Session 1

Introduction to Consumer; Significance & Essentials of Consumer Behavior

CONSUMER BEHAVIOR

AGENDA POINTS

Why so much focus on this entity called the “Consumer”: what is her/his significance to Marketing?

Consumer Behavior Essentials: what does it comprise? What do we mean by buzz-phrases like “Customer Orientation”,

“Understanding Consumer Needs”, “Customer Value”, “Customer Satisfaction”, “Life-time Value”

Is understanding the consumer a complex process? If so, why? What do we mean by Diversity of Consumer Behavior? What do

we mean by Market Segmentation?

WHO IS A CONSUMER?

General Discussion “All those who buy or could potentially buy & use any good or

service generated in the economy” Individuals Households Organizations

Therein also lies the subtle difference between Consumer & Customer

WHY SO MUCH CONSUMER FOCUS?

General Discussion Consumer at the very heart of the Marketing concept that

evolved in the late 1950s Production of only those goods & services that the consumers would buy

Hence, consumer understanding began assuming huge significance for businesses at large

Terms such as Understanding Consumer Needs, Customer Orientation & Customer Value started becoming buzzwords Customer Needs: Understanding what Consumers want Customer Orientation: Thinking “Consumer” at all times & orienting one’s

business accordingly to deliver as per Consumer & Customer Needs Customer Value: Difference between a Customer’s perceived benefits &

the resources used to obtain those benefits

WHY SO MUCH CONSUMER FOCUS?

Further, in the context of Brand Marketing, Brands are valuable to companies because they are valuable to consumers People will pay more for a branded product than a generic one & more for a

favored brand than the alternatives Obvious then that a brand that has forged a strong, enduring bond

with consumers should provide a financial advantage to a company Particularly in the context of increasing competitiveness

Hence, terms such as Customer Satisfaction & Customer Retention an integral part of Marketing lexicon today Customer Satisfaction: Customer’s perception of the performance of a

product in relation to his/her expectation Customer Retention: Retaining satisfied customers

In short, our Consumption related behavior impacts New Product Development & Success/Failure of Businesses

QUESTIONS MARKETERS FACE?

WHAT products & brands do people buy? WHY do people buy the products & brands that they do? WHEN do they buy them? WHERE do they buy them? HOW OFTEN do they buy them? HOW do they actually use them? HOW OFTEN do they use them? HOW do they evaluate them after the purchase? What do

consumers think about our products & those of our competitors? What do they think about possible improvements in our products?

WHAT are their attitudes towards our products & our promotional efforts?

CONSUMER BEHAVIOR?

“The Behavior that people display in searching for, purchasing, using, evaluating & disposing of products & services that they expect will satisfy their needs.”

“The mental & emotional processes & the physical activities of people who purchase & use goods & services to satisfy particular needs & wants.”

“The mental & emotional processes & the observable behavior of people during searching, purchasing & post consumption of a product or service.”

In short, the term “Consumer Behavior” subsumes the entire process… From Planning to Acquire something, to Actual Consumption through till Post Consumption & even Disposal

CONSUMER BEHAVIOR?

Discuss Consumer Behavior across Products & Services

Car / Motor BikeToilet SoapCasual ShirtFormal ShoesRefrigeratorHouseCareer choiceInsuranceMusic SystemEating OutVacation

CONSUMER BEHAVIOR?

Study of Consumer Behavior for a product/service will reveal answers to critical questions such as:

What kinds of consumers buy that product/service? Why do they buy it? What do they look for in it? What benefits do

they seek? How much are they willing to pay? How many are likely to buy now? Do they wait for prices to come down? Do they look for some

freebies?

These have a DIRECT bearing on Marketing - designing the product as well as the marketing mix

SO, IS CONSUMER UNDERSTANDING COMPLEX ?

Discuss Is it really a complex process at all? If so, in what way is it complex? What makes it so complex?

NEEDS

All of us have different kind of needs: Physiological / Biological Needs: Air, Water, Food, Clothing, Shelter, Sex Acquired / Psychological Needs: Self-Esteem, Prestige, Affection, Power,

Achievement Broadly similar Biological Needs: however, vastly different

Acquired Needs

DIVERSITY OF CONSUMER BEHAVIOR

All of us consumers are unique Different Attitudes & Beliefs about Life in general Different things that drive us, interest us, engage us Different Needs & Wants Different Roles that we play in life & in the entire Consumption

process – varies from one product to another

CONSUMER BEHAVIOR DIVERSITY - UNIQUENESS

All of us consumers are unique Different Attitudes & Beliefs about Life in general Different things that drive us, interest us, engage us Different ways in which we process various things that we get exposed to Different Needs & Wants

These are conditioned by: The Culture that we belong to Our Upbringing & Education Environment (People around us that we interact with regularly) Experiences Age & Stage in Life

Amidst this diversity, many of us are also similar to one another “Segmentation”: Dividing one whole mass into groups based upon similarity of

Needs & Wants “Targeting”: Addressing specific segments “Positioning”: Developing a distinct image for an offering in their minds

CONSUMER BEHAVIOR DIVERSITY - BUYING ROLES

We also play Different Roles in life & in the entire Consumption process – varies from one product to another Initiator: Determines un-fulfilled Need/Want Influencer: One who (somehow) influences a Buying decision, Actual

Purchase and/or Use of the Product Decider: One who actually determines what will be finally chosen Gatekeeper: Influences a Family’s processing of information Buyer: One who actually makes the Purchase transaction User/s: One who is directly involved with the Use or Consumption of the

purchased product Buyer Roles: Exercise

Car / Motorbike / House / Computer / Detergent / Toothpaste Why need to understand ALL ROLES? (Discuss)

CONSUMER BEHAVIOR DIVERSITY – CUSTOMER TYPES

There are also different Customers Types – according to Usage Loyalists: Highly Satisfied & Highly Loyal Apostles: Experiences exceed Expectations & who actively spread the word Defectors: Low Satisfaction & Low Loyalty; Neutral but likely to shift Terrorists: Defectors with negative experiences & who will spread the word Hostages: Unhappy, but who stay due to either lack of competition or price Mercenaries: Highly satisfied, but Low Loyalty & may defect due to lower

price elsewhere or on impulse

CONSUMER BEHAVIOR DIVERSITY – CUSTOMER TYPES

Mercenary

Defector

Terrorist

Hostage

Loyalist

Apostle

LOYALTY

SATI

SFAC

TIO

N

Low Medium High

High

Medium

Low

CONSUMER BEHAVIOR DIVERSITY – CUSTOMER TYPES

ApostleLoyalistMercenaryHostageDefectorTerrorist

Most Desirable

Least Desirable

CB IMPLICATION ON MARKETING

Analyze Market opportunity: Identifying unfulfilled Needs & Wants Examining Trends & Conditions Consumers’ Lifestyles Income levels Emerging Influences E.g. Convenience & Leisure products thanks to Dual income households

Selecting Target Market: Review of Market Opportunities helps identify distinct Consumer Segments Identifying them & how they make purchase decisions

enables the marketer to design & market products/services as per needs/wants

CB IMPLICATION ON MARKETING

Marketing-mix Decisions: Once unsatisfied needs/wants identified, determining the right mix of the 4 Ps Product:

Specific decisions w.r.t. Shape, Size, Variants, Features.. Also Packaging, key aspects of Service, Warranties..

Price: What Price to charge? Is the consumer price-sensitive? Should Discounts be given? Do consumer equate lower price with lower quality?

Distribution: Should one sell through all retail outlets or selected ones? Existing multi-brand outlets or create Exclusive ones? Is location a key criterion? Is there a case for Direct marketing?

CB IMPLICATION ON MARKETING

Marketing-mix Decisions: Once unsatisfied needs/wants identified, determining the right mix of the 4 Ps Promotion:

Which among Advertising, Personal Selling, Sales Promotion & Direct Marketing most suitable to effectively reach consumers?

Should it be one approach alone or a combination? Understanding Consumer habits in the context of the Category the key

(Industrial products v/s Consumer products v/s Pharma v/s Insurance) Use in Social & Non-profits Marketing

Designing Marketing Strategies for social programs

CHALLENGE TODAY

Consumers hold more power Have access to more information Exchange between Marketers & Customers increasingly

interactive & instantaneous Marketers can gather more information about consumers more

quickly & easily Impact reaches beyond PC-based connection to the Web

CONSUMER BLACK BOX MODEL

ENVIRONMENTAL FACTORS BUYER’S BLACK BOX

BUYER’S RESPONSEMarketi

ng Stimuli

Environmental Stimuli

Buyer Characteris

ticsDecision Process

Product

Price

Place

Promotion

Economic

Technological

Political

Cultural

Demographic

Natural

Attitudes

Motivation

Perceptions

Personality

Lifestyle

Knowledge

Problem recognition

Information search

Alternative evaluation

Purchase decision

Post-purchase behavior

Product choice

Brand choice

Dealer choice

Purchase timing

Purchase amount

Session 1Introduction to Consumer; Significance &

Essentials of Consumer Behavior

CONSUMER BEHAVIOR

Session 1Introduction to Consumer; Significance &

Essentials of Consumer Behavior

CONSUMER BEHAVIOR

Session 1Introduction to Consumer; Significance &

Essentials of Consumer Behavior

CONSUMER BEHAVIOR