UNIT – I

Consumer Behavior – Meaning, Definition – Scope and Application of consumer behavior –

Consumer Involvement – Nature and Characteristics of Indian Consumers – Consumer Behavior
interdisciplinary approach; Introduction to Industrial Buying Behavior, Consumer Behavior
Models

Introduction:

Consumer behavior is the study of how individual customers, groups or organizations

select, buy, use, and dispose ideas, goods, and services to satisfy their needs and wants. It
refers to the actions of the consumers in the marketplace and the underlying motives for those
actions.

Marketers expect that by understanding what causes the consumers to buy particular
goods and services, they will be able to determine—which products are needed in the
marketplace, which are obsolete, and how best to present the goods to the consumers.

The study of consumer behavior assumes that the consumers are actors in the
marketplace. The perspective of role theory assumes that consumers play various roles in the
marketplace. Starting from the information provider, from the user to the payer and to the
disposer, consumers play these roles in the decision process.

The roles also vary in different consumption situations; for example, a mother plays the
role of an influencer in a child‘s purchase process, whereas she plays the role of a disposer for
the products consumed by the family.

Some selected definitions of consumer behavior are as follows:

1. According to Engel, Blackwell, and Mansard, ‗consumer behavior is the actions and
decision processes of people who purchase goods and services for personal consumption‘.

2. According to Louden and Bitta, ‗consumer behavior is the decision process and physical
activity, which individuals engage in when evaluating, acquiring, using or disposing of
goods and services‘.

Consumer behavior is the study of how individual customers, groups or organizations

select, buy, use, and dispose ideas, goods, and services to satisfy their needs and wants. It
refers to the actions of the consumers in the marketplace and the underlying motives for
those actions.
Nature of Consumer Behavior:

1. Influenced by various factors:

a. Marketing factors such as product design, price, promotion, packaging, positioning and
distribution.
b. Personal factors such as age, gender, education and income level.
 c. Psychological factors such as buying motives, perception of the product and attitudes
towards the product.
d. Situational factors such as physical surroundings at the time of purchase, social
surroundings and time factor.
e. Social factors such as social status, reference groups and family.
f. Cultural factors, such as religion, social class—caste and sub-castes.

2. Undergoes a constant change: Consumer behavior is not static. It undergoes a change over
a period of time depending on the nature of products. For example, kids prefer colourful and
fancy footwear, but as they grow up as teenagers and young adults, they prefer trendy
footwear, and as middle-aged and senior citizens they prefer more sober footwear. The change
in buying behavior may take place due to several other factors such as increase in income level,
education level and marketing factors.

3. Varies from consumer to consumer: All consumers do not behave in the same manner.
Different consumers behave differently. The differences in consumer behavior are due to
individual factors such as the nature of the consumers, lifestyle and culture. For example, some
consumers are technoholics. They go on a shopping and spend beyond their means.
They borrow money from friends, relatives, banks, and at times even adopt unethical
means to spend on shopping of advance technologies. But there are other consumers who,
despite having surplus money, do not go even for the regular purchases and avoid use and
purchase of advance technologies.

4. Varies from region to region and country to county: The consumer behavior varies
across states, regions and countries. For example, the behavior of the urban consumers is
different from that of the rural consumers. A good number of rural consumers are conservative
in their buying behaviors.
The rich rural consumers may think twice to spend on luxuries despite having sufficient
funds, whereas the urban consumers may even take bank loans to buy luxury items such as cars
and household appliances. The consumer behavior may also varies across the states, regions
and countries. It may differ depending on the upbringing, lifestyles and level of development.

5. Information on consumer behavior is important to the marketers: Marketers need to

have a good knowledge of the consumer behavior. They need to study the various factors that
influence the consumer behavior of their target customers.

The knowledge of consumer behavior enables them to take appropriate marketing

decisions in respect of the following factors:

a. Product design/model
b. Pricing of the product
c. Promotion of the product
d. Packaging
e. Positioning
f. Place of distribution
6. Leads to purchase decision: A positive consumer behavior leads to a purchase decision. A
consumer may take the decision of buying a product on the basis of different buying motives.
The purchase decision leads to higher demand, and the sales of the marketers increase.
Therefore, marketers need to influence consumer behavior to increase their purchases.

7. Varies from product to product: Consumer behavior is different for different products.
There are some consumers who may buy more quantity of certain items and very low or no
quantity of other items. For example, teenagers may spend heavily on products such as cell
phones and branded wears for snob appeal, but may not spend on general and academic
reading. A middle- aged person may spend less on clothing, but may invest money in savings,
insurance schemes, pension schemes, and so on.

8. Improves standard of living: The buying behavior of the consumers may lead to higher
standard of living. The more a person buys the goods and services, the higher is the standard of
living. But if a person spends less on goods and services, despite having a good income, they
deprives themselves of higher standard of living.

9. Reflects status: The consumer behavior is not only influenced by the status of a consumer,
but it also reflects it. The consumers who own luxury cars, watches and other items are
considered belonging to a higher status. The luxury items also give a sense of pride to the
owners.

Scope of Consumer Behavior:

Demand Forecasting: Consumer behaviour helps in the forecasting of demands for the
business. Business can identify the needs and wants of the customers by understanding their
behaviour. They can easily find out their unfulfilled needs and demands. If they get a clear
idea of what customer needs, a business can design their products accordingly. It will help
them in the forecasting of demands for products by understanding their behaviour. The
business will be able to identify the market opportunities available to them.

Marketing Management: Marketing has an important role in the successful functioning of

every business. Better understanding of customer needs, problems and expectations will help
 the business in framing sound marketing strategies. If a company is able to do marketing
effectively it can attract more and more customers. Understanding customer behaviour will
help companies to have better knowledge about their customers. This will ultimately help
business in conducting their marketing in a better way.

Selecting The Target Market: Consumer behaviour helps in identifying target customers
from the market. Study of customer behaviour identifies all customers segments with unique
and distinct needs. It helps in segmentation of the overall market into different groups.
Grouping of customers and identification of their needs will help business in serving them
better. The business will be able to design their products in a better way as per the needs and
wants of their customer. It makes clear to businesses who are their target customers and what
they want.

Market Mix: Designing an accurate mix of important elements like product, price, place and
promotion are important for every business. It helps in finding out the dislikes and unfulfilled
wants of customers. This helps marketers in designing the optimum marketing mix for
improving the effectiveness of marketing strategies. The proper marketing mix will help
marketers to attract more and more customers thereby increasing the profit.

Educating Customer: Consumer behaviour helps marketers to identify how customers spend
on their buying decision. By understanding their behaviour marketers can easily guide their
customers about how they can improve their buying decisions. They can suggest ways to save
their money and guides them with better options available in the market. Customers get aware
of different opportunities available to them as per their behaviour.

Assists in Designing Product Portfolio: Designing the right product portfolio is a challenging
task for every business. Every business should design such a portfolio consisting of all class of
products. Consumer behaviour helps in identifying the class and requirements of peoples. This
helps in designing products as per people‘s needs and include in the product portfolio of the
company. This way business is able to design the optimum product portfolio and able to serve
its customers in a better way.

Applications of consumer behaviour:

1) Analysing market opportunity: Consumer behaviour study help in identifying the

unfulfilled needs and wants of consumers. This requires examining the friends and conditions
operating in the Marketplace, consumers lifestyle, income levels and energy influences. This
may reveal unsatisfied needs and wants. Mosquito repellents have been marketed in response to
a genuine and unfulfilled consumer need.

2) Selecting target market: Review of market opportunities often helps in identifying district
consumer segments with very distinct and unique wants and needs. Identifying these groups,
behave and how they make purchase decisions enable the marketer to design and market
products or services particularly suited to their wants and needs. For example, please sleep
revealed that many existing and potential shampoo users did not want to buy shampoo fax price
at rate 60 for more and would rather prefer a low price package containing enough quantity for
one or two washers. This finding LED companies to introduce the shampoos sachet, which
become a good seller.

3) Marketing-mix decisions: Once unsatisfied needs and wants are identified, the marketer has
to determine the right mix of product, price, distribution and promotion. Where too, consumer
behaviour study is very helpful in finding answers too many preplexing questions. The factors of
marketing mix decisions are:
i) product ii) price iii) promotion iv) distribution

4) Use in social and non profits marketing: Consumer behaviour studies are useful to design
marketing strategies by social, governmental and not for profit organisations to make their
programmes more effective such as family planning, awareness about AIDS.

Consumer Involvement:

Consumer involvement is defined as a state of mind that motivates consumers to identify with
product/service offerings, their consumption patterns and consumption behavior. Involvement
creates within consumers an urge to look for and think about the product/service category and
the varying options before making decisions on brand preferences and the final act of
purchase. It is the amount of physical and mental effort that a consumer puts into a purchase
decision. It creates within a person a level of relevance or personal importance to the
product/service offering and this leads to an urge within the former to collect and interpret
information for present/future decision making and use. Involvement affects the consumer
decision process and the sub processes of information search, information processing, and
information transmission. As Schiffman has put it ―Involvement is a heightened state of
awareness that motivates consumers to seek out, attend to, and think about product
information prior to purchase‖. It is the perceived interest and importance that a consumer
attaches to the acquisition and consumption of a product/service offering.

Types of Consumer Involvement: Depending on whether the involvement is short term or

long term, consumer involvement could be of two types, viz., situational and enduring.

1. Situational involvement: This is a state of arousal directed towards attaching relevance to a

person/object/situation for a short term. As an affective state, it creates a level of involvement
when a person thinks about a particular person/object/situation. It is specific to a situation and
is thus temporary in nature. It could vary from low to high, depending upon the situational
factors. For example, a middle aged lady suddenly decides to gift a laptop to her son on his
birthday. She is not techno savvy and has little interest with the product category. She goes to
the electronics mall and visits the various stores that sell computers and laptops. She collects
information on the product features, prices, etc and finally takes the help of her middle aged
neighbor to reach a final decision. Her involvement with the purchase activity would be
regarded as a situational involvement.

2. Enduring involvement: When the level of involvement towards the product/service

category extends over a period of time across situations, it is referred to as enduring
UNIT – II
Environmental Factors : Environmental influences on Consumer Behavior: Consumer
Socialization Process; Consumer roles within a family; purchase influences and role played by
children; family life cycle - Social class and consumer behavior: Determinants and
characteristics - Culture and consumer behavior: Characteristics of culture, core values held
by society and their influence on consumer behavior; introduction to sub-culture and cross-
cultural influences - Opinion leadership process: Characteristics and needs of opinion leaders
and opinion receivers; interpersonal flow of communication – Marketing implications of the
above influences.

Consumers don't exist in a vacuum. Their behavior is influenced by the environment in which
they live, and this behavior includes their buying behavior. This environment includes families
and friends, lifestyle and lifecycle, and the culture and beliefs of their social class. When
marketers understand how these influences work, they can often tap into them as they develop
marketing strategies.
External Environmental Factors Affecting Consumer Behavior:

It is defined as a complex sum total of knowledge, belief, traditions, customs, art, moral law or
any other habit acquired by people as members of society. Our consumer behavior, that is the
things we buy are influenced by our background or culture. Different emphasis is given by
different cultures for the buying, use, and disposing of products. People in South India have a
certain style of consumption of food, clothing, savings, etc. This differs from the people in the
North of India. Different cultures and habits are predominant in different parts of the world.
Japanese have a different culture from that of USA, England or Arabian countries.

Factors Influencing Consumer Behavior:

1. Internal Factors: Internal influences basically come from consumers own lifestyle and way
of thinking. These are consumers' personal thoughts, self-concepts, feelings, attitudes, lifestyles,
motivation and memory (Kotler, 2002). These internal influences can also be known as
psychological influences. Internal influences depict the ways through which consumers interact
with the universe around them, identify their feelings, collect and examine information, develop
ideas and beliefs, and take some specific action.
a. Psychological:
i. Motivation: The level of motivation influences buying behaviour of the consumers. It is
very well explained by Maslow through his need hierarchy theory comprising of basic needs,
security needs, social needs, esteem needs and self-actualization needs. Usually, the basic needs
and the security needs are more pressing needs than the other and hence, these needs become a
motive that directs the consumer behaviour to seek satisfaction.
 ii. Perception: Consumer perception towards a particular product or brand influences his
or her buying decision. It is the process through which individual selects, organizes and
interprets information to draw meaningful conclusion. The iPhone is perceived as a premium
brand and consumers are motivated to buy it to get associated with the elite class of the society.
iii. Beliefs & Attitude: Individuals have certain beliefs and attitudes towards products on
which their purchase decisions rests. These attitudes and beliefs are the tendency to respond to a
given product in a particular way, and these make up the brand image that influences the
consumer buying behaviour. Thus, the marketers try to understand the attitudes and beliefs of the
individuals and modify these through several marketing campaigns.
b. Personal:
i. Age: Consumer buying behaviour is greatly influenced by his or her age, i.e. the life
cycle stage in which the consumer falls. People buy different products in different stages of life
cycle.
ii. Occupation: The occupation of the individual also influences his buying behaviour.
The people tend to buy those products and services that advocate their profession and role in the
society. For example, the buying patterns of the lawyer will be different from the other groups of
people such as doctor, teacher, businessman, etc.
2. External Factors: At the time of purchasing a product or service, all of us are confronted with
several external influences that involve our own culture, subculture, household structure and
groups. These influences are also known as socio-cultural influences, as these grow from the
individuals formal and informal relationships with his friends, family and other individuals.
Understanding of these external influences is essential to affect consumers purchasing decisions.
a. Culture: The influence of culture on the purchasing behaviour varies from country to country,
therefore sellers have to be very careful in the analysis of the culture of different groups, regions
or even countries.
i. Social Class & Status: By social class we refer to the group of people who share equal
positions in a society. Social class is defined by parameters like income, education, occupation,
etc. Within a social class, people share the same values and beliefs and tend to purchase similar
kinds of products. Their choice of residence, type of holiday, entertainment, leisure all seem to
be alike. The knowledge of social class and their consumer behaviour is of great value to a
marketer.
ii. Sub-culture: Within a culture, there are many groups or segments of people with
distinct customs, traditions and behaviour. In the Indian culture itself, we have many subcultures,
the culture of the South, the North, East and the West. Hindu culture, Muslim culture, Hindus of
the South differ in culture from the Hindus of the North and so on. Products are designed to suit
a target group of customers which have similar cultural background and are homogeneous in
many respects.
b. Social: Social factors that influence consumer purchasing include family, peers, roles and
status. Family members such as a spouse, children and parents can exert strong influence on the
consumer‟s purchasing behaviour. Peer pressure is also a strong factor that determines a
consumer‟s purchasing choices. Everyone belongs to a group of some sort, from friends to
neighbors and coworkers. Rather than get left out, people purchase products that make them fit
in. A person‟s role in life, for example as a manager and the status that comes with the position,
determine certain purchasing choices.
i. Social Roles: Each individual plays a dual role in the society depending on the group he
belongs to. An individual working as Chief Executive Officer with a reputed firm is also
someone‟s husband and father at home. The buying tendency of individuals depends on the role
he plays in the society.
ii. Social Status: An individual from an upper middle class would spend on luxurious
items whereas an individual from middle to lower income group would buy items required for
his/her survival.
c. Environment:
i. Technology: Technology is a powerful tool in influencing and changing consumer
behaviour. Unless, companies move as swiftly as the technology used by their consumers, they
will become obsolete. Today internet and smartphones have completely changed the way
consumers choose alternatives, conduct product/brand research and share feedback. Right from
the traditional communication process to consumer decision making process, consumer
behaviour is highly influenced by technology.
ii. Economy: Economic Factors are the factors that talk about the level of sales in the
market and the financial position of the consumer, i.e. how much an individual spends on the
purchase of goods and services that contribute to the overall sales of the company. Several
economic factor family incomes, personal income, consumer credit history and savings influence
the consumer buying behaviour.
iii. Inflation: Inflation is the rate at which the general level of prices for goods and
services is rising and, consequently, the purchasing power of currency is falling. Thus, periods of
inflation influences consumers to save rather than consume because of distrust and uncertainty in
the economy. Inflation influences consumer spending behaviour by influencing both liquid and
non-liquid assets since in period of inflation, there is motivation to hold real assets and not assets
fixed to nominal values.
iv. Politics: From the implications of Brexit to the election of Donald Trump, politics is
having a massive effect on consumers and how they relate to brands. The political environment
of a nation breeds or condemns sell or purchase of certain goods. Reforms and public policies
further influence the demand supply of certain brands/products.
d. Marketing: Marketing strategies including promotions, pricing and packing have tremendous
impact on consumer behaviour. A revamped packing of a breakfast cereal with revised
messaging on the pack will lead to more eye balls and enhance chances of a brand to get back to
consideration set of the target audience. Similarly, contextual promotions such as festive
discounts and offers broaden the purchase horizon of consumers, thus triggering higher than
usual expenditure on lifestyle/fashion purchases.
Consumer socialization:
Consumer socialization is the process by which young people acquire skills, knowledge and
attitudes relevant to their functioning as consumers in the marketplace. It has been argued,
however, that consumer socialization occurs in the adult years as well. This field of study is a
subdivision of consumer behavior as its main focus is on how childhood and adolescent
experiences affect future consumer behavior. It attempts to understand how factors such as peers,
mass media, family, gender, race, and culture plays an influence in developing customer
behavior.

Influences:
George Moschis and Gilbert A. Churchill Jr posit that mass media, parents, school and peers are
all agents of consumer socialization. According to this theory children and young adults learn the
rational aspects of consumption from their parents while the mass media teaches them to give
social meaning to products; schools teach the importance of economic wisdom and finally peers
exercise varying social pressures.
Research in this field is primarily based on two models of human learning: the cognitive
development model, which stem primarily from the works of Jean Piaget, and the social learning
model, which is based primarily on neo-Hullian, neo-Skinnerian and social learning theory.
This aspect of child socialization started receiving academic attention in early 1970s. Systematic
academic research in this area was triggered by charges of various consumer advocacy groups
which were concerned with the effects of marketing, especially TV advertising on children.