CONSUMER BEHAVIOUR

Difference between Consumer and Organisational Buying Behaviour: There are no.of reasons that can be identified to differentiate the process of buying for an individual consumer and Industrial consumer. Organisations buy products in to services to reach their organisational goals. These goals should be profit maximisation, cost reducing, meeting employee needs and satisfy legal obligations. Therefore organisations are more rational during the purchase; however individuals by goods & services for their own satisfaction & other factors could influence the buying behaviour to very small extent. Hence, consumer buying process could be more spontaneous. More people are involved any organisation buying. There may be wide range of influences in the decision making process which could be from the various levels in the organisation. In consumer buying behaviour also they exists many roles played by different individuals. However, the extent or degree of people participation is very less in individual buying process. Organisation purchases are more likely to be based on formal routing like purchasing policies, constraints & requirements established by the organisations. This is not applicable to individual purchases and hence is more informal. The poor performance of a product might cause annoyance to a customer & may not result in the repurchase of the same product. But in case of business buyer it could need to financial loss non achievement of goals. In the process of reducing risk of the organisational buyer, the manufacturers face a greater attention to the development of product for organisational buyer, because he would seek for a longer relationship between buyer and seller with the organisation. However he may not resort to such measures for individual buyer. Since the organisational is more formal, therefore the complexity of the process also increases. It could be a time consumer product & lot of people & various level & departments could be involved in the organisational purchase. However this is not the case in individual purchase. Segmentation, Targeting, and Positioning Segmentation, targeting, and positioning together comprise a three stage process. We first (1) determine which kinds of customers exist, then (2) select which ones we are best off trying to serve and, finally, (3) implement our segmentation by optimizing our products/services for that segment andcommunicating that we have made the choice to distinguish ourselves that way.

Segmentation involves finding out what kinds of consumers with different needs exist. In the auto market, for example, some consumers demand speed and performance, while others are much more concerned about roominess and safety. In general, it holds true that “You can’t be all things to all people,” and experience has demonstrated that firms that specialize in meeting the needs of one group of consumers over another tend to be more profitable. Generically, there are three approaches to marketing. In the undifferentiatedstrategy, all consumers are treated as the same, with firms not making any specific efforts to satisfy particular groups. This may work when the product is a standard one where one competitor really can’t offer much that another one can’t. Usually, this is the case only for commodities. In the concentratedstrategy, one firm chooses to focus on one of several segments that exist while leaving other segments to competitors. For example, Southwest Airlines focuses on price sensitive consumers who will forego meals and assigned seating for low prices. In contrast, most airlines follow the differentiatedstrategy: They offer high priced tickets to those who are inflexible in that they cannot tell in advance when they need to fly and find it impractical to stay over a Saturday. These travelers—usually business travelers—pay high fares but can only fill the planes up partially. The same airlines then sell some of the remaining seats to more price sensitive customers who can buy two weeks in advance and stay over. Note that segmentation calls for some tough choices. There may be a large number of variables that can be used to differentiate consumers of a given product category; yet, in practice, it becomes impossibly cumbersome to work with more than a few at a time. Thus, we need to determine which variables will be most useful in distinguishing different groups of consumers. We might thus decide, for example, that the variables that are most relevant in separating different kinds of soft drink consumers are (1) preference for taste vs. low calories, (2) preference for Cola vs. non-cola taste, (3) price sensitivity—willingness to pay for brand names; and (4) heavy vs. light consumers. We now put these variables together to arrive at various combinations. Several different kinds of variables can be used for segmentation.

Demographic variables essentially refer to personal statistics such as income, gender, education, location (rural vs. urban, East vs. West), ethnicity, and family size. Campbell’s soup, for instance, has found that Western U.S. consumers on the average prefer spicier soups—thus, you get a different product in the same cans at the East and West coasts. Facing flat sales of guns in the traditional male dominated market, a manufacturer came out with the Lady Remmington, a more compact, handier gun more attractive to women. Taking this a step farther, it is also possible to segment on lifestyle and values.” Some consumers want to be seen as similar to others, while a different segment wants to stand apart from the crowd. Another basis for segmentation is behavior. Some consumers are “brand loyal”—i.e., they tend to stick with their preferred brands even when a competing one is on sale. Some consumers are “heavy” users while others are “light” users. For example, research conducted by the wine industry shows that some 80% of the product is consumed by 20% of the consumers—presumably a rather intoxicated group. One can also segment on benefits sought, essentially bypassing demographic explanatory variables. Some consumers, for example, like scented soap (a segment likely to be attracted to brands such as Irish Spring), while others prefer the “clean” feeling of unscented soap (the “Ivory” segment). Some consumers use toothpaste primarily to promote oral health, while another segment is more interested in breath freshening. In the next step, we decide to target one or more segments. Our choice should generally depend on several factors. First, how well are existing segments served by other manufacturers? It will be more difficult to appeal to a segment that is already well served than to one whose needs are not currently being served well. Secondly, how large is the segment, and how can we expect it to grow? (Note that a downside to a large, rapidly growing segment is that it tends to attract competition). Thirdly, do we have strengths as a company that will help us appeal particularly to one group of consumers? Firms may already have an established reputation. While McDonald’s has a great reputation for fast, consistent quality, family friendly food, it would be difficult to convince consumers that McDonald’s now offers gourmet food. Thus, McD’s would probably be better off targeting families in search of consistent quality food in nice, clean restaurants. Positioning involves implementing our targeting. For example, Apple Computer has chosen to position itself as a maker of user-friendly computers. Thus, Apple has done a lot through its advertising to promote itself, through its unintimidating icons, as a computer for “non-geeks.” The Visual C software programming language, in contrast, is aimed a “techies.”

Michael Treacy and Fred Wiersema suggested in their 1993 book The Discipline of Market Leaders that most successful firms fall into one of three categories: Operationally excellent firms, which maintain a strong competitive advantage by maintaining exceptional efficiency, thus enabling the firm to provide reliable service to the customer at a significantly lower cost than those of less well organized and well run competitors. The emphasis here is mostly on low cost, subject to reliable performance, and less value is put on customizing the offering for the specific customer. Wal-Mart is an example of this discipline. Elaborate logistical designs allow goods to be moved at the lowest cost, with extensive systems predicting when specific quantities of supplies will be needed. Customer intimate firms, which excel in serving the specific needs of the individual customer well. There is less emphasis on efficiency, which is sacrificed for providing more precisely what is wanted by the customer. Reliability is also stressed. Nordstrom’s and IBM are examples of this discipline. Technologically excellent firms, which produce the most advanced products currently available with the latest technology, constantly maintaining leadership in innovation. These firms, because they work with costly technology that need constant refinement, cannot be as efficient as the operationally excellent firms and often cannot adapt their products as well to the needs of the individual customer. Intel is an example of this discipline. Treacy and Wiersema suggest that in addition to excelling on one of the three value dimensions, firms must meet acceptable levels on the other two. Wal-Mart, for example, does maintain some level of customer service. Nordstrom’s and Intel both must meet some standards of cost effectiveness. The emphasis, beyond meeting the minimum required level in the two other dimensions, is on the dimension of strength. Repositioning involves an attempt to change consumer perceptions of a brand, usually because the existing position that the brand holds has become less attractive. Sears, for example, attempted to reposition itself from a place that offered great sales but unattractive prices the rest of the time to a

store that consistently offered “everyday low prices.” Repositioning in practice is very difficult to accomplish. A great deal of money is often needed for advertising and other promotional efforts, and in many cases, the repositioning fails. To effectively attempt repositioning, it is important to understand how one’s brand and those of competitors are perceived. One approach to identifying consumer product perceptions is multidimensional scaling. Here, we identify how products are perceived on two or more “dimensions,” allowing us to plot brands against each other. It may then be possible to attempt to “move” one’s brand in a more desirable direction by selectively promoting certain points. There are two main approaches to multi-dimensional scaling. In the a prioriapproach, market researchers identify dimensions of interest and then ask consumers about their perceptions on each dimension for each brand. This is useful when (1) the market researcher knows which dimensions are of interest and (2) the customer’s perception on each dimension is relatively clear (as opposed to being “made up” on the spot to be able to give the researcher a desired answer). In the similarity rating approach, respondents are not asked about their perceptions of brands on any specific dimensions. Instead, subjects are asked to rate the extent of similarity of different pairs of products (e.g., How similar, on a scale of 1-7, is Snicker’s to Kitkat, and how similar is Toblerone to Three Musketeers?) Using a computer algorithms, the computer then identifies positions of each brand on a map of a given number of dimensions. The computer does not reveal what each dimension means—that must be left to human interpretation based on what the variations in each dimension appears to reveal. This second method is more useful when no specific product dimensions have been identified as being of particular interest or when it is not clear what the variables of difference are for the product category.

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Cultural Factors affecting Consumer Behaviour Consumer behaviour deals with the study of buying behaviour of consumers. Consumer behaviour helps us understand why and why not an individual purchases goods and services from the market.

There are several factors which influence the buying decision of consumers, cultural factors being one of the most important factors.

What are Cultural Factors ? Cultural factors comprise of set of values and ideologies of a particular community or group of individuals. It is the culture of an individual which decides the way he/she behaves. In simpler words, culture is nothing but values of an individual. What an individual learns from his parents and relatives as a child becomes his culture. Example - In India, people still value joint family system and family ties. Children in India are conditioned to stay with their parents till they get married as compared to foreign countries where children are more independent and leave their parents once they start earning a living for themselves. Cultural factors have a significant effect on an individual’s buying decision. Every individual has different sets of habits, beliefs and principles which he/she develops from his family status and background. What they see from their childhood becomes their culture. Let us understand the influence of cultural factors on buying decision of individuals with the help of various examples. Females staying in West Bengal or Assam would prefer buying sarees as compared to Westerns. Similarly a male consumer would prefer a Dhoti Kurta during auspicious ceremonies in Eastern India as this is what their culture is. Girls in South India

wear skirts and blouses as compared to girls in north India who are more into Salwar Kameez. Our culture says that we need to wear traditional attire on marriages and this is what we have been following since years. People in North India prefer breads over rice which is a favorite with people in South India and East India.

Subcultures Each culture further comprises of various subcultures such as religion, age, geographical location, gender (male/female), status etc.

Religion (Christianity, Hindu, Muslim, Sikhism, Jainism etc) A Hindu bride wears red, maroon or a bright colour lehanga or saree whereas a Christian bride wears a white gown on her wedding day. It is against Hindu culture to wear white on auspicious occasions. Muslims on the other hand prefer to wear green on important occasions. For Hindus eating beef is considered to be a sin whereas Muslims and Christians absolutely relish the same. Eating pork is against Muslim religion while Hindus do not mind eating it. A sixty year old individual would not like something which is too bright and colorful. He would prefer something which is more

sophisticated and simple. On the other hand a teenager would prefer funky dresses and loud colours. In India widows are expected to wear whites. Widows wearing bright colours are treated with suspicion.

Status (Upper Class, Middle class and Lower Class) People from upper class generally have a tendency to spend on luxurious items such as expensive gadgets, cars, dresses etc.You would hardly find an individual from a lower class spending money on high-end products. A person who finds it difficult to make ends meet would rather prefer spending on items necessary for survival. Individuals from middle class segment generally are more interested in buying products which would make their future secure.

Gender (Male/Female) People generally make fun of males buying fairness creams as in our culture only females are expected to buy and use beauty products. Males are perceived to be strong and tough who look good just the way they are.

Cross Cultural understanding of consumer behavior by SREE

RAMA RAO

on JANUARY 1, 2010

Assessing cultural change still remains a difficult task and marketers are likely to continue to face problems when attempting to understand, appreciate, and reflect changing cultural values. First, these

changes are choice elusive and hard to define, and their practical effects are frequently indirect. Second, the marketer may tend to ascribe fundamental cultural changes simply to the generation gap and incorrectly assume that they are only fads and will quickly disappear. Finally, because change often generates complexity, marketers may resist changing cultural values rather than trying to take advantage of them. More and more companies have adopted a global outlook in which the world becomes their market. For example, numerous major corporations, such as Coca Cola, Hoover, IBM, Pfizer and Gillette, receive over half of their earnings from foreign operations while many others also have significant international markets. Such situations require the marketer’s appreciation both of culture differences among international markets and of their influence on consumer behavior. In this section some of the marketing implication of these cultural subtleties will be discussed. Unfortunately, there have been rather few published cross cultural studies of consumer behavior that the marketer may use in making strategy decisions. There have been some important recent examples of research in this area, however. The need for cross cultural understanding: A recent study of almost 12,000 managers around the world found that although changes were occurring in every country, culture, and corporation, there is still no common culture of management. Moreover, managers’ views tend to correspond more to their country’s cultural heritage and less to its geographic location. The diversity among cultures is reflected not only in management but also in marketing and consumer behavior and it can take some getting used to. Thus, when Americans venture broad, they experience what anthropologists call culture shock, that is, a series of psychological jolts when they encounter new customs, value systems, attitudes and work habits; the shock reduces their effectiveness in foreign commercial environments. Therefore, it is crucial to effective operations that the manager be well schooled in the host culture. A lack of understanding of the host culture will lead the manager to think and act as if he would in his home culture. Such a self reference criterion that is, the unconscious reference to one’s own cultural values – has been termed the root cause of most international business problems abroad. The goal should be to eliminate this cultural myopia. The following effectively expresses the payoff from understanding how culture may influence cross cultural executives. A general comparative analysis if cultures may help marketing executives to anticipate the responses of their rivals, understand more accurately their customs in business transactions and deal with colleagues of different nationalities in joint decision. Culture makes a difference in problem identification and in the objectives motivating choice. Culture also may make a difference in the communication of problems and recommendations, and particularly in the decisiveness of recommendations. Failure to understand these differences may lead to noisy communication, misinformation and misunderstanding. Culture also makes a difference in individual strategies to adjust decision situations to facilitate choice and mitigate undesirable consequences for the organization and the decision maker. The marketer needs a frame of reference with which to understand and evaluate the range of cultural values that may be encountered. A useful conceptualization of the possible range of variations in values

found in different cultures is offered which presents a classification of value orientations that might be encountered by the international marketer. This model suggests five basic orientations, which are thought to be common to all human groups. These relate to human nature, relationship of people to nature, sense of time, activity and social relations. The marketer’s task then becomes one of seeking to understand what type of value system predominates in a given culture and reacting effectively to that system through marketing. Thus, the international marketer would benefit from doing the same. Americans would fall on the right hand side of this value range. Nevertheless it has been observed that even in our modern value systems there are some primitive aspects of consumption that serve as an outlet for spiritual expression and the preservation of ethnic heritage. Families and Family Decision Making The Family Life Cycle. Individuals and families tend to go through a "life cycle:" The simple life cycle goes from

For purposes of this discussion, a "couple" may either be married or merely involve living together. The breakup of a non-marital relationship involving cohabitation is similarly considered equivalent to a divorce. In real life, this situation is, of course, a bit more complicated. For example, many couples undergo divorce. Then we have one of the scenarios:

Single parenthood can result either from divorce or from the death of one parent. Divorce usually entails a significant change in the relative wealth of spouses. In some cases, the non-custodial parent

(usually the father) will not pay the required child support, and even if he or she does, that still may not leave the custodial parent and children as well off as they were during the marriage. On the other hand, in some cases, some non-custodial parents will be called on to pay a large part of their income in child support. This is particularly a problem when the non-custodial parent remarries and has additional children in the second (or subsequent marriages). In any event, divorce often results in a large demand for: Low cost furniture and household items Time-saving goods and services Divorced parents frequently remarry, or become involved in other non-marital relationships; thus, we may see

Another variation involves

Here, the single parent who assumes responsibility for one or more children may not form a relationship with the other parent of the child. Integrating all the possibilities discussed, we get the following depiction of the Family Life Cycle:

Generally, there are two main themes in the Family Life Cycle, subject to significant exceptions: As a person gets older, he or she tends to advance in his or her career and tends to get greater income (exceptions: maternity leave, divorce, retirement). Unfortunately, obligations also tend to increase with time (at least until one’s mortgage has been paid off). Children and paying for one’s house are two of the greatest expenses. Note that although a single person may have a lower income than a married couple, the single may be able to buy more discretionary items. Family Decision Making. Individual members of families often serve different roles in decisions that ultimately draw on shared family resources. Some individuals are information gatherers/holders, who seek out information about products of relevance. These individuals often have a great deal of power because they may selectively pass on information that favors their chosen alternatives. Influencers do not ultimately have the power decide between alternatives, but they may make their wishes known by asking for specific products or causing embarrassing situations if their demands are not met. Thedecision maker(s) have the power to determine issues such as: Whether to buy; Which product to buy (pick-up or passenger car?); Which brand to buy; Where to buy it; and When to buy. Note, however, that the role of the decision maker is separate from that of thepurchaser. From the point of view of the marketer, this introduces some problems since the purchaser can be targeted by point-of-purchase (POP) marketing efforts that cannot be aimed at the decision maker. Also note that the distinction between the purchaser and decision maker may be somewhat blurred: The decision maker may specify what kind of product to buy, but not which brand; The purchaser may have to make a substitution if the desired brand is not in stock; The purchaser may disregard instructions (by error or deliberately). It should be noted that family decisions are often subject to a great deal of conflict. The reality is that few families are wealthy enough to avoid a strong tension between demands on the family’s resources. Conflicting pressures are especially likely in families with children and/or when only one spouse works outside the home. Note that many decisions inherently come down to values, and that there is frequently no "objective" way to arbitrate differences. One spouse may believe that it is important to save for the children’s future; the other may value spending now (on private schools and computer equipment) to help prepare the children for the future. Who is right? There is no clear answer here. The

situation becomes even more complex when more parties—such as children or other relatives—are involved. Some family members may resort to various strategies to get their way. One isbargaining—one member will give up something in return for someone else. For example, the wife says that her husband can take an expensive course in gourmet cooking if she can buy a new pickup truck. Alternatively, a child may promise to walk it every day if he or she can have a hippopotamus. Another strategy is reasoning— trying to get the other person(s) to accept one’s view through logical argumentation. Note that even when this is done with a sincere intent, its potential is limited by legitimate differences in values illustrated above. Also note that individuals may simply try to "wear down" the other party by endless talking in the guise of reasoning (this is a case of negative reinforcement as we will see subsequently). Various manipulative strategies may also be used. One is impression management, where one tries to make one’s side look good (e.g., argue that a new TV will help the children see educational TV when it is really mostly wanted to see sports programming, or argue that all "decent families make a contribution to the church"). Authorityinvolves asserting one’s "right" to make a decision (as the "man of the house," the mother of the children, or the one who makes the most money). Emotioninvolves making an emotional display to get one’s way (e.g., a man cries if his wife will not let him buy a new rap album). Group Influences Humans are inherently social animals, and individuals greatly influence each other. A useful framework of analysis of group influence on the individual is the so called reference group—the term comes about because an individual uses a relevant group as a standard of reference against which oneself is compared. Reference groups come in several different forms. The aspirational reference group refers to those others against whom one would like to compare oneself. For example, many firms use athletes as spokespeople, and these represent what many people would ideally like to be. Associative reference groups include people who more realistically represent the individuals’ current equals or near-equals—e.g., coworkers, neighbors, or members of churches, clubs, and organizations. Paco Underhill, a former anthropologist turned retail consultant and author of the book Why We Buy has performed research suggesting that among many teenagers, the process of clothes buying is a two stage process. In the first stage, the teenagers go on a "reconnaissance" mission with their friends to find out what is available and what is "cool." This is often a lengthy process. In the later phase, parents—who will need to pay for the purchases—are brought. This stage is typically much briefer. Finally, the dissociative reference group includes people that the individual would not like to be like. For example, the store literally named The Gap came about because many younger people wanted to actively dissociate from parents and other older and "uncool" people. The Quality Paperback Book Club specifically suggests in its advertising that its members are "a breed apart" from conventional readers of popular books.

Reference groups come with various degrees of influence. Primary reference groups come with a great deal of influence—e.g., members of a fraternity/sorority. Secondary reference groups tend to have somewhat less influence—e.g., members of a boating club that one encounters only during week-ends are likely to have their influence limited to consumption during that time period. Another typology divides reference groups into the informational kind (influence is based almost entirely on members’ knowledge), normative(members influence what is perceived to be "right," "proper," "responsible," or "cool"), or identification. The difference between the latter two categories involves the individual’s motivation for compliance. In case of the normative reference group, the individual tends to comply largely for utilitarian reasons—dressing according to company standards is likely to help your career, but there is no real motivation to dress that way outside the job. In contrast, people comply with identification groups’ standards for the sake of belonging—for example, a member of a religious group may wear a symbol even outside the house of worship because the religion is a part of the person’s identity.

Reference groups are groups that consumers compare themselves to or associate with. Reference groups are similar to opinion leaders in that they can have a profound influence on consumer behavior. Reference groups are considered a social influence in consumer purchasing. They are often groups that consumers will look to to make purchasing decisions. So if a reference group endorses a product, either through use or statements about the product, those that look to the group will often purchase that product. On the other hand, if a reference group disapproves of a product, those that associate with that group will probably not purchase the product. Types of Reference Groups Reference groups can be either formal or informal. Schools, friends, and peers are examples of informal reference groups . Clubs, associations, and religious organizations are usually formal reference groups. Individuals can also be reference groups (usually known as opinion leaders). Additionally, celebrities can be used as a reference group. A company might use a celebrity it feels will match its target market to get that market to purchase its product. For example, a few years ago Shaquille O'Neal was used to endorse Pepsi because Pepsi felt he represented the spirit of teenagers of the time.

Influence of Reference Groups Reference groups can and do have a tremendous influence on purchasing decisions. This is evident in a number of ways, such as through roles. Everyone is expected to behave in a certain way based on the reference group we belong to. Students act like students. In keeping with this idea, people will often modify their own behavior to coincide with group norms (even those that profess non-conformity are in some ways conforming with other people who want the same thing). Reference groups communicate through opinion leaders, who influence what others do, act, and buy. In the consumer world, this means that if a reference group purchases a product, those that associate with the group likely will as well. Opinion leaders: Our purchase decisions are influenced by any number of people or groups. We often look to opinion leaders for help in our consumer decisions. Opinion leaders are usually people who are more knowledgeable about a certain product or service than the average consumer. As such, opinion leaders can shape how a product is viewed. Consumers are constantly seeking out the advice of knowledgeable friends or acquaintances who can provide information, give advice, or actually make the decision. For some product categories, there are professional opinion leaders who are quite easy to identify–for instance, auto mechanics , beauticians, stock brokers, and physicians. All these professionals can influence the decisions consumers make within their area of expertise. Sometimes, these opinion leaders can actually be groups, known as reference groups.

Mechanics as Secondary Groups Mechanics can be considered opinion leaders in the automotive industry.

Characteristics of Opinion Leaders Opinion leaders are generally people who have the ability to influence others. They usually have deeper expertise in a certain area, and are often looked to for help in making consumer decisions. For example, a local high school teacher may be an opinion leader for parents in selecting colleges for their children. Often, an opinion leader is among the first to use a new product or service, and can then pass on his or her opinions of the product to others. Opinion leaders are often trusted and unbiased and have the social network of friends, family, and coworkers necessary to disperse information.

Opinion Leaders in Marketing Opinion leaders are particularly useful in marketing. If a marketer can identify key opinion leaders for a certain group, she can then direct her efforts towards attracting these individuals. In marketing, celebrities are often used as opinion leaders. Although they may not actually know more about a product or service, there is usually the perception that they do. Celebrity endorsements in marketing are a way to give clout to a product or service . Opinion leaders can have a profound influence on the success of a product, and on one's own consumer purchases. Diffusion of Innovation Products tend to go through a life cycle. Initially, a product is introduced. Since the product is not well known and is usually expensive (e.g., as microwave ovens were in the late 1970s), sales are usually limited. Eventually, however, many products reach a growth phase—sales increase dramatically. More firms enter with their models of the product. Frequently, unfortunately, the product will reach a maturity stage where little growth will be seen. For example, in the United States, almost every household has at least one color TV set. Some products may also reach a decline stage, usually because the product category is being replaced by something better. For example, typewriters experienced declining sales as more consumers switched to computers or other word processing equipment. The product life cycle is tied to the phenomenon of diffusion of innovation. When a new product comes out, it is likely to first be adopted by consumers who are more innovative than others—they are willing to pay a premium price for the new product and take a risk on unproven technology. It is important to be on the good side of innovators since many other later adopters will tend to rely for advice on the innovators who are thought to be more knowledgeable about new products for advice.

At later phases of the PLC, the firm may need to modify its market strategy. For example, facing a saturated market for baking soda in its traditional use, Arm ü Hammer launched a major campaign to get consumers to use the product to deodorize refrigerators. Deodorizing powders to be used before vacuuming were also created. It is sometimes useful to think of products as being either new or existing.

Many firms today rely increasingly on new products for a large part of their sales. New products can be new in several ways. They can be new to the market—noone else ever made a product like this before. For example, Chrysler invented the minivan. Products can also be new to the firm—another firm invented the product, but the firm is now making its own version. For example, IBM did not invent the personal computer, but entered after other firms showed the market to have a high potential. Products can be new to the segment—e.g., cellular phones and pagers were first aimed at physicians and other price-insensitive segments. Later, firms decided to target the more price-sensitive mass market. A product can be new for legal purposes. Because consumers tend to be attracted to “new and improved” products, the Federal Trade Commission (FTC) only allows firms to put that label on reformulated products for six months after a significant change has been made. The diffusion of innovation refers to the tendency of new products, practices, or ideas to spread among people. Usually, when new products or ideas come about, they are only adopted by a small group of people initially; later, many innovations spread to other people. Innovator

Innovators are the first to purchase a product and make up 2.5% of all purchases of the product. Innovators purchase the product at the beginning of the life cycle. They are not afraid of trying new products that suit their lifestyle and will also pay a premium for that benefit. Sales to innovators are not usually an indication of future sales as innovators simply buy because the product is new. Early Adopters

The next group of purchasers are called Early Adopters and they make up 13.5% of purchases. This group of purchasers adopt early but unlike innovators adoption is after careful thought. Early Adopters are usually opinion leaders in their circle (of friends, family and colleagues) so adoption by this group is crucial for the success of the product. Early adopters help the product's journey in becoming "socially acceptable". Early Majority

The Early Majority are a cautious group of purchasers, making up 34% of purchases. They will not buy a product until it has become "socially acceptable". Early majority purchases are needed for the product to achieve wide spread acceptance. Late Majority

Late Majority make up another 34% of sales and usually purchase the product during the late stages of the product's life cycle. They are more cautious than the early majority and will only buy after the majority of people have purchased the product.

Laggards

The final group of people to purchase a product are called Laggards. Laggards make up 16% of total sales and purchase the product near the end of its life. Some laggards will never purchase a product, whilst others will buy it because their existing product is broken and it can not be repaired or replaced with an identical product. Laggards may wait to see if the product will get cheaper and by the time they purchase the product a new version of the product is often (already) on the market. Conclusion

All groups (whether that is at work or within social circles) usually have opinion leaders that the rest of the group like to follow. Opinion leaders are people who are good at selecting the next big thing such as the latest fashion trend or electronic gadget. The challenge for firms is to persuade opinion leaders to adopt their product. Identifying opinion leaders can be challenging, as product type will dictate the product adoption behaviour of a person. For example a person may be an innovator for electronic products but a laggard for kitchenware products.

Five stages of the adoption process

Stage

Definition

The individual is first exposed to an innovation, but lacks information Knowledge

about the innovation. During this stage the individual has not yet been inspired to find out more information about the innovation.

Persuasion

The individual is interested in the innovation and actively seeks related information/details.

The individual takes the concept of the change and weighs the advantages/disadvantages of using the innovation and decides whether Decision

to adopt or reject the innovation. Due to the individualistic nature of this stage, Rogers notes that it is the most difficult stage on which to acquire empirical evidence.[11]

The individual employs the innovation to a varying degree depending on Implementati the situation. During this stage the individual also determines the on

usefulness of the innovation and may search for further information about it.

The individual finalizes his/her decision to continue using the innovation. Confirmation This stage is both intrapersonal (may cause cognitive dissonance) and interpersonal, confirmation the group has made the right decision.

Motivation:

Motivation is the ‘why’ of behaviour. It is an intervening variable between stimulus and response and a governing force of consumer behaviour. “Motivation refers to the drives, urges, wishes or desires which initiate the sequence of events known as behaviour.” as defined by Professor M.C. Burk. Motivation is an active, strong driving force that exists to reduce a state of tension and to protect, satisfy and enhance the individual and his self-concept. It is one that leads the individual to act in a particular way. It is the complex net-work of psychological and physiological mechanisms. Therefore, motives can be conscious or unconscious, rational or emotional, positive or negative. These motives range from a mere biological desires like hunger and thirst to the most advanced scientific pursuits like landing on the Moon or Mars. It was Abraham Maslow who developed five steps human need hierarchy those of survival-Safety Belongingness and Love-Easteem and Self Actualisation. According to him, fulfillment of one will lead to the fulfillment of higher motives. The implications are that as we move up in the ladder, the input of marketing becomes more and more deep and subtle. 2. Perception: Marketing management is concerned with the understanding of the process of perception because, perception leads to thought and thought leads to action. Perception is the process whereby stimuli are received and interpreted by the individual and translated into a response.

In other words, perception is the process by which the mind receives, organises and interprets physical stimuli. To perceive is to see, hear, touch, taste, smell and sense internally something or some event or some relation. Perception is selective because, and individual cannot possibly perceive all stimulus objects within his perceptional field; hence, he perceives selectively. Perception is organized because, perceptions have meaning for the individual and they do not represent a buzzing confusion. Perception depends upon stimulus factors. That is, the nature of physical stimulus itself is a determinant of perception. The variables like colour size, contrast, intensity, frequency and movement are of this kind. Again, perception depends on the personal factors. What the individual brings to the situation governs perception his ability to see or hear the message, his needs, his moods, memory, expressions and values all these modify the message reception. The personal factor of perception is his self concept, need, span of apprehension, mental set and the past experiences. Perception has its own impact on consumer behaviour or consumer decision-making. Let us take some such cases: Perception and communication: It is estimated that 90 per cent of the stimuli that the individuals perceive come through sight and rest from hearing. That is why, advertisements bank heavily audio on visual stimuli. However, it does not mean that loud noises, bright colours and large ads themselves guarantee consumer attention and response. Contrary to this, it is the use of haunting melodies, pastel shades, regional accents and careful adjustment of ad size in relation to the total page or poster size all affect perception and these factors may give better results. Product and brand perception: Good many studies have been made of the ways in which the consumers perceive the products and the brands they choose regularly. It is brand images and the brand differentiation that play vital role in perception in addition to the physical characteristics of the product. Therefore, it is a must for a marketer to examine all the factors that impinge on the construction of a brand image to ascertain their effects on consumer perception of the company’s marketing mix. Price perception: Price is another element of marketing mix where perception has its implications. Studies have proved beyond doubt that consumers judge product or service quality by price. ‘Higher the price better the quality’ that goes.

This goes on establishing that there is going to the direct or positive relationship between price and demand where marketer is cared to gain. Another aspect of this price perception is psychological pricing. The reasoning behind such pricing strategies is that consumers are likely to perceive used in cut-price sales promotions to increase the feeling that a price has been drastically reduced. Store perception: There are five major components of stores image namely, location design-product assortment-services and personnel each of which contributes to consumer perception of the place from which he or she buys. Mere physical attributes do to talk of a store image. Other intangible factors, too, influence consumer perception of stores image such as advertising, inter-personal communication and experience. Consumer perceptions of stores are greatly influenced by consumer’s own self- perception and motives. Further, consumer’s self-images influence the places in which they shop. Perceived risk: The concept of perceived-risk recognizes that consumer experiences a sense of risk in purchase and that consumer behaviour can be studied profitably as a risk reducing behaviour. Consumer behaviour involves risk in the sense that any action of a consumer will produce results which he cannot predict with certainty. The perception of risk in a purchase situation is a function of the possible consequences and the product uncertainty involved. Perceived risk can be divided into forms namely, ‘functional’ and ‘psychological’. Functional risk is related with the performance and the psychosocial risk is related with the fact whether the product enhances one’s sense of well being or self-concept. The level of perceived risk is a function of the uncertainty involved and the possible consequences of purchase and can be reduced by gaining greater certainty or by minimising consequences. In most cases, it is increasing the element of certainty. 3. Learning: In behavioural science, learning means any change in behaviour which comes about as a result of experience. Learning is the process of acquiring knowledge. Consumer behaviour is a process of learning because; it is modified according to the customer’s past experience and the objectives he or she has set. This process of learning is made up of four stages namely, Drive- cue-response and Reinforcement. ‘Drive’ refers to an internal state of tension which warrants action.

Thus, hunger or thirst can be a drive. A ‘cue’ is an environmental stimulus. For instance, it can be an ad on food item or soft- drink, ‘Response’ represents the person’s reaction to cues within his environment. Here, it can be purchased of food item or soft-drink. ‘Reinforcement’ is the responses reward. The food item or soft-drink. ‘Reinforcement’ is the response reward. The food item or soft drink satisfies the hunger or the thirst. When reinforcement happens, the response may be duplicated resulting in habit formation or absence of reinforcement results in extinction of learnt habit. As most consumer behaviour is learnt behaviour, it has deep impact on consumer buying process. Prior experience and learning acts as buying guide. In-spite of such habitual behaviour, one can think of reasonable amount of brand switching, trying new products, does take place. The strong tendency of most consumers to develop brand loyalties definitely benefits the makers of established brands. This makes the manufacturer of a new brand to face difficulty in breaking such loyalties and encouraging brand switching. He succeeds in his efforts when he shows that his product is potentially much more satisfying than his competitors. Free sampling, in store trial and demonstrations and deal activities may be used to break the existing brand barrier to establish new patterns of purchase behaviour. To the extent the learning and brand loyalty can be gained for a product, the manufacturer activates a more stable sales profile less vulnerable to the competitive inroads. 4. Attitude: The concept of attitude occupies a central position in the consumer behaviour studies in particular and social psychology in general because; attitude measurements help in understanding and prediction of consumer behaviour. ‘Attitude’ refers to a predisposition to behave in a particular way when presented with a given stimulus and the attitudes towards people, places, products and things can be positive or negative or favourable or unfavourable. Attitudes develop gradually as a result of experience; they emerge from interaction of a person with family, friends, and reference groups. There are three distinct components of attitude namely, cognitive, affective and co-native. ‘Cognitive’ component is what an individual believes about an object, thing or an event whether it is good or bad, necessary or unnecessary, useful or useless. It is based on the reason and is linked with knowledge and about the object, thing or an event whether it is pleasant or unpleasant, tasty how an individual responds to the object, thing or an event. It is based on the other two components and is related with his behaviour. Each of the three attitude components vary according to both the situation and the person. The marketing manager’s success is determined partly by his ability to understand, predict and influence the consumer attitudes.

The marketer may be interested in confirming the existing attitudes, or change in the existing attitudes or create new attitudes depending on how his product is performing in the market. Attitude confirmation is, perhaps, the easiest course of action which is followed in case of established products. Such an act involves only reminding the consumers as to why they like it and why they should continue it to purchase. Attitude changing is more difficult task than mere confirming it. It is a change from disposition to act in the direction of the original attitude to a disposition to act in the opposite direction. A product disliked is to be liked by the consumers. It is really a difficult process. Attitude creation is to make the consumers to forget the old products or brands and to make them to go in for new product or brand entirely altogether, in fact, it is comparatively easier to create new attitudes than to change the existing one. The most powerful instrument of attitude change and creation is advertising. 5. Personality: Very often, the word ‘personality’ is used to refer to the capacity of a person for popularity, friendliness or charisma. However, in strict sense, it refers to the essential differences between one individual and another. Therefore, personality consists of the mannerisms, habits and actions that make a person an individual and thereby serve to make him distinct from everyone else. It is the function of innate drives, learned motives and experience. This means that an individual responds with certain amount of consistency to similar stimuli. Personality is the interplay of three components namely, ‘id’, ‘the ego’ and the ‘super ego’. The ‘id’ governs the basic drives and the instincts of an individual. On the other hand, the ‘super ego’ disciplines the ‘id’ by suppressing anti-social behaviour; it drives the individual in the direction of more high minded pursuits of civilizations. The ‘ego’ component is the executive and makes the conscious decisions and reconciles the inflicting demands of ‘id’ and ‘super ego’, wherever necessary. For instance, ‘id’ may force an individual to make full use of consumer credit to buy an automobile, ‘super ego’ dissuades such an activity as borrowing is a kind of social sin in Indian society. It is ‘ego’ that reconciles these and works out a compromise making the individual to pay instalments regularly without any strain on his regular budget. The personality of an individual is either expressed in terms of traits or type. The personality traits may be aggressiveness honesty anxiety independence sociability and so on. The personality types may be introvert or extrovert or another classification as tradition direction outer direction and inner direction. Each of these traits and types has been explored as the possible clues to the behaviour of consumers.

Evaluation of personality’s role in marketing is seen in drawing consumer profiles and psychographic market segmentation. The Consumer Buying Decision Process This article is the second in a series of articles about the factors and variables that influence the behavior of consumers. The purchase is only the visible part of a more complex decision process created by the consumer for each buying decision he makes. But what happens before and after this purchase? What are the factors influencing the choice of product purchased by the consumer? Today, let’s focus on the Consumer Buying Decision Process and the stages that lead a shopper to purchase a new product. Engel, Blackwell and Kollat have developed in 1968 a model of consumer buying decision process in five steps: Problem/need recognition, information search, evaluation of alternatives to meet this need, purchase decision and post-purchase behavior. I. Need recognition / Problem recognition : The need recognition is the first and most important step in the buying process. If there is no need, there is no purchase. This recognition happens when there is a lag between the consumer’s actual situation and the ideal and desired one. However, not all the needs end up as a buying behavior. It requires that the lag between the two situations is quite important. But the “way” (product price, ease of acquisition, etc.) to obtain this ideal situation has to be perceived as “acceptable” by the consumer based on the level of importance he attributes to the need. For example, you have a pool and you would like someone to take care of regularly cleaning it instead of you (ideal situation) because it annoys you to do it yourself (actual situation). But you don’t judge the “way” to reach this ideal situation (pay $250 / month for a specialized company) as “acceptable” because its price to obtain it seems too high. Especially compared to the relatively low level of importance you attach to it. So you won’t have a purchase behavior in this situation. On the other hand, the ability to be able to go to your work by car in 20 minutes every morning (ideal situation) rather than lose three hours in transit because you do not have a car and you live in the countryside (actual situation) is something that means a lot to you. So you will have a buying behavior to purchase a car. Even if the price is important. In addition to a need resulting from a new element, the gap between the actual situation and the ideal situation may be due to three cases. The current situation has not changed, but the ideal situation has (a neighbor told you about the possibility – that you did not know – to clean the pool by a specialized company). Or, the ideal situation is still the same but it’s the actual

situation has changed (you’re tired of cleaning your pool by yourself). Or finally, the two situations have changed. The recognition of a need by a consumer can be caused in different ways. Different classifications are used: Internal stimuli (physiological need felt by the individual as hunger or thirst) which opposes the external stimuli such as exposure to an advertisement, the sight of a pretty dress in a shop window or the mouth-watering smell of a french “pain au chocolat” when passing by a bakery. Classification by type of needs: Functional need: the need is related to a feature or specific functions of the product or happens to be the answer to a functional problem. Like a computer with a more powerful video card to be able to play the latest video games or a washing machine that responds to the need to have clean clothes while avoiding having to do it by hand or go to the laundromat. Social need: the need comes from a desire for integration and belongingness in the social environment or for social recognition. Like buying a new fashionable bag to look good at school or choose a luxury car to “show” that you are successful in life. Need for change: the need has its origin in a desire from the consumer to change. This may result in the purchase of a new coat or new furniture to change the decoration of your apartment. The Maslow’s hierarchy of needs: Developed by the eponymous psychologist, this is one the best known and widely used classifications and representations for hierarchy of needs. It specifies that an individual is “guided” by certain needs that he wants to achieve before seeking to focus on the following ones: 1. Physiological needs 2. Safety needs 3. Need of love and belonging 4. Need of esteem (for oneself and from the others) 5. Need of self-actualization II. Information search Once the need is identified, it’s time for the consumer to seek information about possible solutions to the problem. He will search more or less information depending on the complexity of the choices to be made but also his level of involvement. (Buying pasta requires little information and involves fewer consumers than buying a car.) Then the consumer will seek to make his opinion to guide his choice and his decision-making process with:

Internal information: this information is already present in the consumer’s memory. It comes from previous experiences he had with a product or brand and the opinion he may have of the brand. Internal information is sufficient for the purchasing of everyday products that the consumer knows – including Fast-Moving Consumer Goods (FMCG) or Consumer Packaged Goods (CPG). But when it comes to a major purchase with a level of uncertainty or stronger involvement and the consumer does not have enough information, he must turns to another source: External information: This is information on a product or brand received from and obtained by friends or family, by reviews from other consumers or from the press. Not to mention, of course, official business sources such as an advertising or a seller’s speech. During his decision-making process and his Consumer Buying Decision Process, the consumer will pay more attention to his internal information and the information from friends, family or other consumers. It will be judged more “objective” than these from an advertising, a seller’s speech or a commercial brochure of the product. III. Alternative evaluation Once the information collected, the consumer will be able to evaluate the different alternatives that offer to him, evaluate the most suitable to his needs and choose the one he think it’s best for him. In order to do so, he will evaluate their attributes on two aspects. The objective characteristics (such as the features and functionality of the product) but also subjective (perception and perceived value of the brand by the consumer or its reputation). Each consumer does not attribute the same importance to each attribute for his decision and his Consumer Buying Decision Process. And it varies from one shopper to another. Mr. Smith may prefer a product for the reputation of the brand X rather than a little more powerful but less known product. While Mrs. Johnson has a very bad perception of that same brand. The consumer will then use the information previously collected and his perception or image of a brand to establish a set of evaluation criteria, desirable or wanted features, classify the different products available and evaluate which alternative has the most chance to satisfy him. The process will then lead to what is called “evoked set”. “The evoked set” (aka “consideration set”) is the set of brands or products with a probability of being purchased by the consumer (because he has a good image of it or the information collected is positive). On the other hand, “inept set” is the set of brands or products that have no chance of being purchased by the shopper (because he has a negative perception or has had a negative buying experience with the product in the past). While “inert set” is the set of brands or products for which the consumer has no specific opinion.

The higher the level of involvement of the consumer and the importance of the purchase are stronger, the higher the number of solutions the consumer will consider will be important. On the opposite, the number of considered solutions will be much smaller for an everyday product or a regular purchase. IV. Purchase decision Now that the consumer has evaluated the different solutions and products available for respond to his need, he will be able to choose the product or brand that seems most appropriate to his needs. Then proceed to the actual purchase itself. His decision will depend on the information and the selection made in the previous step based on the perceived value, product’s features and capabilities that are important to him. But his Consumer Buying Decision Process and his decision process may also depend or be affected by such things as the quality of his shopping experience or of the store (or online shopping website), the availability of a promotion, a return policy or good terms and conditions for the sale. For example, a consumer committed to the idea of buying a stereo of a well-known brand could change his decision if he has an unpleasant experience with sellers in the store. While a promotion in a supermarket for a yogurt brand could tip the scale for this brand in the consumer’s mind who was hesitating between three brands of his “evoked set”. V. Post-purchase behavior Once the product is purchased and used, the consumer will evaluate the adequacy with his original needs (those who caused the buying behavior). And whether he has made the right choice in buying this product or not. He will feel either a sense of satisfaction for the product (and the choice). Or, on the contrary, a disappointment if the product has fallen far short of expectations. An opinion that will influence his future decisions and buying behavior. If the product has brought satisfaction to the consumer, he will then minimize stages of information search and alternative evaluation for his next purchases in order to buy the same brand. Which will produce customer loyalty. On the other hand, if the experience with the product was average or disappointing, the consumer is going to repeat the 5 stages of the Consumer Buying Decision Process during his next purchase but by excluding the brand from his “evoked set”. The post-purchase evaluation may have important consequences for a brand. A satisfied customer is very likely to become a loyal and regular customer. Especially for everyday purchases with low level of involvement – such as Fast-Moving Consumer Goods (FMCG) or Consumer Packaged Goods (CPG). A loyalty which is a major source of revenue for the brand when you combine all purchases made by customer throughout his entire life (called “lifetime customer value”). The “Holy Grail” that all brands in the industry are trying to achieve.

Positive or negative, consumers will also be able to share their opinion on the brand. Whether in their family or by word-of-mouth. Or on a much broader scale now with social networks or on consumer product review websites. A tendency not to be overlooked because now with the Internet, an unhappy customer can have a strong power to harm for a brand. That’s why that’s important for companies to have awareness of that matter. In addition to optimizing the customer experience, a guarantee (for example, for a washing machine), an efficient customer service and a specific call center are some of the assets that can be developed to improve post-purchase behavior if there is any trouble with the product. An example of Consumer Buying Decision Process Nothing like a real example to better understand the five stages of the Consumer Buying Decision Process. Maybe this situation sounds familiar to you. Stage 1 – Need recognition: It’s sunday night. You’re hungry (internal physiological stimuli) and there is nothing in the fridge. You will order food (statement of need). Stage 2 – Information search: You already have ordered to the Indian restaurant in your street last month (internal information). A friend recommended a pizzeria in your neighbourhood (external information from environment). And this morning you’ve found a flyer for a sushi restaurant in your mailbox (external information from advertising). Stage 3 – Alternative evaluation: You have a bad opinion of the Indian restaurant since you’ve been sick the last time (inept set). The pizzeria is both recommended by your friend and also happens to be a well-known brand (positive perception – evoked set). As for the sushi restaurant, it got good reviews on Tripadvisor (positive perception – evoked set). Stage 4 – Purchase decision: After evaluating the possibilities, you’ve decided to choose the well-known pizza delivery chain. In addition, a new episode of your favorite TV show is broadcasted tonight on TV. Stage 5 – Post-purchase behavior: The pizza was good (positive review). But you know there was too many calories and you regret a little bit (mixed feelings about yourself). The next time you will choose the sushi restaurant. There is less fat in sushi than pizza (next purchase behavior)!