Consumer dynamics

1
Needs and wants = Needs and
wants
Problem
specific
tksabarwal@gmail.com

2
Ultimate Goal of marketing
To make selling a redundant process
•By being focused on customer–
understanding clearly –customer is the end
and manufacturer as the means
•By understanding the customer’s implicit
and explicit needs
•Creating a self generating pull for the
market offering.

3
consumers
customer

4
Customers do not BUYS A
PRODUCT !
What do they buy??

5
Manufacturer specific
Customer specific
Four P’s
Four C’s

7
Is
Consumer behavior
The activities that people engage in when
selecting, purchasing and using products and
services so as to satisfy needs and desires.
Such activities involve mental ,emotional
processes and physical action

8
1. Consumer behavior is motivated
2. Consumer behavior includes many activities.
3. Consumer behavior is a process
4. Consumer behavior varies in timing and complexity
5. Consumer behavior involves different roles
6. Consumer behavior is influenced by external factors
7. Consumer behavior differs for different people
These seven aspects hold key to understand
consume behavior. Model’s acronym is
“MAPTRIP”

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customer
•To understand the customer –basic is to know that
s/he is buying / using the products as a means to solve
or address their own problem, reason and strategy
and not yours and therefore unless marketer is
customer specific in terms of marketing mix elements,
success is usually evasive.
•Customer does not buy a brand s/he buys their
perception, and choose a brand which offers the best
solution to their problem
•Marketers only brief is to synergize the capabilities
of the organization so as to address customer’s specific
needs.

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Customer defections
customer defections
60%
20%
11%
1%
3%
5%
indifference
product
price
death
relocation
new avenues

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Seven sins of service
1. Apathy—indifference,boredom (a matter of attitude)
2. Brush off--- getting rid of customer, not owning
responsibility.
3. Coldness---chilly, hostility, curtness, unfriendliness.
4. Condensation---treating customer with a patronizing
attitude.
5. Robotize---thank you, have a nice day –next
6. Rule book--- rules above the customer.
7. Run around----sorry you will have to …….
Calling mediocre service excellent doesn't make it
excellent

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Buying behavior
Buying behavior covers all activity preceding,
and following purchase decisions
The purchasing behavior is seen as a process of problem
solving and can be grouped into five stages
1. Problem recognition
2. Information search
3. Evaluation of alternatives
4. Purchase decision
5. Post-purchase behavior

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The 5 stage process
1:Problem recognition
• The internal recognition by the consumer that their current needs are
not being met
• Discrepancy between actual & desired state
• Leads to motivation
• Could be real or imagined, physical or psychological
• Implications? Construction of advertising; penetration pricing
strategies for new products; importance of peers; social construction of
desire.
2:Information Search
Next we ask ourselves the question of how do we solve our
problem?
•May already be familiar with options available
•May consult people whose opinions we respect
•May browse around the shops
•May consult independent experts
•Amount of information required dependent on risk attached
•Implications? Role of marketing communications

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The 5 stage process (continued)
3:Evaluation of alternatives
•In deciding which product to buy we have to weigh up which
product best suits our needs
•We construct criteria upon which to base our choice
•We already may have a list of criteria or we may form one
during the information search
•Compensatory vs. non compensatory evaluation
4: Product choice
•Having weighed up the pros and cons between alternatives
eventually we have to make a choice
•Could be as a result of the outcome of our evaluation process
against important criteria – best fit.
•Choice could be affected by availability, payment options etc.
•Implications? Make it easy!

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The 5 stage process (continued)
5: Post purchase evaluation
Once we have made our purchase we decide whether its met
our expectation
•If it does great positive brand associations and visa versa
•Implications? After sales service, marketing
communications

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Value Creation

17
Reference Group Influences
 A reference group is the group
whose perspective an individual
takes on in forming values, beliefs,
attitudes, opinions, and overt
behaviors.
 They set levels of aspiration
 They help define the actual
items/services considered
acceptable for displaying those
aspirations.

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Social Norms and Conformity
 Social norm – any rule or behavior for
meeting societal expectations  normative
system
 Conformity pressures – actions taken to
encourage or force members to act, think
and/or express themselves in certain ways.
 The more important a group is in our lives,
the greater our desire to accept and conform
to its norms

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Homan’s Equation
The difference between the “price” we pay for
conformity and the rewards obtained for doing so
determines for each of us whether we will conform
to group expectations and to what extent.
Price:
•Loss of freedoms
•Time commitment
•Financial
commitment
•Etc.
Rewards:
•Levels of acceptance
•Advancement within the
group
•Prestige gained
•Etc.

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Reference Group Types
 Primary reference group: one with which the
individual has frequent face-to-face contact and in
which members are close-knit.
 Examples: families, households, study groups, work
teams, roommates, etc.
 Secondary reference group: one in which interaction
with other members is less frequent
 Formal group: one in which there is some sort of
structure and/or for which there are specific
membership requirements.
 Informal group: one that has no special membership
or attendance requirements, other than common
interests.

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Reference Group Types
(continued)
 Membership group: one to which a
person currently belongs.
 Aspirational group: a group that a
person would like to be part of, but to
which he or she does not currently/ may
never belong
 Dissociative group: a group that an
individual avoids or denies connection
with.

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Reference Group
Influences
 Reference groups as
 part of the socialization process
 setters of roles
 information sources
 normative influences
 an expression of self-value

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Conformity Pressure
and Marketplace
behavior
 The influence of reference groups varies
 Groups tend to be more influential on
product decisions than they are on
either brand or outlet choices
 Conspicuousness “based on exclusivity” --
product decisions (bikers and black leather
jackets)
 Conspicuousness “associated with the
individual” -- brand decisions possible within
product class, “allowed personal expression”

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Social Power
 Power of reward – praise, approval,
acceptance, status, recognition, etc.
 Coercive power – unacceptable
behavior strongly discouraged
 Expert power – informational
attraction
 Referent power – closer the match
between person and group, more
willingness to conform

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Defining Customer Value
-
=
Total Customer
Value
Total Customer
Cost
(Product, Service,
Personnel, &
Image Values)
(Monetary, Time,
Energy, &
Psychic Costs)
Customer
Delivered Value
(Profit to the
Consumer)

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Customer Satisfaction
Customer Satisfaction Results When a Company’s Performance
Has Fulfilled a Buyer’s Expectations.
Buyer’s Expectations Are Based On:
Customer’s Past Buying Experiences
Opinions of Friends & Associates
Marketer/ Competitor Information &
Promises
Product’s
Actual
Performance
Performance Exceeds Expectations-
Customer is Delighted
Performance Below Expectations -
Customer is Dissatisfied

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Total Customer Satisfaction
 Highly satisfied (delighted) customers produce benefits:
 They are less price sensitive,
 They remain customers longer,
 They talk favorably about the company and products to
others.
 Delighted customers have emotional and rational preferences for
products, and this creates high customer loyalty.
 Therefore, the purpose of Marketing is to generate customer value
profitably.

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The Need for Customer Retention
New
Customer
Costs
Lost
Customer
Costs
Customer
Lifetime
Value
The Key to Customer Retention is Superior Customer Value and
Satisfaction. Companies Must Consider:

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Building Customer Satisfaction and
Loyalty by Relationship Marketing
Structural
Ties
Social
Benefits
Relationship Marketing Involves Creating, Maintaining, and
Enhancing Strong, Long-Term Relationships with
Customers and Other Stakeholders.
Methods for Building Relationships Include Offering:
Financial
Benefits

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PURCHASE
CONVICTION
PREFRENCE
LIKING
KNOWLEDGE
AWARENESS
Publicity -advertising
campaign
Cognitive
The realm of thoughts.
Ads provide
information & facts
Affective
The realm of
emotiions.Ads change
attitudes & feelings
Competitive ads.
Argumentative copy
“image” ads
Status glamour appeals
POP ads/deals/price
appeals / testimonials
Conative
The realm of motives,
ads stimulate or direct
desires
Lavidge hierarch of effects model

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Importance of perceived risk
•A financial loss-when the product is faulty
and needs replacement or repair at one’s own cost.
•A loss of time – due to hours of making
complaints, returning to distributors, repairs etc.
• a psychological risk- when a bad purchase
leads to loss of self esteem or creates general
dissatisfaction
•A physical risk- due to consumption or use of
products potentially harmful to one’s health or the
environment.

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Problem solving approaches
•Extensive problem solving-is adopted when the value of
information and/or the perceived risk is high (unfamiliar brand
in an unfamiliar product class)
•Limited problem solving- applies to the situation of the
buyer confronted with a new, unfamiliar brand in a familiar
product class. where existing brands do not provide an
adequate level of satisfaction)
•Routine response behavior-is observed in the case where
the consumer has accumulated enough experience and knowledge
and has definite preference about one or more familiar brands
(low cost, frequently purchased items)

33
Ten questions
1. Will the product make me feel more important?
2. Will the product make me happier?
3. Will the product make me more comfortable?
4. Will the product make me more prosperous
5. Will the product make my work easier?
6. Will the product give me more security?
7. Will the product make me more attractive? Or
better liked.
8. Will the product give me more distinction?
9. Will the product improve, protect, or maintain my
health?
10.Is this purchase a bargain for me ?

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Total
set
Awaren
ess
set
Evoked
Set
Choice
set
decisiion

35
Perspective
(A mental view of a scene)
SET OF PERSPECTIVES IN
CONSUMER BEHAVIOR
MARKETER
CONSUMER
PUBLIC POLICY
MAKETERS AND CONSUMERS ARE ACTIVE ON
DAILY BASIS
MARKETING DECISIONS
CONTROLLABLE (4P’s) UNCONTROLABLE (5C’s)
Marketing mix
elements
Customers Channels
Conditions Competitors
Company,

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Realistic view
This realistic view is important to the
marketer because ,
1. It gives an external view of the customer.
2. An aggregate view of the customer
3. A product specific view of the customer
4. A brand preference /purchase point of view
5. A behavioral influence orientation
• who does or does not use the product
• Who uses the competitors Brand

37
Comparison of two perspectives
Perspective
characteristics
Marketer’s
perspective
Customer’s
perspective
Point of view External
(buyers)
Internal
(me)
Level of
interest
Aggregate
(markets)
Individual
(myself)
Scope of
interest
Product specific
(what I make)
Across products
(what I buy)
correct choice Brand specific
(my brand)
Best alternative
(best brand for
me)
Role of
influence
Influence
behavior
Handle
behavioral
influences

38
Perspectives-contd.
customer marketer
Most behaviors are internally focused –
we think silently-observe privately-&
evaluate according to our own dictates
Marketer can only have an external
view.
Focus on themselves as individuals Market segmentation as a process of
comprehending markets. Marketers try
to find sub markets within the total
markets for economic viability.
Not an expert for many of their
purchases
An expert for his brand / category
Choose only one brand from a given
set, meaning , making a wrong choice
from the point of view of every
marketer but, one.(branding helps)
Best brand is the one that we make
(building brand equity helps)
someTime and effort required to react
to stimuli. (only if it is interest to me
otherwise ignored)
Targeting markets of interest.
Creating stimuli-intrinsically
interesting to consumers
stimuli are simple and easy on
consumers

39
Black box/CIP models
Consumer’s
Mind
Black box
Consumer”s
Mind
CIP
inputs outputs
output
inputs
External
world
External
world
External
world
External
world

40
INTERNAL WORLDS
EXTERNAL
WORLD
SENSORY
REGISTER
SHORT TERM
MEMORY(STM) OR
WORKING
MEMOTY
LONG TERM
MEMORY (ltm)
STIMULI
Short and long term memory

41
Attitude towards objects
• Attitudes---people form attitudes toward objects on the
basis of their beliefs (perception and knowledge ) about
these objects, beliefs in turn acquired by processing
information which is obtained by Direct experience with
objects and from communications about them received from
other sources
• Information—experience based with objects +communication
received about objects from others.
• Belief---perceptions and knowledge

42
Fishbeins model of ATO
 IS DESIGNED TO DETERMINE A PERSON’S OVERALL ATTITUDE
TOWARD AN OBJECT.
 IT IS BASED ON HIS /HER BELIEFS AND FEELINGS ABOUT VARIOUS
ATTRIBUTES OF THE PRODUCT/OBJECT.
 MODEL IS ALSO REFERRED TO AS MULTIATTRIBUTE MODEL.



n
e
biei
Ao
1
model
Ao = a persons overall attitude towards the object.
Bi = the strength of his/her belief that object is related to
attribute “I”
Ei = evaluation or intensity of feeling towards attribute “I”
N = number of relevant beliefs for that person.

43
)
(
)
( SN
w
Ab
w
BI
B 2
1 


behavior
Behavior
intention
Attitude
Towards
Performing
behavior Subjective
Norms about
behavior
W1 and w2 are the weights of relative influence of
Ab +SN on Behavioral intention
Behavior –as a function of intentions to behave in a certain
manner+ other intervening factors
Attitude– attitude towards acting in that manner + subjective
norms,.(others perceptions)
Fishbein

44
Continued.
To predict behavior
•We determine Ab & SN
•Each is then weighted to reflect importance (add up to
1.0)
Ab=the individual Oveeerall attitude
performing specific behavior. B1=persons
belief that performing that behavior results
in consequence. E1 =persons evaluation of the
consequences I. And n= number of relevant
behavior beliefs.






k
i
n
i
i
i
SN
i
i
b
m
b
e
b
A
1
1
Where SN=the individual's subjective norms
regarding the specific behavior. Bi= normative
belief that reference group or person I thinks
he should or should not perform the behavior.
Mi= his motivation to comply with the thoughts
of referent I.k= the number of relevant
references

45
Beliefs about
Consequences of
behavior
BI model
Evaluation of
consequences
Belief about
Perception of
others
Motivations
to comply
Attitude towards
behavior
Subjective norms
About behavior
BI
Other
Intervening
factors
behavior

47
Changes in customer perceptions
1950-60 60’s early 70’s Late 70’s early 80 Late 89’s –90’s
Mass market
Segmented
perception Sub segments niche
Customer perceived
as
As a mass audience
General/similar
needs
Limited product
offering
Limited No. of
Needs-price
feature
Limited tiring of
products
Growing no. of needs
Primarily in lower
Segments
More market offerings
Portfolio of niche
products

48
Market segmentation
Important
Sub markets
Entire market More important
Sub markets
Individual firms
House holds
Cost low cost high
Low effectiveness high effectiveness
Highly
Individualistic
view
Highly aggregated
view

49
Definition and process
Managerial strategy that adapts a firm’s marketing mix to
best fit in the various demand curves existing in a market
1. Identifying segments
2.selecting target
segments
3.creating mixes aimed
at the
Target segments.
Three stage process
Dividing the market into
meaningful user groups based
on
needs , use patterns,
demographics
Etc.
Strategic and competitive
Considerations
Marketing management
competence

50
criteria for a true segment
1. Group identity—members of the segment bust be similar to the
other consumers in the same segment (homogeneity) –and should
be different from members of other segments (heterogeneity)
2. Systematic behavior---members of a segment should behave
in a similar manner and be likely to react similarly to a
particular marketing mix.members of different segments should
behave differently.
3. Marketing mix efficiency potential---addresses the
practical aspect of whether or not a marketing mix can be
developed to cover efficiently and differently possible
segments groupings.
Differential response-adequate size-measurability-
accessibility

51
Customer classification
Three levels of classification
1. Personal characteristics of the consumers—are
parameters to identify or describe particular individual as
people or consumers.
Level 1 applies to all products and brands ‘cause consumer
descriptions will ot be affected by what any marketer
might do,
2. Benefit sought--- describes the nature of consumer’s
demand for various features of a product or service
offering.
3. Behavioral measures---classifies each consumer on the
basis of their actual behavior in the market place.
Popular options are
product ownership or use
quantity purchased
brand loyalty, supplier loyalty, store loyalty etc.

52
Personal
Characteristics
Benefit sought Behavioral measures
Marketing strategy
Level 1 Level 2 Level 3
influence
adaptation
Marketing implications

53
Using levels for segmentation
•Demographic
•Life style
Psychographics
•geographic
Benefit
Segmentation
Behavioral response
segmentation
Segmentation by
Personal
characteristics
•Benefit sought
•Situational
•Attitudinal
•Usage pattern
•Direct response
Segments
defined
L-1 P.C L-2 B.S L-3 B.M
options Popular type
Segments
evaluated
Segments
evaluated
Segments
evaluated
Segments
evaluated
Segment
defined
Segment
defined

54
• Lifestyle Marketing Perspective
– Marketers must look at Patterns of Behavior to
understand consumers.
– Marketers must identify the set of products and
services that seems to be linked in consumers’ minds to
a specific lifestyle.
• Product Complementarity occurs when the
symbolic meanings of different products are
related to each other.
– These sets of products, called Consumption
Constellations, are used by consumers to define,
communicate, and perform social roles. i.e. The
“Yuppie” was defined by a Rolex watch, BMW cars and
Gucci briefcases.
Linking Products to Lifestyles

55
Linking Products to Lifestyles
Product
Setting
People, Products, and Settings are Combined to
Express a Certain Consumption Style.
Lifestyle
Person

56
Conducting A Psychographic
Analysis
Forms of a
Psychographic Study:
Lifestyle Profile
Product-Specific Profile
Study That Uses Personality
Traits as Descriptors
General Lifestyle
Segmentation
Product-Specific
Segmentation
Definition of
Psychographics:
Involves the “.. use of
psychological, sociological, and
anthropological factors... to
determine how the market is
segmented by the propensity of
groups within the market - and
their reasons - to make a
particular decision about a
product, person, ideology, or
otherwise hold an attitude or use
a medium.

57
Uses of Psychographic
Segmentation
Define the
Target Market
Position the
Product
Create a New
View of the Market
Develop Overall
Strategy
Market Social and
Political Issues
Communicate
Product Attributes

58
AIOs and Psychographics
20/80 Rule
Activities Interests
Demographics - Describes Who Buys
Psychographic Profiles - Tells Why Consumers Buy
Opinions

59
Life styles “AIO patterns”
Life style reflects people choosing activities that represent the way
they
Wish to live. Life styles are largely modeled by three factors
1. The way in which we were raised
2. Our personal interests and values
3. The current demand of our daily lives (suggests that demographic
variables such as age, education and occupation will affect our
lifestyles strongly )
•AIO stands for activities, interests and objects
• questions asked of consumers range from work and social
activities, family, food, media interests, politics, social issues and
the future.
1. Elegant socialite, 2contented housewife 3.old fashioned traditional
4.militant mother. 5. The chic suburbanite.

60
Life style segmentation
valuables
settlement
movement
values
1.prudent
2.defensives
3.vigilante
4.left out
5.romantic
6.squodra
7.rookies
8.dandy
9.business
10.protest
11.pioneer
12scout
13.citizen
14.moralist
15.gentry
16.strict

61
details
1. Prudent—retiree resigned to their fate seeking security
2. Defensives—younger inhabitants of small towns seeking
protection and support in their traditional family structure.
3. vigilante—frustrated blue collar workers, trying to preserve
their identities.
4. Left out—retirees and house wives threatened and left out by
society’s growing complexity; seek protection
5. Romantic—sentimental,romantic, young nest builders seeking
modern progress and a secure life for their families.
6. Squodra—tolerant, suburban young couples seeking a secure life
of sports and leisure. Smaller group gives feeling of security.
7. Rookies—working class youth excluded in their own eyes,
seeking integration via money making/ consumption; frustrated
by low education.
8. Dandy—hedonistic group show-offs; with modest income and
concern for outward appearance

62
Contd.
9. sharks / business– spendthrift, well educated, ambitious young
wolves, seeking leadership in a competitive society.
10. Protest—intellectual young critics seeking to revolutionize society.
11. Pioneer—young well-off, ultra-tolerant intellectuals seeking social
justice
12. Scout—tolerant middle aged conservatives seeking orderly social
progress.
13. Citizens—community organizers seeking leadership in social
activities.
14. Moralist—quiet, religious citizens seeking a peaceful future for
their children.
15. Gentry—law and order conservatives belonging to old money
established elite.
16. Strict—repressive puritans.

63
VALS-2
believers
actualizes
achievers
strivers
strugglers
makers
experiencers
fulfilled
Principle
oriented
Minimal resource
Abundant resource
action
status

64
Global Marketing and Culture
Areas
Affected by
Nationality
Taste and
Stylistic
Preferences
Modesty
Cultural
Sensitivities
Advertising

65
Major Consumer Trends
Environmentalism and
Green Marketing
A Return to Value
Time Poverty
Disillusionment of
Working Women
Decreased Emphasis
on Nutrition and Exercise

Consumer dynamics

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