Chapter 5

1. Chapter 5 Consumer Markets & Consumer Buyer Behavior

2. Consumer Buyer Behavior • Consumer Behavior • What • Where • How • How much • When • Why The consumers buy. Understanding the rest is easy but the “why” is difficult.

3. Consumer Behavior • Consumer Behavior Model • “How the STIMULI are changed into a RESPONSE” can be understood by analyzing two things: • The BUYER’S CHARACTERISTICS influence how he PERCEIVES and how he REACTS to the STIMULI. • The BUYER’S DECISION PROCESS affects buyer’s behavior.

4. Consumer Behavior • Buyer’s Characteristics • Cultural Factors • Social Factors • Personal Factors • Psychological Factors Psychological Motivation Perception Learning Beliefs & Attitudes Buyer

5. Buyer’s Characteristics Psychological Motivation Perception Learning Beliefs & Attitudes Buyer

6. Buyer’s Characteristics • Cultural Factors • Culture • A set of basic values, perceptions, wants and behaviors learned by a member of society from family and other important institutions. • Cultural shift – the change in secondary values affecting people’s choices of products and lifestyle. • e.g. a shift toward greater concern for health and fitness has created a huge (diet) industry. The shift toward informality has resulted in more demand for casual clothing and simple home furnishings. • Subculture • A group of people with shared value system based on common life experiences & situations. • e.g. nationalities, religions, racial groups, ethnic groups & geographic groups.

7. Buyer’s Characteristics • Culture Factors (example)(the US children are exposed to the following values) • Achievement and success • Activity and involvement • Efficiency and practicality • Progress • Material comfort • Individualism • Freedom • Humanitarianism • Youthfulness • Fitness and health • What comparative value are you exposed to?

8. Buyer’s Characteristics • Cultural Factors (continued) • Social class • Relatively permanent and ordered divisions in a society, based on income, occupation, education and wealth, whose members share similar values, interests and behaviors. • In some social class systems, members of different classes are REARED for certain roles and cannot change their social positions. Hence, affecting their life-longpreferences for certain products. • Upward and downward shifts are also possible and are of great importance to a marketer to know.

9. Buyer’s Characteristics • Cultural Factors (continued) • Social class

10. Buyer’s Characteristics Psychological Motivation Perception Learning Beliefs & Attitudes Buyer Buyer

11. Buyer’s Characteristics • Social Factors • Group • Membership group – a group to which a person belongs • Reference group – a group serving as direct or indirect points of comparison in forming a person’s attitudes or behavior. • Opinion Leader – a person within a reference group who, because of special skills, knowledge, personality or other characteristics, exerts social influence on others. • Marketers need to identify these Opinion Leaders in order to use them to do buzz marketing for their brands. • First, Opinion Leaders are targeted through direct marketing. • High-Tech Buzz or e-buzz (social networking websites). • e-buzz can easily backfire because users control the content.

12. Buyer’s Characteristics Assignment Real Marketing Tremor and Vocalpoint: What’s the Latest Buzz? (Principles of Marketing, 12th Edition, pages 128-129)

13. Buyer’s Characteristics • Social Factors (continued) • Family • The biggest influence on buyer-behavior. • The biggest consumer buying organization. • Patriarchic vs. Matriarchic families. • Joint vs. nuclear families. • Husband-wife involvement varies widely. • 48:52 population ratio • Nike (Ref: What Women Want (Mel Gibson, Helen Hunt) • Children – affect the decisions regarding food, clothing, entertainment, vacations, TVs & personal care items. • Restaurants, Auto makers and travel destinations are now putting ads in Cartoon Network & Toon Disney.

14. Buyer’s Characteristics • Social Factors (continued) • Roles and Status • The group (family, organization, club etc.) you belong to gives you a Role i.e. activities you are expected to perform according to the persons around you. • Each Role h as status reflecting the general esteem given to that role. • People choose products that reflect their roles in that group. • Imagine a man being a son and husband at home, manager at office, trainee at Gym, and a fan at a sporting event.

15. Buyer’s Characteristics Psychological Motivation Perception Learning Beliefs & Attitudes Buyer Buyer

16. Buyer’s Characteristics • Personal Factors • Age & Life-Cycle Stage • Occupation • Economic Situation • Life-Style • Personality and Self-Concept

17. Buyer’s Characteristics • Personal Factors • Age and Life-Cycle Stage • People change good and services over their lifetime. • Food, clothes, furniture and recreation are often age related. • Both TASTES & BUYING are shaped by the stage of family life-stage. • RBC Royal Bank has identified FIVE life-stage segments. • Youth – younger than 18. • Getting Started – aged between 18 & 35, going through first experiences of almost everything. • Builders – between 335 & 50, at the peak earning years, focused on Career and Family, usually borrowing more than they invest. • Accumulators – between 50 & 60, worry about saving for retirement and investing wisely. • Preservers - over 60, want to maximize their retirement income to maintain a desired life-style. • RBC Bank offers different services to them. • What would be the life-stage segments for Car or a House?

18. Buyer’s Characteristics • Personal Factors • Age and Life-Cycle Stage • Life-Cycle • Singles, divorced and married • Singles with kids and no kids • Divorced with kids and no kids • Married with kids and kids

19. Buyer’s Characteristics • Personal Factors (continued) • Occupation • A person’s occupation affects the goods and services bought. • Blue-collar workers prefer more rugged clothes. • White-collar workers prefer more suits and formal dresses. • A company can specialize in making products for a specific occupational group. • e.g. Carhartt makes rugged, durable work clothes. • An Animal trainer says; • “My Carhartt jeans not only keep me warm but they stood up to one playful lion and her very sharp claws”.

20. Buyer’s Characteristics • Personal Factors (continued) • Economic Situation • Marketers watch trends in income, savings & interest rate. • If recession is indicated, marketers may redesign, reposition and reprice their products. • Some target the rich e.g. Rolex: • “a tribute to elegance, an object of passion, a symbol for all time”. • Some target consumers with more modest means e.g. Timex: • “take a licking and keep on ticking.”

21. Buyer’s Characteristics • Personal Factors (continued) • Lifestyle • People from them same culture, subculture, social class and occupation may have quite different lifestyle. • Lifestyle is a person’s pattern of living as expressed in his/her psychographics (i.e. AIO) • A – Activities (work, hobbies, shopping, sports, social events) • I – Interests (food, fashion, family, recreation) • O – Opinions (about themselves, social issues, business products) • Lifestyleprofiles a person’s whole pattern of acting and interacting. • VALS (Value and Life Style) classification

22. Buyer’s Characteristics • Example of Life-Style for Technography • Fast-forwards(biggest spenders, career driven, time strapped) • New age nurturers(tech for edutainment) • Mouse potatoes(technotainment) • Techno-strivers(up-&-coming believers in tech) • Traditionalists(folks suspicious of tech beyond basics)

23. Buyer’s Characteristics

24. Buyer’s Characteristics • Personal Factors (continued) • Lifestyle • VALS • VALS classifies people by Psychologicaland Four Demographics that correlate with buying behavior. • Primary Motivations (psychological): • Ideals oriented – guided by knowledge and principles • Achievement oriented – products and service that demonstrate success to their peers • Self-Expression oriented – look for social or physical activity, variety and risk. • Innovators and Survivors are exceptions to the above styles. • Innovators have so much that they can demonstrate any motivation. • Survivors have so little that they can not demonstrate anything but needs. • Resources (demographics) • Income • Education • Health& energy • Self-confidence etc.

25. Buyer’s Characteristics • Personal Factors (continued) • Personality and Self-Concept • Personality – the unique psychological characteristics that lead to relatively consistent and lasting responses to one’s own environment. • i.e. self-confidence, dominance, sociability, autonomy, defensiveness, adaptability and aggressiveness. • Heavy Coffee Drinkers tend to be high on sociability. Thus, Starbucks offers an environment where they can relax and socialize. • Brand personality – the specific mix of human traits that my be attributed to a particular brand. • Consumers are likely to choose brands with personalities that match their own.

26. Buyer’s Characteristics • Personal Factors (continued) • Personality and Self-Concept • Five common brand personalities • Sincerity (honest, down-to-earth, cheerful) • Excitement (daring, spirited, imaginative & up-to-date) • Competence (reliable, intelligent and successful) • Sophistication (upper class and charming) e.g. Mercedes • Ruggedness (outdoorsy and tough) e.g. Levi’s • Self-Concept • “Who or What am I?” • Usually, what we have reflects what or who we are. • Identify possible self-images/concepts and associate your brand with it.

27. Buyer’s Characteristics Psychological Motivation Perception Learning Beliefs & Attitudes Buyer Buyer

28. Buyer’s Characteristics • Psychological Factors • Motivation • Perception • Learning • Beliefs and Attitudes

29. Buyer’s Characteristics • Psychological Factors • Motivation • Biological or Psychological needs turn into motives which seek satisfaction. • Motive – a need that is sufficiently pressing to direct the person to seek satisfaction of the need. • What motivates different people for different choices? • Sigmund Freud – we never know, its all subconscious. • A 60 year old using a convertible sports car or listening to his “good-old-days” melodies, might be at a deeper level motivated by the need to feel younger which he consciously may deny. • Many companies employ psychologists, anthropologists and other social scientists to explore through research the motivation levels and reasons for human choice.

30. Buyer’s Characteristics • Psychological Factors • Motivation • Example summary of Motivation Research • “Good morning, ladies and gentlemen. We have called you here today for a little consumer research. Now, lie down on the couch, toss your inhibitions out the window and let’s try a little free association. • First, think about brands as if they were your friends. Imagine you could talk to your TV. What would you say and what would he say? • Now, think of your shampoo as an animal. A panda, a lion, a snake, anything?”

31. Buyer’s Characteristics • Psychological Factors • Motivation • However, Abraham Maslow offers the following:

32. Buyer’s Characteristics • Psychological Factors • Perception • A motivated person is ready to act but how he/she should act is affected by the way he/she perceives the situation. • The process by which people select, organize and interpretinformation to form a meaningful picture of the world. • People are exposed to 3000 to 5000 messages every day. • People can form different perceptions of the same stimulus because of THREEperceptual processes; • Selective Attention • Selective Distortion • Selective Retention

33. Buyer’s Characteristics • Psychological Factors • Perception • Selective Attention – the tendency to screen out information • Selective Distortion – the tendency to interpret information in a way that supports what a person already believes: • if you distrust a company, you will perceive even an honest ad from that company as questionable. • Selective Retention – the tendency to retain information that supports our attitudes and beliefs and forget what is against. • Without distorting, you may forget the good points about a competing brand and remember the good points about your own brand.

34. Buyer’s Characteristics • Psychological Factors • Learning • When people act, they learn. • So, changes in an individual’s behavior arising from experience. • Learning is an interplay of • Drives/motives • Stimuli • Cues • Responses • Reinforcement • A drive(self-actualization) becomes a motive when directed toward a stimulus object(digital camera). • This response is conditioned by cuesi.e. the minor stimuli that determine when, where and how the person responds. • Cues could be discussion with a friend, windows shopping etc. • Say, Nikon was bought. If the experience with Canon is rewarding, his behavior/response is reinforced. • He/she may prefer Nikon Brands for anything related in future.

35. Buyer’s Characteristics • Psychological Factors • Attitudes & Beliefs • Through doing and acting, we learn. • Our learning designs our attitudes and beliefs. • Belief – a descriptive thought that a person has about something. • Attitude – a person’s relatively consistent evaluation, feelings, and tendencies toward an object or idea. • Beliefs are based on either real knowledge, opinion or feelings. • Marketers should know the beliefs of people about their brands. • Attitudes put people into a frame of mind of liking or disliking things or moving toward or away from them. • Our camera buyer may have the attitude: • “buy the best” which leads to “Japanese camera”, which leads to Nikon. • Attitudes are difficult to change. Better to FIT our products into the existing attitudes.

36. The Buying Decision Behavior • The Buying Decision Behavior • Complex Buying Behavior • Dissonance-Reducing Buying Behavior • Habitual Buying Behavior • Variety-Seeking Buying Behavior

37. The Buying Decision Behavior HIGH Involvement LOW Involvement SIGNIFICANT Differences among Brands FEW Differences between Brands

38. Types of Buying Behavior • Complex Buying Behavior • Expensive, risky, purchased infrequently & highly self-expressive products. • Favorable communication is PRINT MEDIA with LONG COPY and PUSH STRATEGY. • e.g. a Laptop buyer knows little about GHz & RAMs. He/she goes through learning process, developing beliefs, then attitudeand finally a thoughtful purchase decision. • Dissonance-Reducing Buying Behavior • Expensive, risky, infrequent purchase but sees little difference among brands. • Due to post-purchase dissonance, after-sale communications to provide evidence and support to help them feel good about purchase. • e.g. Carpeting. Price & convenience may attract primarily.

39. Types of Buying Behavior • Habitual Buying Behavior • Low-cost, frequently purchased products e.g. salt. • They buy a brand repeatedly due to habit, not brand loyalty. • Ads repetition creates brand familiarityrather than brand conviction, price and sales promotion. Ad should have few key points. • In such cases, consumer behavior does not pass through the usual “learn-belief-attitude-behavior” process but through passive learning. • Price and sales-promotion are good tools to stimulate trial. • Visual symbols are important because they are easy to remember and be associated with the brand. • A campaign should include high repetition (TV is better than others as its suitable for passive learning).

40. Types of Buying Behavior • Variety-Seeking Buying Behavior • Cookies, for example, about which the buyer may hold some belief will be evaluated during consumption. • The next purchase might be a different brand, not because of dissatisfaction, but because of boredom or simply to try something new. • The market leader should keep shelf space, dominate shelf space, frequent ads. • The challengers should lower prices, special deals, free samples and ads convincing people to seek variety.

41. Types of Buying Behavior • In more routine purchases, consumers often skip some of these stages e.g. while buying your favorite & familiar brand of toothpaste. • But in a more complex situation, it is all followed.

42. Buying Decision Making Process • Need Recognition • Internal Stimulus • External Stimulus • Information Search • Personal sources (family, friends, neighbors, colleagues, acquaintances) • Commercial sources (ads, websites, dealers, packaging, displays) • Public sources (mass-media, internet searches, editorials) • Experiential sources (handling, examining, using the product) • Personal sources are more preferred. As they legitimize and evaluate the product for the buyer while commercial sources only inform.

43. Buying Decision Making Process • Information evaluation • After gathering information, sometimes, buyers calculate and evaluate a lot. At other times, they just act on impulses and intuition. • Size • Price • Color • Style • Features • Benefits etc. • Purchase Decision • After making the decision, STILL TWO factors matter a lot: • Attitude of others (nears & dears) • Unexpected situational factors (economy, competitors, feed back of a friend)

44. Buying Decision Making Process • Post purchase behavior • Expected performance vs. actual performance • Thinking about opportunity cost • Cognitive dissonance • Dissatisfied customers usually do not tell the seller. • A company should create systems that encourage customers to complain. • In this way, the company can learn how well it is doing and how it can improve.

45. Buying Decision Making Process Assignment Real Marketing Lexus: Delighting Customers to Keep them Coming Back (Principles of Marketing, 12th Edition, pages 142-143)

46. Buying decision process for New Products • New product • A good, service, idea or place that is perceived to be new by consumers. • Adoption process • The mental process through which an individual passes from first learning to final adoption. • Adoption – the decision of a consumer to become a regular user of a product. • Adoption Process involves Five Stages: • Awareness – the consumer becomes aware of it, but lack information. • Interest – the consumer seeks information due to interest. • Evaluation – the consumer considers whether trying is worth it. • Trial – a small scale try to improve initial estimates & guesses • Adoption – the consumer decides to make full & regular use. • Marketer should help consumer go through these stages through free trials or weekend trials (for cars).

47. Buying decision process for New Products • Individual differences in innovativeness • People differ greatly in their readiness to try a new product. • They can be classified in FIVE groups; • Innovators – venturesome, try new ideas at some risk • Early adopters – adopt early but carefully, guided by respect, they are opinion leaders • Early majority – deliberate, adopt new products before the average person, rarely are opinion leaders • Late majority – skeptical, they adopt ONLY after a majority tries it • Laggards – tradition bound, suspicious of changes and adopt the innovation ONLY when it has become something of a tradition itself • A marketer should direct his marketing efforts toward innovators and early adopters. They are relatively younger, better educated and higher on income than the rest. • They are less brand loyal. Prefer to take advantage of special promotions e.g. discounts, samples etc.

48. Buying decision process for New Products • Influence of product characteristics on rate of adoption • Some products catch on almost overnight (iPod) while some take a bit longer. • Five Characteristics are important in influencing an innovation’s rate of adoption; • Relative advantage – the degree to which innovation appears superior to existing products • Compatibility – the degree to which it FITS the values & experiences of consumers • Complexity – the degree to which it is difficult to understand or use • Divisibility – the degree to which it may be tried on limited basis • Communicability – the degree to which the results of using the innovation can be observed and described to others

49. Buying decision process for New Products • Consumer Behavior across borders • Some differences are obvious e.g.: • Kellogg’s (cereals) strategy • In the US, people do have cereals in breakfast. Kellogg convinces them to choose Kellogg over others. • In France, where people either do not have breakfast or have it with coffee, Kellogg convinces them JUST to add cereal to their table. • In India, where people prefer heavy, fried breakfast, Kellogg convinces people to try something lighter. • Some differences are subtle (physical differences or environmental) e.g.: • Remington: • Offers a smaller electric shaver in Japan because of OBVIOUS difference in hand size (obvious difference) BUT pushy and hard-hitting advertisements can be viewed as aggressive BECAUSE Humility and Respect are great values in their culture.