Professor Saroj Kumar Datta

Consumer Buying Behaviour

Consumer Behaviour An Important Aspect of Marketing A product or service should have a consumer to buy it. Thus, it is very necessary to make a study on the behavioural aspect of the consumer i.e., there must be reasonable answer to the following questions: What does a consumer buy? Where from does he buy? When does he buy? How much does he buy? And Why does he buy? Though the first four questions can be answered by carrying out statistical data based market research known as retail audit, prescription audit, etc., the answer to the last question is indeed a very difficult one and can be answered by carrying out motivational research. Nevertheless the answer to the Why of consumer behaviour is the most important factor to any organisation while designing a successful product/service and its marketing strategy. Definition of Consumer Behaviour A consumer is a person who purchases goods and services for his own personal needs. Consumer Behaviour can be defined as those acts of individuals which are directly involved in making decisions to spend their available resources (time, money, energy) in obtaining and using goods and services. General Characteristics of Consumer Behaviour The reason for studying consumer behaviour lies in its general characteristics, as it may affect present day business operation. These characteristics can be described as below: The Consumer is the King The Consumer Behaviour can be known The consumers behaviour can be influenced

Why Study Consumer Behaviour? It will help to segment the market usefully It will aid in development of an effective marketing mix It will help to assess new market opportunities Consumer Market Vs Business Market A Consumer market consists of persons (individuals or households) who buys goods and services for personal consumption. Here the goods and services are not subject to any commercial processing. A Business Market consists of organisations who buy for the production or assembling of goods or services to be sold to the consumers or other organisations.

Professor Saroj Kumar Datta

How Business Market Differs from the Consumer Market Business market are generally characterised by the following : Fewer but larger size of buyers Interaction between supplier and customer necessary Geographically concentrated buyers Derived and inelastic demand Dominated by professional purchasers Buying decisions influenced by several individuals Because of the large size of buying, multiple sales calls are required. The Mechanics of Consumer Buying Behaviour The mechanism of consumer buying behaviour can be explained by a simple model based of stimuli response situations existing in the marketing environment. In the real market situation, the marketer wants to control the consumers response to a buying situation. In order to do so, they generate controlled marketing stimuli in the form of product, price, communication system and distribution network. These stimuli hits the mind of the consumer but in a filtered way as they travel through the macro environmental factors such as technological, economic, political and socio-cultural. For example, if the environment is very poor in terms of technological development, any effort by the marketers to generate signals on high technological offerings such as new generation computers, cellular phone connections will affect the consumers mind in a poor manner. The consumers response will depend strongly on its buying characteristics which are generally influenced by factors like cultural, social, personal and psychological. The same can be explained by the model given below:

Environmental Factors Product choice Marketers stimuli

Product Price Distribution network Communication systems Economic Technological Political Socio-cultural

Buyers mind
Buyers characteristics Buyers Decision Process

Brand choice Buyers response

Dealer choice

Purchase timing Purchase amount

Figure 4.1: A stimuli- response Model of Buyer Behaviour

Professor Saroj Kumar Datta

What influences Consumers Buying Decision Process? Consumers buying behaviour is influenced by cultural, social, personal and psychological factors. The cultural factors exert the broadest and deepest influence.

Cultural Factors Culture Subculture Social Class

Buying Decision Process Problem Recognition Information Search Identification & Evaluation of Alternatives Purchase decision Post Purchase Behaviour

Social Factors Reference Groups Family Roles & status

Personal Factors Age Occupation Lifestyle Personality

Psychological Factors Motivation Perception Learning Attitude

Figure 4.2: Factors influencing consumer buying behaviour

Cultural Factors Culture is a complex of symbols (attitudes, beliefs, values, language, etc.) and artefacts created by a society and handed down from generation to generation. The way people perform their biological activities such as eating is culturally determined. Thus, a hungry Indian consumer may like to eat rice and dal whereas a hungry American consumer may like to eat hamburger and coke. Cultures do change over time, for example two-income nuclear families; changing gender roles are the latest cultural trends. There is a diffusion of culture across countries since we live in a global village. Culture shapes behaviour. Culture is a social phenomenon. Culture is adopted Culture sets values Increase in the trend of cross-cultural activities Culture is a strong determinant of marketing strategy

Professor Saroj Kumar Datta

Example: American culture stresses achievement, success, efficiency, progress, material comfort, etc., whereas Indian culture emphasizes peace, harmony, truth, forgiveness, service, etc. Within a general culture there are smaller sub-cultures that provide more specific identification and socialisation of their members and having distinctive behavioural pattern. For example, within the general Indian Culture there exists specific sub-cultures like Punjabi, Marwari, Bengali, South Indian, etc., which have their own distinctive characteristics. Social Class is again a division in a society which are built on hierarchical order but members of same class share similar values, interests and behaviour. Each society gets stratified into number of social classes which represents a hierarchy of prestige. Formation of social classes is a multi-dimensional and dynamic process. A general three-class system exists Upper class (15%) Middle class (65-70%) Lower class (15-20%) Members of each class share similar values, interests and behaviour. Social classes tend to have distinct preferences in products and brands in areas like clothing, home furnishing, automobiles, leisure activities, etc. Social Factors Consumers Behaviours are determined to a great extend by social forces and groups such as reference groups, family etc.: Reference Groups: Groups of people who interact formally or informally influencing (direct or indirect) each others attitudes and behaviour. Membership groups are groups of people having a direct influence on a person. There are two types of membership groups : primary and secondary. Primary groups : interacts regularly and informally, e.g., family, friends, neighbours and co-workers Secondary groups : interacts occasionally and formally, i.e. Trade unions, professional associations, society members People are significantly influenced by their reference groups both for product and brand choices, sometimes mainly on choice of brand in such items as furniture and clothing or choice of product in such items as beer and cigarettes or both choices in such items as automobiles and colour televisions. Marketers also try to reach opinion leaders in these reference groups. These opinion leaders are persons who have significant influence on large number of members of the group. Family: Consumers family members are the most influential reference groups, which shapes his buying behaviour. Now it is observed that there is a shift in the buying decision centre i.e., the family member who has major influence on the buying decision. Earlier it used to be the eldest male member of the family who decided on purchase of house/flat, car, etc., while the female members decided major household products but nowadays these types of

Professor Saroj Kumar Datta

decision patterns are changing when female members (even children) have strong influence on such purchase as real estate, car, etc. Roles & Status: The buying behaviour of an individual depends on the type of role an individual is expected to play while purchasing. E.g. an individual plays the role of a father while buying birthday gifts for his son or the same individual is a husband buying anniversary gift for his wife. Each role carries a status e.g., the individual mentioned above could be the Managing Director of a MNC or a teacher of a primary school. Personal Factors The buyers own characteristics such as age, stages in life cycle, occupation, lifestyle and personality, etc.; are again determinant of his buying behaviour. Age: Peoples behaviour and habits changes as he grows older, for example a childs deep interest in toys and games gets transformed into automobiles and houses as he grows to adulthood. Stages in Life Cycle: Consumption is shaped by the family lifecycle, for example a young, independent bachelor shall exhibit different consumption pattern from that of a middle aged family man with dependent children. Nine stages of family life cycle (mentioned by William D Wells and George Gubar) are given below : Bachelor stage : Young, single, not living at home. Few financial burdens, fashion opinion leaders. recreation oriented. Buy : basic home equipment, furniture, cars, vacations. Newly married couples : Young, no children. Highest purchase rate and highest average purchase of durables : cars, appliances, furniture, vacations. Full nest I : Youngest child under six. Home purchasing at peak. Liquid assests low. Interested in new products, advertised products. Buy : washers, dryers, TV, baby food, chest rubs and cough medicines, vitamins, dolls, wagons, sleds, skates. Full nest II : Youngest child six or over. Financial position better. Less influenced by advertising. Buy larger size packages, multiple unit deals. Buy : many foods, cleaning materials, bicycles, music lessons, pianos. Full nest III : Older married couples with dependent children. Financial position still better. Some children gets jobs. Hard to influence with advertising. High average purchase of durables: new, more tasteful furniture, auto travel, unnecessary appliances, boats, dental services, magazines. Empty nest I : Older married couples, no children living with them, head of household in labour force. Home ownership at peak. Most satisfied with financial position and money saved. Interested in travel recreation, self-education. Make gifts and contributions. Not interested in new products. Buy : vacation, luxuries, home improvements. Empty nest II : Older married. No children living at home, head of household retired. Drastic cut in income. Keep home. Buy : medical appliances, medical-care products. Solitary survivor : In labor force. Income still good but likely to sell home. Solitary survivor : retired. Same medical and product needs as other retired group; drastic cut in income. Special need for attention, affection, and security.

Professor Saroj Kumar Datta

Occupation : The nature of ones occupation can influence the buying behaviour, for example, blue collared workers tend to buy work clothes, work shoes whereas white collared corporate executives prefer to buy expensive tailored made suits. Life Style : Patterns, in which people live, spend time and money. It is the whole person as expressed in activities, interests and opinions. Marketers task is to find the relationships between their products and lifestyle groups. The lifestyle pattern can be determined by the AIO dimensions as shown in the table below: ACTIVITIES Work Hobbies Social events Vacation Entertainment Clubs Community Shopping Sports INTERESTS Family Home Job Community Recreation Fashion Food Media Achievements OPINIONS Themselves Social issues Politics Business Economics Education Products Future Culture

Table 4.1 The AIO Frame Work The marketer can find out the psychographics (use of psychology and demographics to understand an individual) of the consumer and design a suitable brand to match the consumer psychographics. The Complete Man positioning of Raymond Suiting and Taste the Thunder positioning of Thumps Up are examples of successful brand positioning based on consumer psychographics. Another most popular available classification system based on psychographic measurement is SRI Consulting Business Intelligences (SRIC-BI) VALSTM Framework. People are classified according to their tendencies and availability of resources such as actualisers, fulfilleds, achievers, experiencers, believers, strivers, makers and strugglers. Personality & Self Concept A persons buying behaviour is influenced by his/her personality traits. Personality A set of unique psychological traits leading to relatively consistent and enduring pattern of response. Self confidence Dominance Sociability Autonomy Defensiveness Adaptability Assumption : Consumers are likely to choose brands whose brand personality matches with their own.

Professor Saroj Kumar Datta

Self Concept How a person thinks of himself/ herself, that is, the perception one has towards own self. This is based on the assumption I am what I have, for example, a rich illiterate person may have a huge collection of classics in Literature to give an appearance of a learned person. Psychological Factors Motivation The force that energizes behaviour, gives direction to behaviour and underlies the tendency to persist. Theories of Motivation: Freuds Theory Maslows Theory Herzbergs Two factor Theory Freuds Theory : Sigmund propagated that people behaviour are shaped by the psychological forces which are rooted in the unconscious state of his/her mind. Maslows theory : According to Abraham Maslow, human needs are arranged in hierarchy and people will try to satisfy their most important needs first.

5 Selfactualisation Needs (Self-development & realisation) 4 Esteem Needs (self-esteem, status, recognition) 3 Social Needs (sense of belonging, love) 2 Safety Needs (security & protection) 1 Physiological Needs
(food, water, shelter)

Figure 4.3: Maslows Hierarchy of Needs

Professor Saroj Kumar Datta

Hertzbergs Theory Fredrick Hertzberg developed a two-factor theory that distinguishes dissatisfiers and satisfiers. The absence of dissatisfiers not enough, satisfiers must be present to motivate a purchase. Learning An individual learns and gains experience overtime. Learning involves changes in an individuals behaviour arising from experience. Buying Roles Every buying process goes through a buying unit comprising of number of individuals playing various roles as given below: Initiator: A person who initiates the buying process i.e. a person who first suggests. Influencer: A person who has a considerable influence in the buying decision. Decider: A person who decides the total buying process, i.e. the brand, the dealer, time of purchase, etc. Buyer: The person who makes the actual purchase. User: A person who consumes or uses the product or service. Different Types of Buying Situations Depending on the degree of involvement required from the consumer and the degree of brand differences four major types of buying situations arises as shown below: High Involvement Complex buying situation Dissonance reducing buying situation Low Involvement Variety seeking buying situation Habitual buying situation

Brands differ widely Brands differ marginally

Figure 4.4: Four types of buying situations Complex Buying Situation: Purchase of a car, house, computer, etc.: Here the marketer should stress on pre-purchase counseling. Habitual Buying Situation: Purchase of salt, sugar, etc. : Marketing strategy should be making it easily available. Dissonance-reducing Buying Situation: Purchase of Kashmiri carpets : Post purchase counseling will be very effective in order to reduce post purchase dissonance of the consumer. Variety-seeking Buying Situation: Purchase of cookies, perfumes, etc.: Successful strategy will be enticing the retailers and customers through attractive offers. 4.8 Buying Decision Process To be an effective marketer it is very necessary to understand the thinking process, which a consumer goes through while making a purchase decision. Marketing scholars have developed Five Stages Model of the buying decision process, which is shown below:

Professor Saroj Kumar Datta Need Recognition

Information Search

Identification & Evaluation of Alternatives

Purchase Decision

Post Purchase Behaviour

Figure 4.5 : Five Stage Model of Consumer Buying Process

The Nature of Business Markets and Business Buying Behaviour Business markets consist of all business users (individuals and organisations) that buy goods and services for one of the following purposes : To make other goods and services To resell to other business users or to consumers To conduct the organisations operations Businesses (including government and nonprofit organisations) are a market for raw and manufactured materials and parts, installations, accessory equipment, supplies and services. The variables impacting the business buyer are similar to those of the consumer buyer in some ways but very different in others. In general, the business buyer generally is much more technical, price-oriented, educated for the job, and riskaverse than the consumer buyer. In addition, with the business-buying environment, there is more concern for the status and power of potential vendors, and persuasiveness and empathy play relatively lower roles.

Professor Saroj Kumar Datta

Buying Situations in Business Markets The business buyer while making a purchase, faces many decisions depending on the buying situations. According to Patrik Robinson and others there are three types of business buying situations : Straight rebuy: When the purchasing department reorders on a regular basis (i.e., office supplies, regular consumables etc.) Modified rebuy : In this situation, the buyer wants to modify the product specification or other terms and conditions of existing purchase. New task : Here the purchaser buys the product or service for the first time. The buying passes through several stages like awareness, interests, evaluation, trial and adoption. The business buyer has to make maximum number of decisions in this situation. For example, if the company is developing a new product (say, for example, when the TATAs first developed Indica model) the buyer has to determine new product specifications, delivery terms, service terms, product costing etc. This gives the organisation greatest opportunity and challenge and many companies use a missionary sales force consisting of their most effective sales people who are capable of reaching to as many key buying influencers as possible and provide helpful information and assistance. Systems buying and selling Business buyers, many a times, prefer to buy a total solution to their problem from one seller who provides a turnkey solution (as the buyer turns to one key supplier to get the job done). For example, a petrochemical project can be given to a prime contractor on turnkey basis who subsequently sublets to specialised suppliers but remain solely responsible for the whole project to the buyer. Buying Roles in Business Buying The decision making in business buying is done by what is known as buying center composed of all those individuals and groups who participate in the buying process with some common goals to be achieved for the organisation. We can identify seven roles played by different members of the buying centers. Initiators : Those who request that something to be purchased. They may be users or others in the organisation. Users : Those who will use the product or service. In many cases, the users initiate the buying proposal and help define the product requirements. Influencers : People who influence the buying decisions. They often help define specifications and also provide information for evaluating alternatives. Technical personnel and consultants are particularly important influencers. Deciders : People who decide on product requirements on suppliers. Approvers : People who authorize the proposed action of deciders or buyers. Buyers : People who have formal authority to select the supplier and arrange the purchase terms. Buyers may help shape product specifications, but they play their major roles in selecting vendors and negotiating. In more complex purchases, the buyers might include high-level managers participating the negotiations. Gatekeepers : People who have the power to prevent sellers or information from reaching members of the buying center. For example, purchasing agents, receptionists, and telephone operators may prevent salespersons from contracting users or deciders.

Professor Saroj Kumar Datta

Major Influences on Industrial Buying Behaviour Business buyers behaviour and their response pattern are influenced by many factors. The following four factors can be considered having major influence : Environmental factors : Business buyers decisions are influenced by external environmental factors such as level of demand, economic outlook, interest rate, rate of technological change, political factors, social factors and the nature of market competition. Organisational factors : Organisation-specific purchasing objectives, policies, procedures, structures, and systems influences business buyers behaviour. Interpersonal factors : The interpersonal relationship of the members of the buying center influences buying decisions as the different participants of the buying unit differs in interests, authority, status, empathy and persuasiveness; hence the business marketer should try to understand the nature of group dynamics taking place during buying decision process. Individual factors : Each buyer has his / her personal motivations, perception and preferences which are influenced by the buyers age, income, education, job position, personality etc. For example, a young, professionally educated buyer may take more aggressive and risky buying decisions which may benefit the organisation substantially if found to be successful. Buying decisions are also influenced by the cultural aspects of the country where the buying center is located. The Business Buying Process The business buyers tend to obtain the highest benefit package in relation to a market offerings cost. The marketer needs to know how business purchase departments work and also the nature of the buying process which consists of eight stages called as given below : Problem recognition The company first recognises a problem or need to buy a good or service as part of their regular production or for the purpose of developing a new product. General need description The buyer works out general characteristics of the goods and services which he intends to acquire and also the required quantities. Product specification The buyer develops the items technical specification and the organisation does a Product Value Analysis (PVA). Product value analysis is an approach to cost reduction in which components are carefully studied to determine if they can be redesigned or standardised or made by cheaper methods of production. Supplier search The buyer tries to identify the most appropriate suppliers. Proposal solicitation The buyer invites qualified supplier to submit proposals. Supplier selection Before finalising on a supplier, the organisation will specify desired supplier attributes and indicate their relative importance in order to rate suppliers. Order-routine specification

Professor Saroj Kumar Datta

The buyer finalises on the technical specifications, quantity required, delivery terms and other terms of sale in order to release the final contract. Performance review The buyer periodically reviews the performance of the selected suppliers and monitors the quality and delivery terms of supplies. Institutional and Government Market The institutional market consists of schools, hospitals, cinema halls, nursing homes and other institution that must provide goods and services to the consumers when they are within the institution. The governments of many countries are major buyers of goods and services through such departments like defense, railways, irrigation etc. The institutional and government market share many practices with the business market and has some additional characteristics. Institutional buyers are less concerned with profit than with other considerations when they define the products and services to buy for the people under their care. Government buyers tend to require many forms. They favour open bidding and their own nationals when they choose their suppliers. Suppliers must be prepared to adapt their offers to the special needs and procedures found in institutional and government markets.