CONSUMER BEHAVIOUR Consumer Behaviour Consumer Behavior is the study of when, why, how and where people do or do not buy a product. It basically depends on the psychology of the consumer. It attempts to understand the buyer decision making process both individually & in groups. It studies the individual consumers such as demographics & behavioural aspects to understand the people’s wants. In the study of Consumer Behaviour main focus is the customer satisfaction because customer is the only person with whose presence businesses actually exists Types of consumer Consumer Ultimate Consumer Buyer Institutional Buyer Customer Consumer: According to International Dictionary of Management “Consumer is a purchaser of goods and services for immediate use or consumption”. Buyer: He is the person who purchase goods either for resale or for use in production or for use of somebody else. Customer: He is the one who purchases goods for his own use or for the use of others or else he is regular customer of a particular product and he is a regular customer of particular shop. Institutional buyer: These are either govt. institutions or private organizations. Characteristics of consumer behaviour It is a process where consumer decide what to buy, when to buy, how to buy, where to buy & how much to buy. It comprises of both mental and physical activities of consumer. Consumer behaviour is very complex and dynamic which keeps on changing constantly. Individual buying behaviour is affected by various internal factors like his needs, wants, attitudes & motives and also by external factors like social groups, culture , status, environmental factors etc. Consumer behaviour starts before buying and even after buying. Importance/Need of study of consumer behaviour To make better strategies for increasing profits. To take into consideration customer’s health, hygiene & fitness. To know the buying decisions and how consumer make consumption. Consistent change in Consumer’s tastes or preferences. Consumer behavior study is necessary to make pricing policies. To avoid future market failures. Types of Consumer Behaviour Complex Dissonance Reducing Habitual Variety seeking Buying Motives According to D.J.Ducan, “Buying Motives are those influences or considerations which provide the impulse to buy, induce action or determine choice in the purchase of goods and services”. Types of Buying Motives A. Product & Patronage Motives 1.Product Motives Primary Secondary 2.Patronage Motives Price Quality Location Services Variety Personality of the owner B. Emotional & Rational Motives 1. Emotional Motives Love of others Social acceptance motive Vanity Motive Recreational motive Emulate motive Comfort & convenience motive 2. Rational Motives Monetary gain Efficiency in operation Dependability C. Inherent & Learned motives 1. Inherent motives are those which come from physiological & basic needs such as hunger, thirst, sleep etc. If these motives are not satisfied then consumer feels dissatisfied and feels mental tension. 2. Learned motives are those which are learned or acquired by a person from environment and education like social status, acceptance, fear, security etc. D. Physiological & Social buying Motives 1. 2. Physiological motives are those which are driven by learning, perception or attitude. Social buying motives are those which are influenced by the society in which the consumers live. CONSUMER DECISIONS: Theory and Reality in Consumer Buying PROBLEM RECOGNITION/ Recognition of unsatisfied need IDENTIFICATION OF ALTERNATIVE/ INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE POSTPURCHASE EVALUATION/ BEHAVIORS Factors influencing consumer behaviour Psychological factors 1. Consumer needs & motivation (Maslow’s need hierarchy theory 2. Perception 3. Learning 4. Beliefs & attitudes Cultural factors 1. Culture 2. Sub culture 3. Social class Social Factors 1. Reference group 2. Role and status 3. Family Personal factors 1. Age 2. Stages in life cycle 3. Occupation in economic status 4. Life style 5. Personality Economic factors 1.Personal income 2.Family income 3.Income expectations 4.Savings 5.Liquidity position 6.Consumer credit Environmental Factors 1.Political situation 2.Legal forces 3.Technological advancement 4.Ethical considerations Market Segmentation Segmentation is essentially an identification of the subsets of buyers within a market that share a similar needs and demonstrates similar buyer behaviour. The world is made up of billion buyers with there own set of needs and behaviour. Segmentation made to match different group of buyers with different set of needs & buyer behaviour. Such a group is known as “segment.” A customer is allocated to one market segment by the customer's individual characteristics. Examples of characteristics used for segmentation: Gender Price Interests Location Religion Income Size of Household Process of Market Segmentation Establish overall strategy The org must clearly state its segmentation strategy in consistent to its mission n objectives as well as its current situation- its strengths , weaknesses, opportunities n threats. Decide the basis For segmentation Any marketer should do segmentation on basis of differe factors may be demographic or psychographic, he should have the idea of market characteristics of consumer and buying behaviour. Select segmentation variables After selecting bases of segmentation, segmentation Variables like in demographic, age, income, occupation etc should taken into consideration. Profile the segments After segmenting the market, marketers has to analyze his customers in those segments, like what type of customers are there in that market. Evaluate segment attractiveness Evaluation is done on the basis of estimating the profit contribution by each sector. most importantly he’ll see the demand potential of customers from each segment, and the revenue earned out of each segment & expenditure incurred. Other criteria like measurability, accessibility, Responsiveness, risk etc. Select segment Every marketer can consider only one segment at a time even if the other segments are profitable. ultimately he will select the most profitable segment, this is called targe marketing. Objectives of Market Segmentation To understand the needs, wants, desires and buying habits of customers. To formulate marketing programs for each consumer groups according to their nature. To develop new products according to consumer’s changing needs. To expand market & market share. To provide satisfaction to consumers. To make the marketing strategies and policies consumer oriented. Product Differentiation It is the process of distinguishing a product or offering from others, to make it more attractive to a particular target market. This involves differentiating it from competitors' products as well as a firm's own product offerings. Difference between market segmentation & product differentiation Market Segmentation •Consumer oriented •Focuses on group of customers •Attempt to match the supply •With demand. •Aims at increasing sales •Concentrates on a limited mkt Product differentiation •Production oriented •Focuses on product differences •Attempt to match demand with supply •Aims at facing intense comp •Concentrate on large mkt. •It helps to win the competition. Criteria for successful segmentation Segment Segment must must be be large large Substantiality Substantiality enough enough to to warrant warrant aa special special marketing marketing mix. mix. Identifiability Segments Identifiability Segments must must be be identifiable identifiable and Measurability and their their size size measurable. measurable. Measurability Members Members of of targeted targeted segments segments Accessibility Accessibility must must be be reachable reachable with with marketing marketing mix. mix. Unless Unless segment segment responds responds to to aa Responsiveness Responsiveness marketing marketing mix mix differently, differently, no no separate separate treatment treatment is is needed. needed. Homogeneity Customers in one particular Segment should be similar in terms of their responses Profitability There should be sufficient demand for goods in the segment selected Advantages of Market Segmentation A. Advantages to firms Increase in sales volume. Helps to prepare effective marketing plans. Enables to take decisions Helps to understands needs of consumers. Helps to win competition. Makes best use of resources. Achieve marketing goals Specialized marketing Creates innovations Higher market share. B. Advantages to Consumers Customer oriented Quality products at reasonable prices Other benefits (discounts, buy 1 get 1 free offer, customers become the winner) Reasons for development of market segmentation Rapid change in technology Adoption of cost reducing techniques. Implementation of marketing programs & marketing mix. Introduction of new products. Cut- throat competition in the market. Patterns for segmentation or Market strategies Undifferentiated marketing: In this marketing only one mix is used for all customers. For eg: soft drinks. 2. Differentiated marketing: In this, different marketing mix is used for each set of segment. Eg; consumer products. 3. Concentrated marketing: In this, all the marketing mix are concentrated and applied at each segment. 4. Customized or personalized marketing: When marketer see each customer as separate segment and apply marketing strategy as per the requirements of customer. For eg: Interior designers, civil engineering firms design roads as per the requirement of customers. 1. LEVELS OF MARKET SEGMENTATION Segment Marketing: Consists of group of customers who share similar set of needs and wants. can offer better price, design and can fine tune the marketing activities. For eg: Air Deccan. Niche marketing: more narrowly defined customer group seeking a distinctive mix of benefits. For eg: some companies make clothes for oversized customers. Local marketing: Tailored to the needs & wants of local consumers in trading areas, neighborhoods and even individual stores. For eg: matrimonial websites like Bharat matrimony who are further offering other websites for each n every community say Punjabi, Bengali, Muslim, Sikh etc. Individual marketing: Designing the product & service offerings of individual choices. For eg Asian paints, in which you can mix desired colour n quantities of their own choice as per the requirement. Bases of Market Segmentation Demographic variables Behavioral variables Geographic variables Psychographic variable Geographical Segmentation In this type of segmentation market is divided into different geographical units like: Regions (by country, nation, state, neighborhood) Population Density (Urban, suburban, rural) City size (Size of area, population size and growth rate) Climate (Regions having similar climate pattern) A company, either serving a few or all geographic segments, needs to put attention on variability of geographic needs and wants. After segmenting consumer market on geographic bases, companies localize their marketing efforts (product, advertising, promotion and sales efforts) Demographic Segmentation In , market is divided into small segments based on demographic variables like: Age Gender Income Occupation Education Family size Family life cycle Religion Demographic factors are most important factors for segmenting the customers groups. Consumer needs, wants, usage rate these all depend upon demographic variables. So, considering demographic factors, while defining marketing strategy, is crucial. Psychographic Segmentation In this type of segmentation, segments are defined on the basis of social class, lifestyle and personality characteristics. Psychographic variables include: Interests Opinions Personality Self Image Activities Values Attitudes A segment having demographically grouped consumers may have different psychographic characteristics. Behavioral Segmentation In this segmentation market is divided into segments based on consumer knowledge, attitude, use or response to product. Behavioral variables include: Product segmentation. Product benefits segmentation. Brand Loyalty segmentation Occasions segmentation (holidays like mother’s day, New Year and Eid) User Status (First Time, Regular or Potential) Behavioral segmentation is considered most favorable segmentation tool as it uses those variables that are closely related to the product itself. Limitations of Market Segmentation High cost of production. High advertising & promotional costs. High working capital & storage expenses required. High administration expenses. Difficult to choose variable segments. Difficulty in getting skilled & experianced workers. TARGET MARKETING A target market is a group of customers at whom entire marketing efforts are directed. In target marketing ,marketer identifies some parts of market, selects one or more of them and develop suitable products & other elements (price ,place, promotion) for each target market selected. For e.g.: Mercedes target high status consumers, .whereas Hyundai target sensitive customers Approaches for selecting target market Total market approach: in this company develops a single marketing mix and direct it t the entire market for a particular product. Concentration approach: in this organisation approach a single marketing segment through a single market mix, total market consists of many segments but this will select only one segment as target mkt. Multi segment approach: In this organisation targets two or more segments by developing marketing mix for each segment. Eg: P7 G. toyota. Advantages of target marketing It enables the firm to tap marketing opportunities better. Firm can offer suitable product to each target mkt, thus they can serve better nad also could develop loyal customers. It can expand the market share Possible to build up company image in the market. It is suitable in case of services. Product positioning Consumers will position the product in there minds because they find some unique features in the product as compare to other products. The act of creating an image about the product in the minds of the customers is known as Product positioning. For eg; Close up has looked upon by consumers as mouth freshener than teeth cleaner and pepsodent is looked upon as a germ killer in consumer’s mind. Steps in Product positioning Identifying potential competitve advantages. Identify the competitors positions. Choosing the right competitive advantage. (may be in terms of technology, quality, costs etc) Communicating the competitive advantage. Monitoring the position strategy. Techniques of product positioning Positioning by corporate identity (eg: Tata , Sony, Godrej etc.) Positioning by brand endorsement. Positioning by product attributes and benefits. (Eg: Colgate positioned itself on the basis of fresh breath, tooth decay) Positioning bye use occasion & time. Eg:Dettol for nicks n cuts, vicks for children at night. Positioning by price and quality: Eg Nirma detergent powder. Positoning y product category: For eg & up earlier was positioned as a fresh clean taste now it has been positioned as soft drink. Positioning by product user: Eg: Farex. Positioning by competitor.