Subject:- CONSUMER BEHAVIOR

BBA:- Concentration
Course Instructor:- Mahesh Singh Badal

Consumer is the reason why business exists. Without them no company can survive or
thrive. In their absence, an organization doesn’t have a business or purpose. The main
purpose of a company is to satisfy customer’s needs and wants. Though similar, consumers
are unique in themselves; they have needs and want which are varied and diverse from one
another; and they have different consumption patterns and consumption behavior. The
marketer helps satisfy these needs and wants through product and service offerings. For a
firm to survive, compete and grow, it is essential that the marketer identifies these needs
and wants, and provides product offerings more effectively and efficiently than other
competitors. A comprehensive yet meticulous knowledge of consumers and their
consumption behavior is essential for a firm to succeed.

Consumer
Any individual who purchases goods and services from the market for his/her end-use is
called a consumer. In simpler words a consumer is one who consumes goods and services
available in the market. In other words, consumer is an ultimate user of a product or
service.
According to International Dictionary of Management, “consumers are purchasers of goods
and services for immediate use and consumption”.

Consumer Behavior
Consumer behavior explains the reasons and logic that underlie purchasing decisions and
consumption patterns; it explains the processes through which buyers make decisions.
Consumer Behavior may be defined as “the interplay of forces that takes place during a
consumption process, within a consumers’ self and his environment. This interaction takes
place between three elements viz. knowledge, affect and behavior; it continues through
pre-purchase activity to the post purchase experience; it includes the stages of evaluating,
acquiring, using and disposing of goods and services”. The “consumer” includes both
personal consumers and business/industrial/organizational consumers.

Definitions
 “The behavior that consumers display in searching for, purchasing, using, evaluating
and disposing of products and services that they expect will satisfy their needs.”-
Schiffman and Kanuk
 “the decision process and physical activity engaged in when evaluating, acquiring,
using or disposing of goods and services." - Loudon and Bitta
 “The study of consumers as they exchange something of value for a product or
service that satisfies their needs”- Wells and Prensky

Course instructor:- Mahesh Singh Badal(MBA), mail:- [email protected]

  “Those actions directly involved in obtaining, consuming and disposing of products
and services including the decision processes that precede and follow these
actions”. -Engel, Blackwell, Miniard
 “The dynamic interaction of effect and cognition, behavior and the environment by
which human beings conduct the exchange aspects of their lives”- American
Marketing Association

By analyzing the above definition, it reveals that the study includes within its purview, the
interplay between cognition, affect and behavior that goes on within a consumer during
the consumption process: selecting, using and disposing off goods and services.

i. Cognition:
This includes within its ambit the “knowledge, information processing and thinking” part;
It includes the mental processes involved in processing of information, thinking and
interpretation of stimuli (people, objects, things, places and events). In our case, stimuli
would be product or service offering; it could be a brand or even anything to do with the
4Ps.

ii. Affect:
This is the “feelings” part. It includes the favorable or unfavorable feelings and
corresponding emotions towards stimuli (towards a product or service offering or a
brand). These vary in direction, intensity and persistence.

iii. Behavior:
This is the “visible” part. In our case, this could be the purchase activity: to buy or not to
buy (again specific to a product or service offering, a brand or even related to any of the 4
Ps).

Why we study of CONSUMER BEHAVIOR: (Importance of CONSUMER BEHAVIOR)

a) Analyzing the environment: identifying opportunities and fighting threats.
b) Segmenting, targeting and positioning.
c) Designing the marketing-mix.
d) Designing the marketing strategy.
e) Governmental and Non-profit Organization and Social Marketing.

Nature of Consumer Behavior

1. Process: -Consumer behavior is a systematic process relating to buying decisions of
the customers. The buying process consists of the following steps;
i. Need identification to buy the product
ii. Information search relating to the product.
iii. Listing of alternative brands.
iv. Evaluating the alternative (cost-benefit analysis)
v. Purchase decision.
vi. Post-purchase evaluation by the marketer.

Course instructor:- Mahesh Singh Badal(MBA), mail:- [email protected]

 2. Influenced by various factors: -Consumer behavior is influenced by a number of
factors. The factors that influenced consumer are as follow; marketing, personal,
psychological, situational, social, cultural etc.
3. Different for different customers: -All consumers do not behave in the same
manner. Different consumers behave differently. The difference in consumer
behavior is due to individual factors such as nature of the consumer’s life style,
culture, etc.
4. Different for different products: -Consumer behavior is different for different
products. There are some consumers who may buy more quantity of certain items
and very low/no quantity of some other items.
5. Varies across regions: -The consumer behavior vary across states, regions and
countries. For instance, the behavior of urban consumers is different from that of
rural consumers. Normally, rural consumers are conservative (traditional) in their
buying behavior.
6. Vital for marketers: -Marketers need to have a good knowledge of consumer
behavior. They need to study the various factors that influence consumer behavior
of their target customers. The knowledge of consumer behavior enables marketers
to take appropriate marketing decisions.
7. Reflects Status: -Consumers buying behavior is not only influenced by status of a
consumer, but it also reflects it. Those consumers who own luxury cars, watches and
other items are considered by others as persons of higher status.
8. Result in spread-effect: -Consumer behavior has a spread effect. The buying
behavior of one person may influence the buying behavior of another person. For
instance, a customer may always prefer to buy premium brands of clothing, watches
and other items etc. this may influence some of his friends, neighbours, colleagues.
This is one of the reasons why marketers use celebrities like Sharuk khan, Sachin
Tendulkar to endorse their brands.
9. Improves Standard of Living: -Consumer buying behavior may lead to higher
standard of living. The more a person buys the goods and services, the higher is the
standard of living.
10. Undergoes a change: - The consumer’s behavior undergoes a change over a period
of time depending upon changes in age, education and income level. Etc, for
instance,, kids may prefer colourful dresses, but as they grow up as teenagers and
young adults, they may prefer trendy clothes.

Scope of Consumer Behavior:

The study of consumer behavior deals with understanding consumption patterns and
behavior. It includes within its ambit the answers to the following:
‘What’ the consumers buy: goods and services
‘Why’ they buy it: need and want
‘When’ do they buy it: time: day, week, month, year, occasions etc.
‘Where’ they buy it: place

Course instructor:- Mahesh Singh Badal(MBA), mail:- [email protected]

 ‘How often they buy’ it: time interval
‘How often they use’ it: frequency of use
The scope of consumer behavior includes not only the actual buyer but also the various
roles played by him/ different individuals.

Basic Components of Consumer Behavior:

i) Decision making (Cognitive and Affect):
-this includes the stages of decision making: Need recognition, Information search,
Evaluation of alternatives, Purchase activity, Post purchase behavior.

ii) Actual purchase (Behavior):

-this includes the visible physical activity of buying of goods and/or service. It is the result
of the interplay of many individual and environmental determinants which are invisible.

iii) Individual determinants and environmental influences: The environmental factors

affect the decision process indirectly, through way of affecting individual determinants.

iv) Buying roles: Actual Buyer vis a vis other users. There are five buying roles, viz.,
Initiator, Influencer, Decider, User, and Buyer. The initiator is the person who identifies
that there exists a need or want; the influencer is the one who influences the purchase
decision, the actual purchase activity and/or the use of the product or service; the decider
is the one who decides whether to buy, what to buy, when to buy, from where to buy, and
how to buy; the buyer is the one who makes the actual purchase; and, the user is the
person (s) who use the product or service. These five roles may be played by one person or
by different persons. A person may assume one or more of these roles. This would depend
on the product or service in question.
Examples: Let us take an example.
A child goes to a kindergarten school. She comes back home and asks her parents to buy
her a set of colour pencils and crayons. Now the roles played are:
i. Initiator: the child in nursery school
ii. Influencer: a fellow classmate
iii. Decider: the father or the mother
iv. Buyer: the father or the mother
v. User: the child

Application of Consumer Behavior:

An understanding of consumer behavior is necessary for long term success and survival of
a firm. It is viewed as the edifice of the marketing concept, an important orientation in
marketing management.
An understanding of the study of consumer behavior helps formulate appropriate
marketing strategies for a firm keeping in view the consumer and his environment. It has a
number of applications; the main application bases are as follows:

1. Analyze the environment:

Course instructor:- Mahesh Singh Badal(MBA), mail:- [email protected]

The knowledge of consumer behavior can be applied to help identify opportunities and
fight threats. The opportunities could be in terms of newer customers, newer markets,
unfulfilled needs and wants (through a study of consumer individual determinants and
other environmental influences). The threats could be fought by developing and
implementing appropriate marketing strategies to best fit the environment.

The marketing strategies need to be dynamic and constantly evolving keeping in view the
uncertainty in the environment; Environmental uncertainty is a function of complexity and
dynamism. Complexity is defined in terms of the number, strength and interrelatedness of
the various factors in the environment that a firm has to deal with. Dynamism relates to
how quickly the changes take place in the environment.

2. Segmentation, targeting and positioning:

The study of consumer behavior may be applied to segment the market, select the target
market and position the product or service offering. Identifying the target segment,
understanding their needs, providing the right product and service offering and
communicating about the offering – all of these help a marketer succeed in the long term
and ensure his survival and success in a changing environment.
a) Segment the market: The marketer needs to identify distinct customer groups
with needs and wants, classify them on basis of descriptive characteristics and
behavioral dimensions. The descriptive characteristics may take forms of age,
gender, income, occupation, education, family size, family life cycle, gender, lifestyle,
personality, religion, generation, geography, nationality, and social class. The
behavioral dimensions take forms of benefits, uses, use occasion, usage rates, and
loyalty status.
b) Select target market: The marketer then selects one or more markets to enter. The
segment(s) that should be targeted should be viable; there should be a fit between
the market attractiveness and the company’s objectives and resources. The
marketer would be able to assess the viability of a segment on the basis of the
following criteria, viz., measurability, substantial ability, accessibility,
differentiability, and action-ability.
c) Position: the product offering in the mind of the customers: The marketers should
be able to communicate the distinct and/or unique product characteristics.
3. Designing the Marketing Strategy:
There exists an interrelation between the Consumer, the Environment and the Marketing
strategy.
a) Consumer: The consumer has his needs and wants as well as product preferences;
Thus, there exists an interplay of Cognition (knowledge about products and
alternatives), Affect (feelings of favorableness and un-favorableness) and Behavior
(action: buy or not to buy).
b) Environment: This refers to forces in the environment, which make the
environment complex and dynamic.
c) Marketing strategies: This implies setting up of goals and then achieving them
through the design of an appropriate marketing mix.

Course instructor:- Mahesh Singh Badal(MBA), mail:- [email protected]

The Marketing Strategy should be designed to influence consumers (Cognition, Affect and
Behavior) and be influenced by them. It should be flexible and ever evolving with changes in
the
customer needs and wants; as well as, changes in the environment in which it operates.
The knowledge of consumer behavior can be applied to develop a “best fit” between
consumer needs and wants, the environment in which the firm operates; and, the firms’
goals and objectives.

4. Designing the Marketing Mix:

4-Ps The study of consumer behavior may be applied to design the 4 Ps.
a) Product: The term product includes both tangible products and intangible
services. The issues to address consist of name (brand), size, shape, features,
labelling, packaging, accessories and supplementary products, terms of sale and
services, after sales etc.
b) Price: This includes the pricing of the product offering. The major components
include, form of payment, terms and conditions of payment, discounts, price
sensitivity, differential prices and customer reaction, imagery (price increase and
customer reaction, price decrease and customer reaction).
c) Place and Distribution: This includes the marketing channel, and comprises
decisions regarding choice of channel (direct or indirect), location, accessibility
and availability of product offering, wholesaling, retailing, logistics etc.
d) Promotion: This includes marketing communication, and the major issues
comprise decisions on communication/promotion mix, the message and media
strategy (the content, appeal and context).

5. Application in Governmental and Non-profit Organizations and Social Marketing:

The knowledge of consumer behavior finds relevance even in Governmental and Non-profit
Organizations and Social Marketing. Governmental and Non-profit Organizations have the
society as its customers and need to understand them so as to be able to serve them better.
Social marketing involves propagation of ideas; attempts at such circulation and spread of
ideas for moral and social upliftment can be more successful if there is a proper
understanding of the these consumers (i.e., the public and society)

The Interdisciplinary Nature of Consumer Behavior:

As an interdisciplinary area of study, the subject borrows heavily from psychology,
sociology; social psychology; anthropology and, economics.
i. Psychology: This includes the study of the individual as well as the individual
determinants in buying behavior, viz., consumer perception, learning and
memory, attitude, self-concept and personality, motivation and involvement,
attitudes and attitudinal change and, decision making.

ii. Sociology: This includes the study of groups as well as the group dynamics in
buying behavior, viz., family influences, lifestyles and values, and social group
influences.

Course instructor:- Mahesh Singh Badal(MBA), mail:- [email protected]

 iii. Social psychology: This includes the study of how an individual operates in
group/groups and its effects on buying behavior viz, reference groups and social
class influences.

iv. Anthropology: This is the influence of society on the individual viz., cultural and
cross-cultural issues in buying behavior, national and regional cultures etc.

v. Economics: This is the study of income and purchasing power, and its impact on
consumer behavior. The underlying premise is that consumers make rational
choices while making purchase decisions. While resources are limited and needs
and want many, consumers collect information, and evaluate the various
alternatives to finally make a rational decision.

As discussed before, consumers are unique in themselves. A comprehensive yet meticulous

knowledge of consumers and their consumption behavior is essential for a firm to succeed.
In order to understand and predict consumption patterns and behaviors within segment
(s), market research becomes essential.

Difference between Consumer Buying Behavior and Organizational

Buying Behavior

Both individuals and organizations need to purchase items to accomplish their daily tasks.
There is a large difference, however, in how and why an organization purchases goods and
services versus how an individual shops. Understanding these differences is important if
you want to tap into both an organizational and a consumer market.

Bases Consumer Buying Behavior Organizational Buying Behavior

The individual consumers buy
goods and services for ultimate
The organizations buy goods and services
use or satisfy their needs. The
Purpose of for their business needs. The buying
buying purpose of such
Buying purpose of them is to earn profit by using
consumers is not to earn profit
and reselling the goods and services.
by reselling the goods and
services.
Organizational buying is done in large
Although consumers buy various quantities. There are several reasons why
kinds of goods, the quantity of organizations must buy the goods they
goods remains small. They buy need in bulk. In the first place, they use
Quantity
only the necessary quantity of large quantities of each item and must
goods, which they need for maintain inventories at a level high enough
regular use. that they will not run out of stock.
Secondly, it is cheaper and more efficient

Course instructor:- Mahesh Singh Badal(MBA), mail:- [email protected]

 to make large-volume purchases.
Consumer buying takes decision
Organizational purchasing is a rational
by consumers themselves.
process because the purchasing behavior
Sometimes they can consult with
Purchase of organizations is guided by objective
family members and friends.
Decision factors having to do with production and
They need not fulfill any
distribution. It takes long time than
formality like organizational
consumer buying.
buying.
Organizational purchase criteria are
Most of the consumers may not
specifically defined. Organizational buyers
have adequate knowledge and
usually have fewer brands to choose from
information about market
than do individuals, and their purchases
Market situation, available goods and
must be evaluated on the basis of criteria
Knowledge services, etc. The educated
that are specific to the overall needs of the
customers may be aware and
organization. The organizational buyers
have knowledge about market
have full knowledge of market and
and goods.
suppliers.
Consumers buy many goods to
Types of Organizational buyers buy limited goods to
use to satisfy personal or family
Goods use to conduct business.
needs.
Many individuals are involved in the
buying process. Within large organizations,
Consumer buying behavior is rarely is one individual solely responsible
effected by age, occupation, for the purchase of products for the
Effect
income level, education, gender purchase of products or services. Instead,
etc. of consumers. many individuals and departments may be
involved and departments may be involved
in the buying process.
The consumer buying process is
very simple. No need to fulfill any
Buying Buyers and sellers in the organizational
formality. There is also no need
Process market must maintain extensive contact.
to maintain extensive contact
with sellers.

Course instructor:- Mahesh Singh Badal(MBA), mail:- [email protected]

Organizational Buyer versus Individual Buyer
The obvious difference between industrial or institutional markets and consumer markets
is that, instead of purchases being made for individual consumption industrial markets are
made for business use. There are several factors that differentiate consumer markets and
their buying bahavior from organizational market and their buying bahavior. The key
factors of differentiation are:
i Market Structure and Demand
ii. Buyer Characteristics
iii. Decision Process and Buying Patterns
i Market Structure and Demand : The distinguishing factors of market structure and
demand are as follows:
In organizations buyers are more geographically concentrated than consumer markets.
Organizational buyers are fewer in number but they are bulk buyers compared to
individual buyers. Organizational buyer markets are either vertical or horizontal. In
vertical structures they cater only one or two industries, whereas in horizontal structure
the buyer base is too broad. Organsational demand is derived from consumer demand. The
nature of the demand is fluctuational and inelastic.

ii. Buyer Chararteristics: The distinguishing factors of buyer characteristics are as

follws:
Many individuals or group involvement is seen in decision making process. Organizational
buyers are quite knowledgeable and professional. The buying motive is mostly rational
than individual buyer.
iii. Decision Process and Buying Patterns The major differences are as follows:
In organizational buying lot of formalities like proposals, quotations, procedures are to be
followed unlike consumer buying. Decision process is much complex with high financial
risk, technical aspects, multiple influencing factors etc. Organizational buying requires
more extensive negotiation over larger time period than consumer buying.

Course instructor:- Mahesh Singh Badal(MBA), mail:- [email protected]