Consumer behaviour and customer loyalty

1. Consumer behaviour and customer loyalty By SunitaSen

2. CONSUMER BEHAVIOUR Schiffman & Kanuck “Consumer behavior refers to the behavior that consumer display in searching for, purchasing, using, evaluating and disposing of goods and services that they expect will satisfy their needs & study of consumer behavior is the study of how individual make decisions to spend their available resources like time, money, efforts on consumption related items. .

3. Includes all things in the environment that influence thoughts, feelings, and actions of consumers . Comments from other consumers Advertisements Price information Packaging Product appearance What is Consumer Behavior? (cont.)

4. Customer and Consumer • Customer – regular purchaser of a particular store or company • Consumer – potential purchases of products and services ‘offered for sale’. • purchasing for the purpose of individual or household consumption.

5. Personal Consumer: Who buys goods and services for his personal use (e.g. haircut, toothbrush, towel, etc.), or Household consumption (e.g. sugar, furniture, telephone service etc.), or a birthday present for a friend (e.g. A pen set, greeting card, etc.) These are the “end users” or “ultimate users”. Organizational Consumer: This includes profit and non-profit organizations, government agencies (like schools, hospitals), organizations requiring equipment and services to run their organizations (e.g. raw materials, technology, advertising services to communicate to their customers).

6. Disciplines Involved in the study of Consumer Behavior • Psychology: It is the study of the individual, which includes motivation, perception, attitudes, personality and learning theories. • Sociology: It is the study of groups. The influences of group memberships, family and social class on consumer behavior are important for the study of consumer behavior. • Social Psychology: It is a combination of psychology and sociology and studies how an individual operates in a group. It also studies how peers, reference groups, their families and opinion leaders influence individuals in their consumption behavior

7. Continued….. • Cultural Anthropology: It is the study of human beings in society. It explores the development of core beliefs, values and customs that individuals inherit from their parents and grandparents. This helps to compare consumers of different nationalities and cultures. • Economics: It is the study of how consumers spend their funds, how they evaluate alternatives, and how they make decisions to get maximum satisfaction from their purchases.

8. Thinking, feelings, and actions of individual consumers, targeted consumer groups, and society at large are constantly changing. Requires ongoing consumer research and analysis of important trends. Makes development of marketing strategies difficult and exciting. Shorter product life-cycle increases importance of constant innovation. Consumer Behavior is Dynamic

9. Interactions among people’s thinking, feelings and actions, and the environment Marketers need to understand: What products and brands mean to consumers? What consumers must do to purchase and use them? What influences shopping, purchase, and consumption? Consumer Behavior Involves Interactions

10. Exchange between people involves giving up of something of value and receiving something in return. Role of marketing in society is to help create exchanges by formulating and implementing marketing strategies. Consumer Behavior Involves Exchanges

11. Consumer Behavior Applications in Marketing • Analyzing Market Opportunity: Consumer behavior study helps in analyzing the unsatisfied needs and wants (e.g. trends like consumer’s lifestyles, income levels, etc.) • Selecting Target Market: A review of Market opportunities enabled the marketers to design products and promotion strategies for specific segments of consumers as per their requirement only. E.g. Shampoo sachet. • Marketing Mix Decisions: Right mix of product, price, distribution and promotion.

12. Continued….. • Product: Size, shape, features, Packaging, Warranties and Accessories etc. E.g. Nestle introducing different flavors in Maggi noodles. • Price: How the Company’s product is perceived by the consumer. • Promotion: Different promotional efforts for personal and organizational consumer. • Distrbution:

13. Consumer Decision Making: The Process and Outcome

15. Consumer Decision Making – The Process: • Need Recognition • Pre-purchase Search • Evaluation of Alternatives

16. Need or Problem Recognition • The realization that there is a difference between actual and desired states • The higher the gap, the stronger the need (or bigger the problem)

17. Information search • Depending on need intensity two states on individual’s are: • Heightened attention • Active information • Sources of information search • Personal • Commercial • Public • Experiential

18. Type of Information Search: INTERNAL & EXTERNAL SEARCH

19. Information Search and Marketing Strategy • Get products into consumers’ evoked set • Limit information search if your brand is the preferred brand • Increase information search if your alternative is not the preferred brand • Use point-of-purchase advertising effectively

20. Evoked Set Purchase! Evaluation of alternatives • Objective characteristics (features and functionality of the product) • Subjective characteristics (perception and perceived value of the brand by the consumer or its reputation). • “evoked set”: “The evoked set” (“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). • “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). • “inert set” is the set of brands or products for which the consumer has no specific opinion.

21. Purchase of product • 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.

22. Post purchase behaviour • 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”.

24. Consumer Decision Making Model

25. Types of Decision Process Extensive Problem Solving Limited Problem Solving Routine Response Behaviour

26. Level of Consumer Decision making • Extensive Problem-Solving: It is usually initiated by the motive that is fairly central to the self-concept and the decision is perceived to carry a fair degree of risk.   • Limited Problem Solving: It usually involves recognizing a problem for which there are several solutions. There is limited amount of external search and more internal search, simple decision rules are followed on a few attributes and a little post-purchase evaluation is required. • Routinized Problem Solving: When a consumer buys a brand he has bought before, it usually involves little or no information seeking and is performed quickly. There is a likelihood that repeat purchases are made on the basis of habits or routines.            

27. Limited Problem Solving Limited Problem Solving: If the item being purchased is low value and frequently bought, it follows that the buyer will spend less time and effort and will have less involvement with the purchase.

28. Extended Problem Solving: An expensive high risk infrequent purchase will require a lot of detailed information and careful analysis before deciding which one to purchase.

32. Consumer learning: • A process by which individuals acquire thepurchase and consumption knowledge and experience that they apply to future related behavior.

33. Simplified model of consumer learning:

34. There are two approaches to the study of learning, • Behavioural approach: learning takes place in response to events/happenings in a person’s external environment. • Classical conditioning • Operant conditioning • Cognitive approach to learning: learning takes place as a result of a person’s conscious and deliberate information processing and storage activity

35. Classical conditioning theory • Pairing a stimulus with another stimulus that elicits a known response to produce the same response when used alone.

36. Strategic Applications of Classical Conditioning: • Repetition : Signs, symbols, logos, colours and jingles help facilitate consumer learning through the process of association • Cosmic variation • Substantive variation • Stimulus Generalization: This is defined as phenomenon that occurs when a stimulus is so similar to another stimulus, that the former evokes the same response as the Latter. Example “me too” products. • The inability to perceive differences between slightly dissimilar stimuli. • Stimulus Discrimination: the ability to differentiate a particular stimulus from among similar stimuli.

37. Implications for marketers: The Pavlovian Theory has implications for marketers. Consumers respond to learning via classical conditioning when: • -The level of perceived risk is low (and cognitive effort is not required) • Products are low on differentiation • Purchases are routine; convenience goods and impulse items

38. Operant conditioning • learning based on a trial-and-error process, with habits forced as the result of positive experiences (reinforcement) • The Operant Conditioning Theory has implications for marketers. Consumers respond to learning via instrumental conditioning when: • Trial can be attempted before purchase • Purchases are linked to desirable affective experiences • There is higher involvement and greater cognitive activity

39. Types of reinforcement

41. Instrumental Conditioning and Marketing • Make the product the ultimate reward • Provide samples and free trials • Provide non-product rewards • Practice relationship marketing • Reinforcement Schedules • Shaping

42. Cognitive Learning Theory • Learning through problem solving, which enables individuals to gain some control over their environment. • Factors that can affect a consumer's ability to process, store and retrieve knowledge are familiarity with the information, relevance of the information, interest in the information, the form in which it is provided etc.

44. Information processing and Involvement Theory • Central and Peripheral Routes to Persuasion • highly involved consumers are best reached through ads that focus on the specific attributes of the product (the central route) • uninvolved consumers can be attracted through peripheral advertising cues such as the model or the setting (the peripheral route).

45. Elaboration Likelihood Model (ELM) • a person’s level of involvement during message processing determines which route to persuasion is likely to be effective

46. The Elaboration Likelihood Model Involvement LOW HIGH Central Route Peripheral Route Message Arguments Influence Attitudes Peripheral Cues Influence Attitudes

47. Marketing implication: • For low-involvement purchases, marketing communication through TV is the right media; consumers learn via repetition, i.e. exposure to the same message over TV again and again. • On the other hand, in cases of high-involvement purchases, the print media acts as right choice while selection of media.

48. Models of consumer behaviour: Monadic models • Economic model • Response hierarchy model • Black box model Eclectic or multivariable models: • Howard Sheth model • Nicosia • Engel, Blackwell and Miniard model • Product adoption model

49. Elasticity model: • As price increases, other things remaining constant, demand of the commodity will go down. • Purely economic model • Response Hierarchy model: • Purely Psychological model • Defines sequence of mental stages that consumer passes through before buying Cognitive Affective Behaviour

50. 3. The Black Box Model: • Stimulus – response model • The stimuli that is presented to the consumer by the marketer and the environment is then dealt with by the buyer’s black box. The buyer’s black box, comprises two sub components, viz., the buyer’s characteristics and the buyer decision process.