Spokespeople etc. Marketers try to attract opinion leaders...they actually use (pay) spokespeople to market their products. McDonalds, Gatorade etc.) Michael Jordon (Nike,

Roles and Family Influences-Role...things you should do based on the expectations of you from your position within a group. People have many roles. Husband, father, employer/ee. Individuals role are continuing to change therefore marketers must continue to update information. Family is the most basic group a person belongs to. Marketers must understand:
o o o

that many family decisions are made by the family unit consumer behavior starts in the family unit family roles and preferences are the model for children's future family (can reject/alter/etc) family buying decisions are a mixture of family interactions and individual decision making family acts an interpreter of social and cultural values for the individual.

The Family life cycle: families go through stages, each stage creates different consumer demands:
o o o o o o o

bachelor stage newly married, young, no children Youngest child Older married couples with dependant children Older married couples with no children living with them Older married couples, no children living at home, head retired Divorced and no children. Reference Groups-Individual identifies with the group to the extent that he takes on many of the values, attitudes or behaviors of the group members. Any group that has a positive or negative influence on a persons attitude and behavior. Affinity

marketing is focused on the desires of consumers that belong to reference groups. The degree to which a reference group will affect a purchase decision depends on an individuals susceptibility to reference group influence and the strength of his/her involvement with the group. d Social Class An open group of individuals who have similar social rank. Social rank may be based on occupation, education, income, wealth, race, ethnic group and possessions. Social class influences many aspects of our lives. Upper Class ,Lower- upper class , upper middle class , middle class , lower middle class Working class, lower class. e Culture and Sub-culture-Culture refers to the set of values, ideas, and attitudes that are accepted by a homogenous group of people and transmitted to the next generation. Culture also determines what is acceptable with product advertising. Culture determines what people wear, eat, reside and travel. Cultural values in the India good conduct , respect for elders , hospitality etc

1.4

BUYING PROCESS
Six Stages to the Consumer Buying Decision Process (For complex decisions). Actual purchasing is only one stage of the process. Not all decision processes lead to a purchase. All consumer decisions do not always include all 6 stages, The 6 stages are:

Problem Recognition : (awareness of need)--difference between the desired state and the actual condition. Hunger stimulates your need to eat .Your need can be stimulated by the marketer through product informationFor eg.: a commercial for a new pair of shoes, stimulates your recognition that you need a new pair of shoes.

Information search-a. Internal search, memory.

b. External search if you need more information. Friends and relatives

(word of mouth). Marketer dominated sources; comparison shopping; public sources etc. A successful information search leaves a buyer with possible alternatives, the evoked set. 3 Evaluation of Alternatives Need to establish criteria for evaluation, features the buyer wants or does not want. Rank/weight alternatives or resume search. May decide that you want to eat something spicy, indian gets highest rank etc. If not satisfied with your choice then return to the search phase. Can you think of another restaurant? Look in the yellow pages etc. Information from different sources may be treated differently. Marketers try to influence by "framing" alternatives.
4

Purchase decision--Choose buying alternative, includes product, package, store, method of purchase etc. Purchase--May differ from decision, time lapse between 4 & 5, product availability. Post-Purchase by instead. Evaluation--outcome: after Satisfaction or Dissatisfaction. etc.

Cognitive Dissonance, have you made the right decision. This can be reduced warranties, sales communication After eating an indian meal, may think that really you wanted a chinese meal

1.5

BROAD PROFILE OF INDIAN CONSUMERS The Indian consumption patterns are slowly converging with global norms. The Indian consumer is now spending more on consumer durables, apparel, entertainment, vacations and lifestyle related activities. Entertainment,

clothing and restaurant dining are categories that have been witnessing a maximum rise in consumer spending since 2002. India is on the radar screen in the retail world and global retailers and at their wings seeking entry into the Indian retail market. The market is growing at a steady rate of 11-12 percent and accounts for around 10 percent of the country's GDP. The inherent attractiveness of this segment lures retail giants and investments are likely to sky rocket with an estimate of Rs 20-25 billion in the next 2-3 years, and over Rs 200 billion by end of 2010. Indian retail market is considered to be the second largest in the world in terms of growth potential. 1.5.1 Challenges facing the Organized Retail Industry:

Despite the rosy hopes, some facts have to be considered to positively initiate the retail momentum and ensure its sustained growth. The major constraint of the organized retail market in India is the competition from the un-organized sector. Traditional retailing has been deep rooted in India for the past few centuries and enjoys the benefits of low cost structure, mostly owner-operated, therein resulting in less labour costs and little or no taxes to pay. Consumer familiarity with the traditional formats for generations is the greatest advantage to the un-organized sector. On the contrary, organized sector have big expenses like higher labour costs, social security to employees, bigger premises, and taxes to meet. Availability and cost of retail space is one major area where Government intervention is necessary. Liberalizing policy guidelines for FDI needs focus as well. Proper training facilities for meeting the increasing requirements of workers in the sector would need the attention of both Government and the industry. Competition for experienced personnel would lead to belligerence between retailers and higher rates of attrition , especially during the phase of accelerate d growth of the retail industry. The process of avoiding middlemen and providing increased income to farmers through direct procurement by retail chains need the attention of policy makers. Taking care of supply chain

management, mass procurement arrangements and inventory management are areas that need the focus of entrepreneurs. India is now on the radar of global retailers. Accelerated development of retailing industry in t he country and building brand value of domestic products is essential not only for marketing our consumer products more efficiently , but also for the development of our own retailing industry. About one-third of households in India can afford white goods, such as washing machines, refrigerators and air conditioners. However, consumers are price-conscious, and demand for many white goods is restrained by long replacement cycles in urban areas. 1.5.2 Consumer Profile: One of the key reasons for the increased consumption is the impressive growth of the middle class. Around 70 per cent of the total households in India reside in the rural areas. The total number of rural household is expected to rise from 135 million in 2001-02 to 153 million in 2009-10. This presents the largest potential market in the world. According to the study conducted by NCEAR, the number of `lower middle income' group in rural areas is almost double as compared to the urban areas, having a large consuming class with 41% of the Indian middle class and 58% of the total disposable income. 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 be 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. There were nearly 70 mn households (33% of the total) with an income of more than US$3,000 in 2006. These "well-off" households already own relatively expensive consumer durables, such as air conditioners and refrigerators.

1.5.3

CONSUMER BEHAVIOUR INDIAN CONTEXT Availability of lifestyle spending options is increasing for Indian consumers and that inducing higher spends on "status acquisition". Traditionally, Indian consumer is cautious about debts. In recent past, this attitude has changed radically and in recent year's credit is no more a feared entity. Indian consumer buying behavior to a large extent has a western influence. Foreign brands have gained wide consumer acceptance in India and they are much more open for experimentation. Beauty parlors in cities, eateries, designer wear, watches, hi-tech products are a few instances which reflect these changes. Purchasing priorities in India also influence the level of sales of individual products. Penetration data bear this out: televisions in use in 2006 were estimated at 95 per 1,000 populations, far higher than the level for white goods. This reflects the growing demand for entertainment in India. According to Ernst & Young report, 'The Great Indian Retail Story, 2006', the emergence of a larger middle and upper middle classes and the substantial increase in their disposable income has changed the nature of shopping in India from need based to lifestyle dictated. The self-employed segment has replaced the employed salaried segment as the mainstream market, thus resulting in an increasing consumption of productivity goods, especially mobile phones and 2 - 4 wheeler vehicles. There is also an easier acceptance of luxury and an increased willingness to experiment with the mainstream fashion, resulting in an increased willingness towards disposability and casting out from apparels to cars to mobile phones to consumer durables. 1.5.3.1 Consumer Spending: The rate of growth of spending on discretionary items (unlike basic necessities like food) has been growing at an average of 9 per cent per year over the past five years. A nation of savers, India, has now altered into a nation of spenders.

Indian consumer spending basket (2003):

Consumer durables 53% Books & Music 32% Movies & Theater 38% Vacation 32% Home Textiles 29% Mobile phones 96% Payment Household help 48% Computer / peripherals 10% Consumer Spend (Year 2006)

Total Consumer Spend : Rs. 20,00,000 cr ($ 445 bn) Retail : Rs. 12,00,000 cr ($ 270 billion) double digit growth expected Organized Retail: Rs. 55,000 cr ($ 12.4 bn) at current prices 40%+ annual growth expected Scope for Organized Retail: Rs. 2, 00, 000 cr ($ 45 bn) by 2010. Av. Salary hike of 15+ per cent: there will be lot more consumption. Leading retailers' sales growth: 50-100% in 2005-06 Urban-Rural divide in Spending (%) Category Entertainment Consumer Services Durables Misc. Consumer goods Clothing and Footwear Food Source: KPMG/Research Rural 33 44 50 57 61 64 Urban 67 56 50 43 39 36

The demanding assertive Indian consumer is now sowing the seeds for an exciting retail transformation that has already started bringing in larger interest from International Brands / formats. With the advent of these players, the race is on to please the Indian consumer and its time for the Indian Consumer to sit back and enjoy the hospitality of being treated like a King. ----------------------------------