Book Code : 8377 Price : ` ISBN : COPYRIGHT

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2 FUNDAMENTALS OF BUYING BEHAVIOUR Book Code : 8377 Price : ` ISBN : SBPD PUBLICATIONS COPYRIGHT

3 Chapter Contents Page No. 1. The Nature of Consumer Behaviour Customer Meaning and Classification Building Customer Satisfaction Through Quality, Service and Value Customer Lifetime Value and Profitability Customer Relationship Management : Tool for Attracting and Retaining Customer s Influence of Culture on Consumer Behaviour Social Factors Influence on Consumer Behaviour Personal and Psychological Forces Affecting Consumer Behaviour Customer Buying Decision Process Theories of Consumer Buying Dicision The Nature of Organisational Buying SBPD PUBLICATIONS COPYRIGHT 12. Analysis of Business Buying Process

4 The Nature of Consumer Behaviour 1 Chapter The Nature Of Consumer Behaviour INTRODUCTION All of us are consumers. We consume plethora of products and services to satisfy our innate needs and desires. The buying and consumption decisions of these products are made according to our needs, preferences and purchasing power. These can be consumable goods, durable goods, speciality goods or, industrial goods. What a consumer buys, how he buys, from where he buys, when he buys, in how much quantity he buys depends on his perception, self-concept, social and cultural background and age and family cycle, his attitudes, beliefs, values, motivation, personality, social class and many other factors that are both internal and external to him. While buying, a consumer also considers whether to buy or not to buy and, from which source or seller he should buy. A rich person from an affluent society can afford to buy in greater quantities and at shorter intervals while his counterpart in a poor society can barely make his both ends meet. The marketers therefore try to understand the needs of different consumers and having understood their different behaviours which require an in-depth study of their internal and external environment, they formulate their plans for marketing. They do this by engaging in exchanges of resources including information, money, goods, services, status, and emotions with consumers, exchanges that both businesses and customers perceive to be beneficial. When companies ask, who are our customers? How do we reach them? What should we sell to them? What will motivate them to buy? What makes them satisfied? They are asking questions that require sophisticated understanding of consumer behaviour. WHAT IS CONSUMER BEHAVIOUR? The term consumer behaviour refers to the behaviour that consumers display in searching for, purchasing, using, evaluating and disposing of products and services that they expect will satisfy their needs. The study of consumer behaviour is the study of how individuals make decisions to spend their available resources i.e. time, money and efforts on consumption related items. It includes the study of what they buy, why they buy it, when they buy it, where they buy it, how often they buy it, and how often they use it. We may take a very simple example of product toothpaste. What type of toothpaste do consumers buy (regular, gel, herbal, colourful or white); what brand they prefer i.e. a national brand Dabur, Babool, Vicco or an international brand like Colgate, Pepsodent or a local brand or generic product; why do they buy it (to fight germs, to prevent cavities, to whiten teeth, to remove stains or for any other purpose); where do they buy it (from

5 2 SBPD Publications Fundamentals of Buying Behaviour a local kiryana wala, a superstore, a mall or from a chemist shop); how often they use it (when they wake up, after each meal, when they go to bed etc.); how often do they buy it (weekly, fortnightly or monthly)? CONSUMER BEHAVIOUR Definition Consumer behaviour is a complex, multi-faceted phenomenon which can be defined in a number of different ways. Some of the important definitions of consumer behaviour are given below : 1. Consumer behaviour is the observation of the decision-making, purchasing patterns and habits of the general public Consumer behaviour is the study of individuals, groups, or organisations and the processes they use to select, secure, use, and dispose of products and services, experiences or ideas to satisfy needs and the impacts that these processes have on the consumer and society It s the behaviour displayed by the consumers during the acquisition, consumption and disposition of products, services, time and ideas by decision making units. 4. It is the body of knowledge which studies various aspects of purchase and consumption of products and services by individuals with various social and psychological variables at play. 5. The behaviour that the consumers display in searching for, purchasing, using, evaluating and disposing of products and services that they expect will satisfy their needs. 6. The process and activities people engage in when searching for, selecting, purchasing, using, evaluating, and disposing of products and services so as to satisfy their needs and desires. 7. The activities directly involved in obtaining, consuming, and disposing of products and services, including the decision processes that precede and follow these actions. 8. The American Marketing Association (AMA) defines consumer behaviour as The dynamic interaction of cognition, behaviour & environmental events by which human beings conduct the exchange aspect of their lives. 9. The study of consumer behaviour involves search, evaluation, purchase, consumption and post purchase behaviour of the consumers and includes the disposal of purchased products keeping environment and personal characteristics in mind. In general, consumer behaviour can be defined as the decision-making process and physical activity involved in acquiring, evaluating, using and disposing of goods and services. These definitions clearly brings out that it is not just the buying of goods/services that receives attention in consumer behaviour but, the process starts much before the goods have been acquired or bought. A process of buying starts in the minds of the consumer, which leads to the search of alternatives between products that may be acquired with their relative merits and demerits. This leads to internal and external research by the buyer. It is followed by a process of decision-making for buying and using the goods, and then the post purchase behaviour which is also very important, because it gives a clue to the marketers whether his product has been a success or not. 1 Yadin, D. (2002). The International Dictionary of Marketing: Over 100 professional Terms and Techniques. 2 Hawkins, D. (2007). Consumer Behaviour : Building Marketing Strategy - 10th edition. McGraw-Hill.

6 The Nature of Consumer Behaviour 3 To understand the likes and dislikes of the consumer, numerous consumer research studies are conducted by the scholars from time to time. These researches try to find out the answers to few important questions viz.: What the consumer thinks of the company s products and those of its competitors? How can the product be improved in their opinion? How the customers use the product? What is the customer s attitude towards the product and its advertising? What is the role of the customer in his family? Consumer behaviour is a complex, dynamic, multidimensional process, and all marketing decisions are based on assumptions about consumer behaviour. The heterogeneity among people makes understanding consumer behaviour a challenging task to marketers. Hence marketers felt the need to obtain an in-depth knowledge of consumers buying behaviour. Finally this knowledge acted as an imperative tool in the hands of marketers to forecast the future buying behaviour of customers and devise for marketing strategies in order to create long-term customer relationship. EVOLUTION OF CONSUMER AND BUYER BEHAVIOUR Consumer behaviour is comparatively a new field of study which evolved just after the Second World War. The sellers market has disappeared and buyers market has come up. This led to paradigm shift of the manufacturer s attention from product to consumer and specially focused on the consumer behaviour. The evaluation of marketing concept from mere selling concept to consumer-oriented marketing has resulted in buyer behaviour becoming an independent discipline. The growth of consumerism and consumer legislation emphasizes the importance that is given to the consumer. The formal study of consumer behaviour as a subject distinct from other business related courses first appeared in American universities in the mid 1960s. The first textbook of consumer behaviour was published in 1968, written by Engel, Kollat and Blackwell, and includes the first comprehensive model of consumer behaviour. Their model now appears in most texts and is regarded as a classic among buyer behaviour models. The first journal of buyer behaviour, The Journal of Consumer Research, appeared in The initial thrust of the consumer research was from a managerial perspective; marketing managers want to know the specific causes of consumer behaviour. They regarded the consumer behaviour discipline as an applied marketing science. This approach is known as positivism, and consumer researches primarily concerned with predicting consumer behaviour are known as positivists. Later on, because of the interdisciplinary nature of consumer behaviour, the researcher from other disciplines have became interested in the study of consumer behaviour not necessarily from a managerial or applied perspective, but simply to understand consumer better. This approach is known as interpretivism also known as postmodernism. Although the titles Consumer Behaviour and Buyer Behaviour, as applied to a discipline in its own right, have appeared only recently, studies and speculation on human behaviour relevant to marketing can be traced back several centuries. In our country too the concept of consumer behaviour has gained momentum only after the introduction of economic reforms of 1990s and burgeoning consumerism among the people. CONSUMER BEHAVIOUR Vs. BUYER BEHAVIOUR Up to this point, the terms consumer behaviour and buyer behaviour have been used as if they were interchangeable. But the two terms are different from each other and as

7 4 SBPD Publications Fundamentals of Buying Behaviour a student of marketing we must appreciate the distinction between the two. To some degree, both terms refer to the same discipline and draw from the same material. Strictly speaking, buyer behaviour focuses on the behaviour of the buyer while consumer behaviour focuses on the consumer. In most cases the consumer and the buyer are the same person, and the disciplines overlap. In a family situation, however, consumers and buyers begin to separate. For example, the mother may actually buy domestic used items for the family s consumption but will consume only a part of it. When she buys an ice cream for her child, the separation of buyer and consumer becomes absolute. In an organisational situation, the company buyer may be completely divorced from the product s use. CONSUMER BEHAVIOUR AS AN ACADEMIC FIELD OF STUDY The academic field of consumer behaviour is the study of individuals, groups, or organization and the process they use to select, use and dispose of products, service, experience, or ideas to satisfy needs and the impact that these processes have on the consumer and society. Several discipline collectively referred to as the behavioural science have studied human behaviour for sometime, and we can draw upon their contribution for understanding consumer behaviour. This borrowing has been quite extensive and includes theories used in explaining behaviours as well as methods useful in investigating it. In fact, this borrowing is so extensive that consumer behaviour is often said to be multidisciplinary in nature. The major disciplines that contribute to the study of buyer behaviour are outlined below. The first of these, individual psychology, applies to buyers as individuals. The remaining three disciplines apply to the buyer as a group member. Psychology Psychology is the systematic study of human actions and mental events. Psychologists try to develop principles that explain individual behaviour and the nature of the way individuals think. Psychology is the most noteworthy contributing discipline to buyer behaviour. The various approaches covered in it are such as personality, motivation, learning theory, perception and attitudes. Some psychologists place weight on an individual s earlier experience and how this understanding may shape future behaviour, demonstrating a learning approach to psychology. Other psychologists place more stress on the way individuals see and think about things in other words, the way we process information. In the area of motivation, psychologists focus on human needs and the consequent behaviour associated with attempting to gratify those needs. Personality is related to individual differences. Social Psychology Social Psychology, as with psychology in general, is concerned with explaining human behaviour but focuses on behaviour in the context of other people. Buyers are seen as members of groups rather than isolated individuals, and social psychology examines the impacts that people have on each other. Organisations represent groups of people and hence the study of social psychology is central to organisational buyer behaviour. Groups also provide a means of contrast, enabling individuals to develop a sense of them. Anthropology Anthropology is the study of societies and cultures. Early anthropologists studied cultures that may be described as tribal or under-developed. These days anthropologists study all societies. They record observations and examine them, focusing on aspects such as traditions and rituals and the values held by a society s members. As the global economy

8 The Nature of Consumer Behaviour 5 becomes more of a truth, marketers are forced to think about the culture of those they are having a business. Anthropological analysis is also applied to organisations, where the concept of organisational culture plays an increasingly important role in management. Sociology Sociology is the study of collective behaviour of people in groups. Sociology overlaps with social psychology to some degree. However, sociology is more concerned with group processes in their entirety than with individual behaviour in a social context. Sociologists study social phenomena in general this includes the nature of communication processes and the flow of information throughout society. Understanding the nature of the flow of information has important implication for promotion and advertising. Sociological analysis has application to topics such as family decision-making, social class and status. Economics Economics is the study of people s production, exchange, and consumption of goods and services. It helps in understanding how a consumer uses his limited resources to gratify his unlimited and diversified needs that too in a rationale manner. WHY STUDY CONSUMER BEHAVIOUR Just as consumers and marketers are separate from one another, the reasons for studying consumer behaviour are also varied. The field of consumer behaviour holds great significance for us as consumers, as marketers and as student of marketing and consumer behaviour discipline. (i) As consumers, we are benefitted from insights into our own consumption-related decisions : what we buy, why we buy, how we buy, and the promotional influences that convince us to buy. The study of consumer behaviour enables us to turn into better that is, wiser- consumers. (ii) As marketers and future marketers, it is important for us to recognize why and how individuals make their consumption decisions, so that we can make better strategic marketing decisions. Without doubt, the marketers who understand consumer behaviour have greater competitive advantage in the market place. (iii) As students of marketing and consumer behaviour discipline, we are interested in understanding consumer behaviour; with gaining insights into why individuals act in certain consumption-related ways and with learning what internal and external influences push them to act as they act. PERSPECTIVE OF CONSUMER BEHAVIOUR The study of consumer behaviour can be approached in three different perspectives namely; Consumer Influence Perspective, Wholistic Perspective and Intercultural Perspective. 1. Consumer Influence Perspective : Under this perspective consumer behaviour is said to be of particular interest to those who, for various reasons, desire to influence or change that behaviour, including those whose primary concern is marketing, consumer education and protection and public policy. 2. Wholistic Perspective : Consumer behaviour according to this perspective goes beyond consumption. Researchers in this area argue that purchase decision is only a small component in the constellation of events involved in the consumption experience and that it is time for consumer experts to take consumption as the central emphasis and examine all facets of the value potentially provided when some living organism acquires, uses, or disposes of any product that might achieve a goal, fulfil a need, or satisfy a want.

9 6 SBPD Publications Fundamentals of Buying Behaviour 3. Intercultural Perspective : This perspective stressed the importance of consumer behaviour across different culture. According to this perspective, on all continents, there is striving toward economic development and greater self-sufficiency. Even in socialistic countries, consumer goods are becoming increasingly important. This perspective holds that as a consumer-oriented society emerges, an early manifestation is a middle class with disposal income and that unless political restrictions are imposed arising standard of living will becomes a dominant concern. APPLICATIONS OF CONSUMER BEHAVIOUR KNOWLEDGE From the marketing point of view, understanding consumer behaviour is crucial to successful delivery of firms offerings in the market place. Some of the marketing application areas of consumer behaviour knowledge are given as follows : 1. Market-Opportunity Analysis : This involves examining trends and conditions in the market place to identify consumers needs and wants that are not being fully satisfied. 2. Target-Market Selection : This has to do with identifying distinct groupings of consumers who have unique wants and needs and the selection of segment that matches the firm s strength and offer better opportunities. 3. Marketing-Mix Determination : This involves developing and implementing a strategy for delivering an effective combination of want-satisfying features to consumers within target market. The marketing mix is made up of four components; product, price, promotion and place. 4. Marketing Strategy : Understanding of consumer behaviour is needed in strategic marketing activities. This is because marketing strategies and tactics are based on explicit or implicit beliefs about consumer behaviour. 5. Effective Regulatory Policy : An enduring policy in terms of marketing practices requires an extensive knowledge of consumer behaviour. 6. Social Marketing : Social marketing also require an indepth understanding of consumers and their behaviours or attitudes. Social marketing is the application of marketing strategies and tactics to alter or create behaviours that have positive effect on the target individuals and or society as a whole. Social marketing 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, to reduce behaviours potentially leading to AIDS, to enhance support of charities, to reduce drug use, and many other important courses. MARKETING STRATEGY AND CONSUMER BEHAVIOUR To stay alive in a competitive environment, a marketer 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 cost of acquiring those benefits. Providing superior customer value requires the organization to do better job of anticipating and reacting to customer needs than the competitors does. An understanding of customer behaviour is the basis for strategic marketing formulation. Consumers reactions to this marketing strategy determine the organization s success or failure. However, these reactions also determine the success of the consumers in meeting their needs, and they have significant impacts on the larger society in which they occur. Marketing strategy is conceptually very straightforward. It begins with a study of the target market which includes company, conditions, competitors, and consumers. It is

10 The Nature of Consumer Behaviour 7 followed by, Market segmentation which involves identifying product-related need sets, grouping customers with similar need sets, describing each group and selecting an attractive segment to serve. Third stage is marketing strategy and it involves manoeuvring of marketing mix. The marketing mix includes the product, price, promotion, distribution, and services provided to the target market. The final stage Outcomes involves analysis of firm s product position and customer satisfaction resulting from implementation of the strategy. USEFUL QUESTIONS I. Long Answer Type Questions Define consumer behaviour and identify the various perspectives for understanding the behaviour of consumers. 2. What do you understand by consumer behaviour? What information is sought in consumer researches? 3. What are the major marketing applications of an understanding of consumer behaviour? 4. How consumer behaviour is helpful in formulation of marketing strategy? 5. Consumer behaviour is based on the principles borrowed from behavioural sciences disciplines. Name these disciplines and explain how each contributes to the understanding of consumer behaviour. 6. What is the interrelationship between the consumer behaviour discipline and the marketing concept? 7. How would knowledge of consumer behaviour help you in formulating marketing program for the following products or services? Justify your answer with reasons : (a) Retail Banking, (b) Disposable Diapers, (c) Coffee Bars. II. Short Answer Type Questions What is consumer behaivour? 2. What is the utility of consumer behaivour in demand to recasting? 3. What is the difference between a consumer and buyer? 4. How consumer behaviour is useful in market-segmentation? III. Objective Type Questions Fill In the Blank : 1. Consumer behaviour refers to the behaviour that consumer show in searching for, purchasing, using, evaluating and...of products and services they expect will satisfy their needs. 2. The first textbook of consumer was written by...and was published in Consumer researches primarily concesned with predicting consumer behaviour one known as appreach states that consumer behaviour is interdisciplinary in nature. 5. Consumer behaviour helps in predicting...towards a product or service. [Ans. 1. Dispose, 2. Engel, kollat and blackwell, 1968, 3. Positivists, 4. Interpretivism, 5. Consumers, attitude.]

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