Consumer Behaviour. Synopsis. 1. People as Consumers. 2. Consumer Society. Learning Objectives. Sections. Learning Summary. Learning Objectives

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1 Synopsis Consumer Behaviour 1. People as Consumers To place consumption in the context of human behaviour The positivist and interpretivist approaches to its study The concept of real cost The production orientation and the marketing concept 1.1 Introduction 1.2 Buyers, Customers and Consumers 1.3 Consumer Behaviour 1.4 The Consumer Environment 1.5 The Consumer and the Marketplace 1.6 Markets and Marketing Consumer behaviour is an integral part of our daily lives. The psychological and social processes involved in buying and consuming goods and services form the subject matter of this text. The objective positivist approach to studying cause and effect in consumer behaviour (as in any other kind of behaviour), will be combined with the interpretivist emphasis on trying to understand the emotional, non-rational aspects of the process. The environment that the consumer operates in, including the nature of the marketplace for goods and services, also needs to be considered. Finally, the change from a production orientation to a marketing concept has been instrumental in fostering the study of consumer behaviour over recent decades. 2. Consumer Society Consumer Behaviour Edinburgh Business School 1

2 How the notion of consumer culture has come about The meaning of globalisation and its implications for marketers and consumers How people choose to dispose of products and the existence of alternative marketplaces The ways in which consumers act unethically and implications for marketers How marketing might be used for the good of society 2.1 Introduction: Consumer Society in the Twenty-first Century 2.2 Globalisation and Consumer Behaviour 2.3 Alternative Markets 2.4 Marketing and Social Responsibility Marketing is both embedded in and contributes to the broader cultural context of a society. It is part of our everyday lives, and this is hardly surprising since consumption is such an integral part of our existence. With an abundance of choice, consumers have become more demanding. Society s fixation with consumption and using consumption as a means of constructing identity has led to the notion that we live in a consumer culture. Globalisation is transforming marketplaces. It refers to the increasing integration of economies, societies and civilisations. It is a complex and uneven process which is always subject to local and individual interpretations. It raises awareness of local heritage and spreads new ideas and styles, and it is changing the way consumers think about themselves and connect with others across borders. It seems globalisation increases consumer choice and spurs the trend for more demanding consumers. Today s consumer culture means disposing of products is a major issue and marketers are increasingly aware of consumers desire for sustainable consumption. The second-hand market is a large and important market it its own right. Counterfeit goods represent another major, more controversial market. The thriving counterfeit market is just one example of how consumers do not always act in an ethical way. Other unethical behaviours include shoplifting and fraud, which present major challenges for marketers globally. Marketing can be used for the good of society, for example by encouraging people to lead more healthy lifestyles or give to charitable causes. It is not only public sector and not-for-profit organisations that apply marketing to social causes. Commercial organisations are increasingly promoting efforts to act in a more socially responsible manner, and this can be an important means of differentiation from competition. Consumer Behaviour Edinburgh Business School 2

3 3. Market Segmentation The effect of the marketing concept on segmentation The origins and importance of segmentation The contribution of segmentation to marketing The different forms of segmentation The particular importance of psychographic and behavioural segmentation The importance of positioning 3.1 Introduction: The Origin of Segmented Markets 3.2 Why Use Market Segmentation and Target Marketing? 3.3 Geographic Segmentation 3.4 Demographic Segmentation 3.5 Psychographic Segmentation 3.6 Behavioural Segmentation 3.7 Segmenting Business Markets 3.8 Positioning Market segmentation began when producers realised they could no longer sell whatever they produced, but had to begin competing for business. Three common targeting strategies are mass market, growth market and niche strategies. Market information and an understanding of consumer behaviour are critical to the success of a segmentation strategy. Four forms of segmentation were identified as being particularly important: geographic, demographic, psychographic and behavioural. A great deal of work has been done on psychographic segmentation, producing various attempts at classifying consumers according to personality factors. Finally, positioning is an important aspect of marketing which follows the segmentation and target marketing process. Perceptual positioning is particularly important but inherently difficult as it is subjective, occurring in the consumer s mind. 4. New Products and Innovations The factors involved in introducing new products to the market The effects of personal influence factors on success Consumer Behaviour Edinburgh Business School 3

4 How new products and innovations are diffused How and why new products and innovations are adopted The social and cultural implications for innovations 4.1 Introduction 4.2 Developing New Products 4.3 The Product Life Cycle 4.4 The Effects of Personal Influence 4.5 The Diffusion of New Products and Innovations 4.6 The Adoption of New Products and Innovations 4.7 Cultural and Social Implications for Innovations Thousands of new products are marketed every year in supermarkets alone, and most of them fail. Because of declining birth rates, shortening lead times on the profitability of new products and intensified global competition, innovation is now regarded as a crucial function of all organisations. Levitt s total product concept is a useful model for marketers in thinking about the benefits of the product they are introducing. Successful innovation seems to imply some far-reaching social change in the life of the consumer, or in the relationship between the consumer and the producer of goods or services. Every new product seems to go through a five-stage life cycle from its introduction to its inevitable decline. By the latter stage, replacement products should, rationally, be in the process of development. However, because of the influence of non-rational psychological processes within organisations, this does not always occur. Personal influence is often exerted on the introduction of successful products both in the form of product champions within the producers and opinion leaders among consumers. Diffusion of new products may be accomplished by three forms of innovation: continuous, dynamically continuous and discontinuous. The adoption of new products is never total and immediate, but often takes longer to be profitable than producers anticipate. However, large profits may still be made from products that are only adopted by a relatively small percentage of the population. The wider social and cultural context has a significant influence on the adoption and spread of new products and services. Organisations now put significant effort into monitoring emerging trends, and a general understanding of both the individual and social perspectives of consumer behaviour is crucial to the success of an innovation. Consumer Behaviour Edinburgh Business School 4

5 5. Perception The nature of sensory information How this information is used in perception How perceptual cues from the environment are organised How consumers perceive different products and the role of symbolism How consumers perceive risk when buying products 5.1 Introduction: Can We Trust Our Senses? 5.2 Using Our Senses 5.3 Common Properties of the Senses 5.4 Perception: Processing Sensory Information 5.5 Organising Perceptual Cues 5.6 Subliminal Perception 5.7 Self-images, Symbolism and Consumer Behaviour 5.8 Perceiving Risk Perception involves the construction of reality by the brain with the information it receives from the senses. All the senses, but especially the dominant modes of vision and hearing, are used by marketers and advertisers in selling products. All the senses have common properties, notably thresholds of awareness between sensing or not sensing a given stimulus (absolute threshold), distinguishing between two different stimuli (difference threshold) and adaptation to a given level of sensory stimulation. The processing of sensory information, which is the basis for perception, normally works so efficiently that we are unaware of it. At the same time there are situations, involving both internal, or personal, factors and external, environmental factors, in which the brain is subject to illusions and perceptual distortion. The existence, and possible effects, of subliminal perception has long been a matter of some debate in consumer behaviour. It certainly exists, but is probably not susceptible to manipulation except in rather trivial ways. The perception of products that consumers have is an important reality for marketers to deal with. Symbolic consumption is bound up with a consumer s self-image. Finally, a perception of risk in making a purchase may apply to a given product for a given consumer. Marketers need to be aware of this possibility so they can help the potential purchaser minimise this perceived risk. Consumer Behaviour Edinburgh Business School 5

6 6. Personality and the Self The way the term personality is used in psychology An outline of the major theories of personality Practical applications of personality theories in marketing and advertising The concept of self and its implications for consumer behaviour and marketing 6.1 Introduction: How Does Our Personality Affect What We Buy? 6.2 What Is Meant by Personality? 6.3 Formal Theories of Personality 6.4 Freudian Psychoanalysis 6.5 Neo-Freudian Psychoanalysis 6.6 Trait Theory 6.7 Self Theory Personality factors are of great importance to consumer behaviour and have already appeared in previous modules. Both professional psychologists and laypeople use the term personality as a kind of shorthand for trying to make sense of someone s characteristic behaviour. Of the many formal theories that attempt to do this systematically, the most influential generally, and in terms of consumer behaviour specifically, is psychoanalysis both Freudian and neo-freudian. The development of some widely used psychometric techniques based on Freudian theory has been particularly important. Trait theory has also been noteworthy in increasing our understanding of consumer behaviour. Self theory is particularly important in helping us understand why consumers make specific choices and the role and importance of symbolism for marketers. Finally, one interesting offshoot from this work has been the development of the idea of brand personality. 7. Learning, Memory and Thinking Why learning is so important to our lives The major approaches to studying learning Consumer applications of behaviourism How we make learning meaningful Consumer Behaviour Edinburgh Business School 6

7 How we process information and the implications for marketers How we observe and model behaviour and what this means for marketing 7.1 Introduction: How Do We Learn? 7.2 What Is Learning? 7.3 The Behaviourist Approach 7.4 The Cognitive Approach 7.5 Modelling Learning is a key psychological process that has been intensively studied for many years. There are two main approaches to this research, representing two major schools of thought in psychology, the behaviourist and the cognitive approaches. The behaviourist approach is based on the link between stimulus and response and deals solely with behaviour rather than thoughts or feelings. Its key technique for influencing behavioural responses is that of conditioning. The two major forms of conditioning are classical, or Pavlovian, and operant, or Skinnerian. Both forms have direct consumer applications in advertising and marketing. The cognitive approach deals with mental processes such as memory, information processing and thinking in general and is concerned with insight as a form of learning rather than the trial-and-error learning of the behaviourist approach. The search for meaning in what we learn is a crucial part of the cognitive approach. Tapping into this search and directing it in a chosen direction is the ultimate objective of a great deal of advertising and marketing. Finally, learning by modelling the behaviour of other people is an important aspect of everyday life from earliest childhood and one that is widely used to sell a great variety of products. 8. Motivation The psychological sources of motivation How the term is used in marketing and advertising The relationship between needs and buying behaviour The unconscious influences on individual buying decisions 8.1 Why Do People Buy What They Buy? Consumer Behaviour Edinburgh Business School 7

8 8.2 What Is Meant by Motivation? 8.3 Defining Motivation 8.4 The Fulfilment of Needs 8.5 The Motivational Mix 8.6 Unconscious Motivation Motivation ramifies throughout the study of consumer behaviour, appearing in discussions of learning, personality, market segmentation and attitudes. It is primarily concerned with the links between cause and effect in observed behaviour. The most important theories in this field, especially that of Maslow, deal with individual needs and their fulfilment. Some needs, such as those for achievement, affiliation and power, have been of particular interest to researchers. The relationship between these specific needs and Maslow s hierarchy is illustrated by Figure 1. Table 1 Relationship between Maslow s hierarchy and specific needs The degree of psychological involvement a consumer has with a given product is thought to be crucial to understanding his or her motivation towards actually buying it. As much of our motivation is unconscious, the symbolic interpretation of consumer responses to products has an important place in this field. 9. Family Influences How we first learn to be consumers How family buying decisions are made The family roles we play as consumers The difference between a household and a family Effects of being at different stages of the life cycle How our generation contributes to our consumer identity 9.1 Introduction: How Does Our Upbringing Affect Us as Consumers? Consumer Behaviour Edinburgh Business School 8

9 9.2 What Is a Family? 9.3 Socialisation 9.4 Family Buying Decisions 9.5 Life-cycle Effects 9.6 Non-family Households 9.7 Age and Consumer Identity Our families provide the emotional environment in which we are reared, however nurturing or dysfunctional that may be. Usually the family experience occurs within a household of people sharing the same accommodation. The family is the first major social institution to socialise its members, followed by the school and the nation state. Socialisation is the process which is brought to bear on individuals with the aim of bringing out the social nature of their personality and providing them with knowledge of the appropriate behaviour expected from them in a given situation. Socialisation into the role of consumer is part of that process. Family buying decisions are very complex processes indeed. Different members of the family have traditionally taken particular roles in this process, although that seems to be changing. Following the stages in a family s life cycle is a useful way of analysing the effects of family life on consumer behaviour. Nine different stages have been identified, from bachelorhood to retirement, and these are of varying interest to the marketer. Finally, significant events during our formative years help to shape our values and behaviour, meaning our generation can be an important part of our identity and provide some insight into our behaviour as consumers. 10. Social and Developmental Influences Stages of psychological and social development How we develop economic concepts Effects of school experience on consumer socialisation Effects of social norms Effects of advertising and marketing 10.1 Introduction: How Does Our Psychological Development Affect Our Consumer Behaviour? 10.2 Maturation 10.3 Stages of Development 10.4 Development of Economic Concepts 10.5 External Influences on Consumer Socialisation Consumer Behaviour Edinburgh Business School 9

10 We all go through similar stages of development in our understanding of the world and of human behaviour. The nature of this understanding is affected by the particular language and culture we are born into. This holds as true for consumer behaviour as for any other kind of behaviour. Thus, the development of economic concepts like profit, investment and credit have both a universal developmental aspect to them and a specific aspect, depending on the social environment a child is reared in. The most important influences of the social environment are those of parents, school, general social norms and the specific effects of advertising and marketing. 11. The Influence of Small Groups How membership of different groups can influence consumer behaviour How group dynamics operate How group norms are formed and their influence on consumer behaviour The importance of reference groups 11.1 What Are the Effects of Group Pressure on the Individual Consumer? 11.2 Types of Group 11.3 Properties of Group Life 11.4 Reference Groups and Consumer Behaviour We live our lives in groups, and an understanding of the interaction between individuals and the groups they belong to is crucial to an understanding of consumer behaviour. This is particularly true of small, primary groups where the psychological dynamics involved have been intensively studied for many years. But larger, secondary groups are also important, as are an individual s membership and reference groups. Patterns of interaction between people are a key feature of group life. Word-of-mouth contact has a very potent effect on many buying decisions, especially when opinion leaders are involved. Perhaps the single most important aspect of any group s life is the pressure on individuals to conform to the group s expectations. The effects of it on many forms of purchase decisions are immediately evident in our lives. This is perhaps most apparent when consumers aspire, by their buying behaviour, to be seen as members of a particularly valued reference group. Consumer Behaviour Edinburgh Business School 10

11 12. The Influence of Social Class The concept of social class: how it is used and measured The importance of status symbols in consumption The effects of social class membership on consumer behaviour 12.1 How Does Our Social Class Affect What We Buy? 12.2 Social Stratification 12.3 Social Status and Symbols 12.4 Life Chances and Lifestyles 12.5 Measuring Social Class 12.6 Social Class Categories 12.7 Changing Social Class 12.8 Marketing and Consumer Behaviour The term social class is sometimes used interchangeably with socioeconomic status (SES), a standard form of market segmentation. However, while this might be relevant for much of the social aspect of the term, it does not deal with its psychological aspects. Social class therefore includes factors of status and the symbols of status which people respond to as individuals. It also includes the whole issue of individual lifestyles and the way those lifestyles are chosen and acted upon by people as consumers and this is another key form of market segmentation. There are various methods by which social class is measured and people are assigned to different categories, and these may vary in different countries. This categorisation process changes over time as research methods become more refined. Moreover, individuals may move between social classes over time, both socially as defined by external indices and psychologically as individuals redefine themselves. This categorisation and redefinition of categories affects the way products may be marketed to consumers and the way consumers may take themselves into, or out of, a market for a given product. 13. Cultural Influences The concept of culture in consumer behaviour Similarities and differences between cultures and their practical effects Consumer Behaviour Edinburgh Business School 11

12 The concept of subculture The effects of cultural changes 13.1 How Does Our Culture Affect What We Buy? 13.2 Similarities across Cultures 13.3 Differences between Cultures 13.4 Cultural Values 13.5 Subcultures 13.6 Changes in Culture Culture, in the social scientific sense of the term, is important to an understanding of consumer behaviour. This is true of the assumptions about the world that people never talk about, as well as the more obvious beliefs and attitudes of a society. Similarities between different cultures are often difficult to see, but they cover the whole range of human behaviour. Moreover, it has been argued that, with the development of global systems of communication and the marketing and advertising which accompanies them, there is a trend towards convergence between cultures in their patterns of consumption. Differences between cultures are still more apparent, however, than similarities. This is true of both verbal and non-verbal forms of communication. These can present marketers and advertisers with many potential pitfalls and lead to the failure of an otherwise successful product. But these are the means of communication between cultures; cultural values themselves have still to be understood, and these may be very complex and exhibit apparent contradictions. The issues of influential subcultures within a parent culture must also be dealt with. Finally, all these factors must be considered against a background of ongoing cultural change throughout the world. 14. Attitudes How the term attitude is used What attitudes consist of How attitudes are formed Ways of analysing attitudes How attitudes change The relationship between attitudes and behaviour Consumer Behaviour Edinburgh Business School 12

13 14.1 Where Do Our Attitudes Come From and How Do They Change? 14.2 What Are Attitudes? 14.3 Characteristics and Components of Attitudes 14.4 Forming Attitudes 14.5 Theories of Attitudes 14.6 Changing Attitudes 14.7 Attitudes and Behaviour Attitudes have been intensively researched in psychology for many years and are more complex than we might suspect from the popular usage of the term. An individual attitude can be divided into three components: affective (feelings), behavioural (intentions) and cognitive (beliefs). It is important to note that all attitudes are learned, in the various ways that people are capable of learning, and are therefore open to change. The source of our attitudes towards a specific product may be our family, our friends or our own direct experience. The study of the attitudes involved in making consumer decisions has led to the development of multi-attribute models of attitudes. Some of these models attempt to quantify likely buying intentions. The psychological processes that lead to the formation of attitudes are also very influential in any changes which occur in them, though other processes may be involved, some of which are discussed in other modules. However, the leading companies in any market are primarily interested in strengthening consumer attitudes towards their products; it is their competitors who are most interested in changing those attitudes. There are various strategies for changing consumer attitudes depending on how much involvement the consumer has in making a particular decision; that is, how important it is to the consumer to differentiate between the products on offer. Finally, the relationship between attitudes and behaviour was considered. It appears that, while a change in attitudes can lead to a change in buying behaviour, the reverse is also true; a change in buying behaviour can lead to a change in attitudes about a product. The key factor here appears to be the amount of consumer involvement in making the decision. With high involvement, attitudes can change behaviour, but, with low involvement, behaviour can change attitudes. 15. Communication and Persuasion How advertising affects consumer behaviour An analysis of the communication process How we deal with advertising communications Consumer Behaviour Edinburgh Business School 13

14 Cultural effects on advertising communications 15.1 How does Advertising Affect Our Behaviour? 15.2 The Importance of Advertising 15.3 The Process of Communication 15.4 Feedback and Evaluation 15.5 Cultural Factors in Advertising Advertising is a long-established and pervasive aspect of most societies. Its influence on consumer behaviour is great, but sometimes in ways that are not always generally understood. Fear of advertising is probably mostly unfounded, but we can be influenced nonetheless in ways that we may not be aware of. As a first step, it is important to analyse the extensively studied process whereby advertising messages are communicated to consumers. This process links the source with the intended audience via a particular communication, and there are important psychological findings which illuminate each part of the process. It is then crucial to examine the role of the consumer in dealing with the communications aimed at him or her. We are not just passive recipients of advertising. We have ways of evaluating the communications aimed at us and of responding to them. Part of that response is in the form of feedback to the communicator that transforms a one-way process into an ongoing two-way process. This is a kind of dialogue, in effect, which is limited only by the sensitivity and ingenuity of the advertiser in recognising and understanding the meaning of the consumer s feedback. 16. Approaching a Decision The prevalence of decision making The methods people use to make decisions The nature of the decision-making process Stages in the process Marketing implications 16.1 How People Make Decisions 16.2 Heuristics 16.3 The Consumer Decision Process Consumer Behaviour Edinburgh Business School 14

15 16.4 Marketing Implications Making decisions is an integral and ongoing part of our daily lives, so we are not usually aware of how we go about doing so. We would like to believe that we make reasoned and informed decisions based on adequate information, but that is probably the exception rather than the rule. The way we seem to approach most decisions, including buying decisions, is to employ heuristics that is, informal rules of thumb which are necessary because of the sheer number of decisions we constantly have to make, but which also allow us to avoid examining our decisionmaking processes too closely. The actual process that we go through as consumers in making a buying decision has been extensively studied and may be divided into five stages. The first three stages of that process were dealt with in this module: recognising a problem, searching for information and evaluating the alternatives. The marketing implications of these stages are of obvious importance, including understanding how consumers use cues in approaching a decision, categorise products and use decisionmaking rules, and how information might be most effectively presented to them. 17. The Decision and Its Consequences The process of making a buying decision The differences between in-store and at-home buying behaviour How we deal with the consequences of a buying decision 17.1 Introduction 17.2 Stage IV: Purchasing Processes 17.3 Stage V: Post-purchase Processes The material in this module is a continuation of that in the last one. The first three stages in a decision-making model were dealt with in Module 15 and the final two in this module. Stage IV deals with the actual process of making a purchase, either instore or at home. These are very different kinds of locations in which to make buying decisions. Much of the attraction of shopping in-store for many people is social and psychological and may not be focused directly on the goal of making a specific purchase. Marketers should therefore be familiar with issues of location, Consumer Behaviour Edinburgh Business School 15

16 store layout, service, pricing and merchandising in order to understand these factors and their practical implications. At-home purchasing is the locus of a relatively small, though growing, number of buying decisions. People who are very resistant to going out shopping, antishoppers, estimated at anything up to 25 per cent of the population in some places, form a ready market for direct marketing. This form of marketing is well over a century old, having been pioneered by Sears Roebuck and their famous catalogue, but it has been given a boost in recent years by the Internet and various forms of interactive technology. The final stage of the decision-making model, Stage V, deals with post-purchase processes; that is, the psychological consequences for the consumer which are inherent in making a decision. Consumers are set to reduce the cognitive dissonance which is involved in making a decision, and the closer the decision between competing alternatives the greater the dissonance to be resolved. Thus consumers may go to great lengths to convince themselves of the wisdom of the decision they have made. 18. Models of Consumer Behaviour The study of consumer behaviour draws on various disciplines, including psychology but also economics and sociology How economic and contemporary models of consumer behaviour contribute to our understanding of how and why people buy what they buy The benefits and limitations of using models in consumer behaviour 18.1 Approaches to the Study of Consumer Behaviour 18.2 Economic Viewpoints of Consumer Behaviour 18.3 Contemporary Models in Consumer Behaviour 18.4 Why Consumer Behaviour Models? Throughout this text we have drawn on various perspectives in psychology; each brings something different to our understanding of consumer behaviour. However, the study of consumer behaviour tends to draw on more than one discipline, such as psychology, sociology or economics. Some of the earliest models of consumer behaviour were developed by economists. These are useful for describing people s collective behaviour and making predictions about demand, but they are limited when considering individual consumer behaviour. As the discipline of consumer Consumer Behaviour Edinburgh Business School 16

17 behaviour has evolved, various models have been proposed that are more comprehensive, focusing on the wider consumer decision-making process rather than just the act of purchase, and emphasising mental processes. While models are helpful in assisting marketers to understand, and to some extent predict, consumer behaviour, they are simplified representations of reality and should be used alongside other sources of information when planning marketing. 19. The Future Consumer How the consumer experience is changing The likely future of the producer and the consumer The likely future interaction between producer and consumer 19.1 The Changing Consumer Experience 19.2 The Producer 19.3 The Marketplace 19.4 The Consumer Some changes in the consumer experience may reasonably be predicted for the near future. From the perspective of the producer, responsiveness to consumer preference and customer demands and even the individual customising of formerly massproduced goods will become more commonplace. Meanwhile, organisations will need to strive to form meaningful relationships with their customers to create a sense of connection by tapping into their lifestyles, appealing to their self-concepts and adding value to their lives. Ethical practices are increasingly expected and valued by consumers and are a way organisations can become more appealing to their target market. Public awareness of the rights of consumers has steadily increased, and consumers are active in protecting their own interests alongside the establishment of government regulation to do so. Consumer policy in emerging economies is likely to undergo particular development in the future. From the consumer perspective, more people may be made aware of the possibility of influencing even the largest companies by direct action and organised attempts to influence company behaviour. There will probably be a marked increase in the number of consumers trying one or other forms of alternative lifestyle, notably the exchange economy and ethical consumerism. But ultimately the exponents of traditional capitalism will probably retain enough power over mass consumer behaviour to co-opt any attempts at radical change in the system. Consumer Behaviour Edinburgh Business School 17