An important aspect of marketing process is to understand why a buyer purchases a product. Thorough understanding of the customer’s buying behaviour makes it easier for the marketer to respond to the needs and wants of the customers.
Consumer behaviour can be defined as “the dynamic interaction of affect and cognition, behaviour and the environment by which human beings conduct the exchange aspects of their lives.”
Consumer behaviour studies how individuals, groups, and organizations select, buy, use, and dispose-off goods, services, ideas, or experiences to satisfy their needs and wants. Through consumer behaviour study, the marketers try to investigate and analyze the consumer buying and consumption pattern in order to devise various marketing strategies.
The questions answered through study of consumer behaviour are:
1. Who are the current and potential consumers for their product or service?
2. Why do consumers buy?
3. When do consumers buy?
4. How do the consumers make purchasing decisions?
5. Where do the consumers buy their product or service?
Step # 1. Who are the Current and Potential Consumers for their Product or Service?
Marketers can evaluate their current and potential consumers by dividing the mass markets into different segments on the basis of their buying habits. It is important for the marketer to segment the market in order to devise different marketing mix for different segments since it is observed that people in different segments act differently towards the product or service.
Segmentation concept helps the marketer to understand the heterogeneity in tastes and preferences of the consumers due to which the company can come up with innovative products as per the needs and preferences of the segment. Segmenting and targeting the current and potential consumers helps the marketer to carry out its business efficiently and effectively.
While preparing the strategies, the marketer should consider the following points:
i. Whether people in different segments react differently towards the product or service?
ii. What type of various marketing mix elements can be used for different segments?
In order to determine who their potential consumers are, the marketer needs to collect descriptive information (descriptor variable) about the market and their buying behaviour (behavioural variables) towards the products or service; and develop relationship between the two in order to determine the best market segment which can be pursued.
The various descriptors variables and the behavioural variable are:
The marketer should not only develop alternative segmentation strategies but also determine which of these alternatives are most suitable for the product or service.
For this purpose the marketer needs to study the following factors:
i. Segment Size:
Appropriate segment size needs to be determined since too many groups with smaller segment size are economically unviable. The marketer needs to decide whether the segment size is sufficient in terms of number of customers, sales revenue, or potential profits to be worth targeting.
ii. Segment’s Growth:
The marketer needs to investigate the segment’s growth rate in terms of future revenues, over current size.
iii. Environmental Factors:
The marketer needs to investigate particular environmental factors associated with the segment such as social, cultural, economic, regulatory or other exogenous factors.
iv. Competitive Advantage:
The marketer needs to evaluate its potential competitive position in a particular segment. If the competitor is well established in a segment or if marketer is aware that it cannot offer a product which has a competitive advantage over what is already being offered in that segment then the marketer might decide not to enter that segment.
Step # 2. Why do Consumers Buy?
In order to understand why consumers buy, the marketer needs to understand the benefits which the consumers are seeking from a particular product or service i.e. what are their needs. This study should be conducted at the market segment level since benefits sought by different segments are different.
According to Abraham Maslow five levels of human needs are:
i. Physiological Needs:
Basic human needs such as food, water, and sleep
ii. Safety Needs:
Job security, physical safety from injury, and financial security
iii. Social Needs:
Affection, friendship, acceptance by reference groups
iv. Ego Needs:
Success, self-esteem, prestige
v. Self-Actualization:
Achieving one’s potential, self-fulfillment
The above needs are most relevant to consumer products and services since a product could be marketed to satisfy several of the above needs simultaneously.
However, Maslow’s hierarchy does not describe why most industrial or business-to-business purchases are made. The main motive of organisational buyers to purchase a particular product is to avail the benefits associated with it. Therefore, organisational marketer needs to translate its product characteristics into product benefits. This can be done using managerial judgment or marketing research.
The research and analysis should be carried out on segments instead of single individual consumers since product benefits are valued by segments differently. Therefore, the marketer should not only make an attempt to find the benefits that consumers seek from product attributes but also match them with the target segment.
Step # 3. When do Consumers Buy?
In order to understand the purchase timings of the consumers, it is important to know when the consumers purchase products or services.
This aspect could be studied on the basis of the following:
i. Time of day – eg. Fast food, online shopping
ii. Day of week – eg. Shopping malls, movies
iii. Month or season – eg. Seasonal products such as ice creams, woolen clothes
iv. Cycles defined in years – eg. Durable goods replacement cycles
Consumer’s purchase timings study helps the marketer to precisely time its communications through various medium such as radio, television, internet, and print; or generate demand by placing the communications near the appropriate time of demand.
Marketer also needs to understand the consumer’s purchase timings in order to ensure sufficient availability of product stocks with the distribution channel members so as to satisfy the demand whenever they occur. Some marketers try to smooth out seasonal fluctuations or other timing patterns by trying to build demand during off-seasons.
Step # 4. How do Consumers Make Purchase Decisions?
In order to understand how the consumers make the purchase decisions, the marketer needs to study the following steps of process model:
I. Consumer’s search for alternatives
II. Consumer’s develop and evaluate the options in the consideration or evoked set
III. Consumer’s exhibit post purchase behaviour
IV. Set of external influences affecting this process.
I. Consumer’s Search for Alternatives:
The consumer tries to search for alternative products that deliver the desired benefits and satisfy the motivation for buying. For this purpose, customers use two sources of information: internal and external. The main difference between internal and external sources of information is the timing of the receipt of information.
A. Internal Sources of Information:
Any source of information that has already been obtained previously and can be recalled at anytime is an internal source.
This includes:
a. Past experiences with products
b. Past conversation with experts
c. Old magazine articles such as various reports
B. External Sources of Information:
New source of information that the consumers obtain from the environment after need is established is called as external sources of information.
This includes:
a. Recommendations from friends and relatives
b. Advice from agents/consultants
c. Articles in magazines
d. Advertisements
e. Information from web sites
It should be noted that for more expensive products and services, which are purchased infrequently, the information search will be more extensive. Eg. Consumer durables, significant long term investments, etc.
Also, the amount of information collected by the potential consumers will depend upon:
a. Expertise in a product category
b. How recently a purchase was made
c. The importance of the purchase to the customer
II. Consumer’s Develop and Evaluate the Options in the Consideration or Evoked Set:
As a result of search for alternatives, through internal and external information sources, consumers form three different sets of options:
A. Inert Set:
It is set of products that the consumer has no intention of buying or has no information about. In this case the brands have a zero probability of being chosen. Usually the new products or those products which have low awareness fall under this category. For inert set products, the manger must devote a large portion of marketing budget to create awareness about these products among the customers.
B. Evoked or Consideration Set:
It is the set of products from which the consumer will choose to purchase. In this case the brands have at least a non-zero probability. The marketing manager must try and get their products into as many evoked or consideration sets as possible.
C. Purchase Set:
It is the set of products that the consumer has actually chosen within a specified period of time. In this case, each option in the consideration set is evaluated by the consumer for arriving at the final purchase decision. For this purpose, the marketing manager must decompose its products and services into those attributes or benefits which consumers want to obtain by purchasing the product.
All of the above sets form basis for a popular decision making model called as the multi-attribute model.
To understand this model, marketers require two kinds of information which are:
a. Information about usefulness or importance of each attribute as compared to other attribute.
b. Information regarding how customers perceive the brands in the evoked set in terms of their attributes.
III. Consumer’s Exhibit Post Purchase Behaviour:
After purchase, when the buyer consumes the product or service, the buyer’s purchase experiences become part of his internal memory search. Good experiences create favourable memories and increase the chances of future purchases by the buyer; whereas bad experiences increase the chances of the product not being repurchased and this dissatisfied customer might discourage other potential buyers to purchase this product.
IV. Set of External Influences Affecting this Process:
There is set of external influences which also affect the consumer purchasing process. These include variety of interpersonal and social interactions that influences the way consumers make purchasing decisions.
These are:
A. Group influences
B. Product class influences
C. Situational Influences
A. Group Influences:
a. Social Class:
Social class or social economic status is often associated with occupation. Social class is usually divided into four groups: upper, middle, working, and lower class. Studies have shown that these different classes exhibit some similar qualities as a group and therefore affect the kinds of products and services they buy.
b. Other Reference Groups:
Family and friends also affect purchase behaviours. An example of this is family life cycle where each stage exhibits different sets of values and attitudes.
The typical stages of family life cycle are as follows:
i. Bachelor stage – Young, single, not living at home with parents
ii. Newly married couples – Young, with no children
iii. Full nest I – Young married couples, with children under six years of age
iv. Full nest II – Young married couples, with youngest child being six years old or more
v. Full nest III – Older married couples, with dependent children
vi. Empty nest I – Older married couples, with children not living with them, household head(s) in labour force
vii. Empty nest II – Older married couples, with children not living with them, household head(s) retired
viii. Solitary survivor, in labour force
ix. Solitary survivor, retired
c. Culture:
Cultural values are propagated through religious organizations, educational institutions, and family; and are extremely important in a global marketing context. The marketers who desire to market their products in other countries must understand that the significant differences in culture can affect the way customers respond to product and the marketing strategy.
Cultured sensitivity is not only important in understanding the end customer for consumer products, but it is also essential in marketing of industrial products and services, where there is considerable face-to-face interaction with the client.
The elements of socio-cultural environment are:
i. Behavioral Attributes:
These includes values and attitudes. These are more difficult to obtain. The attributes are usually determined by a country or region’s culture; are developed and nurtured by group of people living in that area; and are transmitted through generations.
ii. Demographic Factors:
These include population size, population growth, age distribution, and geographic spread. The demographic data is often readily available.
iii. Language
iv. Religion
v. Social organization
vi. Education
vii. Technology and Material culture
B. Product Class Influence:
The type of product considered for purchasing also affects the purchasing decision process. Eg. Services are intangible in nature and therefore cannot be easily sampled before purchasing. Goods like automobiles require more extensive information search as compared to convenience goods like toothpaste.
In case of technology-based products, although the unique problems associated with the marketing of technology-based products are concentrated largely in the initial stages of the product life cycle; in the later stages of product life cycle these products are marketed in the same way as other goods and services since these products become well known in the market till then.
In order to explain why customers adopt or do not adopt new technologies, Rogers identified five key attributes as follows:
a. Relative Advantage:
Innovation’s relative advantage determines the rate of acceptance or diffusion of an innovation in the market. Customers will adopt an innovation only if they are convinced that the new improved product will satisfy the same needs which are satisfied by the current product. The bases to explain relative advantage are psychological, economic, or utilitarian.
b. Compatibility:
Customers of new technologies evaluates compatibility of the innovation with existing systems, previously introduced ideas, or values and beliefs. Higher is the compatibility faster is the adoption of innovation.
c. Complexity:
Perceived complexity of the innovation is inversely associated with the innovation’s adoption success. Simple innovations are more likely to be adopted than those that require a significant amount of explanation about their use and benefits.
d. Triability:
Triability is the ability of potential users to try a product on limited basis before adopting. For this purpose, many technology-based companies have established beta test sites for early versions of their product. Also, many or offer prototypes to some of their large and influential customers in order to generate feedback from these customers regarding their products. New services are tested by customers in realistic settings.
e. Observability:
Observability is the degree to which an innovation and its results are available to others. In present era, economic relative advantage has increased since the innovations are more observable.
f. Potential for Network Externalities:
The previous five aspects of innovations were put forth by Roger’s; however, another factor has been found to have a significant impact on the adoption of new technologies which is called as potential for network externalities.
The concept behind network externalities is simple; for many products and services, the value of owning them increases as the number of owner’s increases. Eg. Benefit of having fax machines increases with increase in faxes machines owned by more and more number of people. In this case, the attractiveness of products is influenced by how many others are there “in the network”.
C. Situational Influences:
The final set of purchase influences is situational or those that are unique to a particular time or space.
These include:
a. Physical Surroundings – Weather, the ambience of a store
b. Social Surroundings – People accompanying the customer when he/she shops
c. Temporal Factors – Time availability
d. Task Definition Factors – Buying a product for someone else as a gift or buying a product for own
e. Antecedent States – Current mood or current financial situation
Situational influences are often called as context effects. Researchers have identified a large number of such different effects and have carried out studies to determine as to how these context effects affect consumer behaviour. One such context effect is the compromise effect. The main idea behind this is that the marketer can increase the sales of its brand by keeping its price at intermediate level rather than at extreme option.
Step # 5. Where do Consumers Buy?
In order to determine where consumers buy, the marketer needs to understand which channel of distribution is being used by the target consumers. It is important for marketer to understand which channels of distribution are the most popular among the consumers and what current trends are. This data can be obtained from primary sources such as surveys or from secondary sources such as industry trade publications.