Connecting With Customers (MM UNIT 2)

Consumer Behavior Model (Black Box)

The consumer behavior model explains how consumers make purchasing decisions. The Black Box
model focuses on the interaction between external stimuli and the consumer's internal processes,
leading to their purchasing decisions.

1. External Stimuli

External stimuli are factors that originate outside the consumer and act as triggers influencing their
purchasing decisions. These stimuli are categorized into two types:

1. Marketing Stimuli: These are the elements of the marketing mix (4Ps):

o Product: Features, quality, and branding.

o Price: Affordability and perceived value.

o Place: Distribution channels and availability.

o Promotion: Advertising, sales promotions, and personal selling.

2. Environmental Stimuli: These include external forces that influence consumer behavior, such
as:

o Economic: Income levels, inflation, and market conditions.

o Technological advancements affecting preferences and expectations.

o Political/Legal regulations and policies shaping choices.

o Cultural: Social norms, values, and traditions.

2. Consumer’s Black Box

The "Black Box" represents the internal processes of the consumer that are not directly observable.
It includes:

1. Buyer’s Characteristics:

o Cultural: Culture, subculture, and social class.

o Social: Influence from family, reference groups, and roles.

o Personal: Age, lifestyle, personality, and financial status.

o Psychological: Motivation, perception, learning, beliefs, and attitudes.

2. Buyer’s Decision Process:

o Problem Recognition: Identifying a need or desire.

o Information Search: Collecting relevant data about products.

o Evaluation of Alternatives: Comparing products based on preferences.

 o Purchase Decision: Selecting and buying a product.

o Post-Purchase Behavior: Evaluating satisfaction, which influences future decisions.

The Black Box metaphor signifies the complexity and individuality of consumer behavior, as these
internal processes vary for each person.

3. Buyer’s Response

This refers to the observable outcomes of the decision-making process. It includes:

1. Product Choice: The specific product the consumer selects.

2. Brand Choice: The brand the consumer prefers.

3. Dealer Choice: The retailer or platform from which the consumer makes the purchase.

4. Purchase Timing: When the consumer decides to buy.

5. Purchase Amount: The quantity or budget allocated for the purchase.

Factors Affecting Consumer Behavior

1. Cultural Factors

Cultural factors have the most profound and lasting impact on consumer behavior.

 Culture: This encompasses the shared values, beliefs, norms, and customs of a society.
Culture shapes an individual's preferences, such as food habits, dressing styles, and product
choices.

 Subculture: Subcultures are smaller groups within a culture that share specific values and
traditions. These could be based on ethnicity, religion.

2. Social Factors

Social factors involve the influence of relationships and societal roles on consumer behavior.

 Reference Groups: These are groups that directly or indirectly influence a person’s attitudes
and behavior. Reference groups could include friends, colleagues, or even celebrities. For
example, if a person’s peer group uses a particular smartphone brand, they may feel
motivated to buy the same brand.

 Family: Family is one of the most critical influences on buying behavior. Parents, spouses,
and children play a central role in decision-making. For instance, parents may prioritize
buying educational toys, influenced by their children’s needs.

 Roles and Status: A person’s role in society or a group often dictates their buying behavior.
3. Personal Factors

Personal factors vary from one individual to another and include characteristics that shape
preferences and choices.

 Age and Lifecycle Stage: A person’s needs and desires change with age and their stage in life.
Young adults might focus on electronics or fashion, while older individuals may prioritize
health-related products.

 Occupation: A person’s job influences the types of products they buy. For instance, a
corporate professional might need formal clothing and gadgets, whereas an artist might
invest in creative tools and supplies.

 Economic Situation: A consumer’s financial stability significantly impacts their purchasing

power and product choices. During times of economic hardship, people may cut down on
luxury items and focus on essentials.

 Personality. For example, individuals with a frugal personality tend to seek the lowest prices
and value deals, while those who are status-driven may prefer premium-priced products that
signal luxury or exclusivity.

4. Psychological Factors

Psychological factors relate to internal thought processes that guide a consumer’s decision-making.

 Motivation: Motivation drives individuals to satisfy specific needs. Maslow’s hierarchy of

needs explains this well, starting with physiological needs (food, shelter) and progressing to
higher-level needs like self-actualization.

 Perception: Perception is how individuals interpret information about a product. A product

perceived as eco-friendly may attract environmentally conscious consumers.

 Learning: Consumers often learn from experience, which influences future behavior. A
positive experience with a particular brand can lead to repeat purchases and brand loyalty.

Types of Buying Decision Behavior

Complex Buying Behavior

This type occurs when consumers are highly involved in a purchase and perceive significant
differences between brands.

 Characteristics:

o High involvement due to the high cost, risk, or emotional attachment associated with
the product.

o Consumers spend considerable time researching and evaluating options features and
reviews before making a decision.

o Consumers gather extensive information about the product and brands.

  Marketing Implications:

o Marketers should provide detailed information, comparisons, and personalized

support to help consumers make informed decisions.

2. Dissonance-Reducing Buying Behavior

This type occurs when consumers are highly involved in a purchase but perceive minimal differences
between brands.

 Characteristics:

o High involvement due to price or risk, but brands offer similar features, making
differentiation difficult.

o Consumers may feel post-purchase dissonance (buyer’s remorse) due to uncertainty

about whether they made the right choice.

o Consumers may choose a product based on convenience, availability, or price rather

than clear brand preference.

o After purchase, they seek reassurance that they made the right choice.

 Marketing Implications:

o Marketers should focus on after-sales service, customer testimonials, and warranty

programs to reduce post-purchase dissonance.

3. Habitual Buying Behavior

This type occurs when consumers show low involvement in a purchase and perceive few differences
between brands.

 Characteristics:

o Purchases are routine, with minimal thought or effort.

o Consumers are often influenced by familiarity, convenience, or repeated advertising.

They make decisions out of habit than strong brand loyalty.

o They rarely engage in detailed evaluation or comparison.

 Marketing Implications:

o Marketers should focus on brand visibility, consistent quality, and price promotions
to maintain consumer loyalty.

4. Variety-Seeking Buying Behavior

This type occurs when consumers show low involvement in a purchase but perceive significant
differences between brands.
  Characteristics:

o Consumers switch brands frequently, not out of dissatisfaction but to seek variety or
new experiences and curiosity. They are willing to experiment with new brands or
products.

o Switching often occurs due to marketing promotions or packaging appeal.

 Marketing Implications:

o Marketers should offer incentives like discounts, trials, and engaging packaging to
attract variety-seeking consumers.

The Buyer Decision Process

The journey begins with problem recognition, where the consumer identifies a gap between their
current state and a desired state. This need could arise from an external stimulus, such as an
advertisement highlighting a new product, or an internal trigger Recognizing this gap creates
motivation, setting the buying process in motion.

Once the need is established, the consumer engages in an information search to explore possible
solutions. This search can range from internal sources, such as recalling past experiences, to external
sources like online reviews, advertisements, or recommendations from friends. The intensity of the
search depends on the complexity and importance of the product.

With sufficient information gathered, the consumer moves to the evaluation of alternatives, where
different options are compared based on criteria such as price, quality, and features. This stage is
influenced by individual preferences and priorities. For instance, a budget-conscious buyer may
prioritize affordability, while another might focus on premium features. The evaluation is not always
rational; emotional and social factors, like brand reputation or peer approval, can significantly
influence the decision.

After weighing the options, the consumer arrives at the purchase decision—choosing a specific
product and vendor. This choice is not only influenced by the product itself but also by situational
factors like availability, promotions, or convenience. For instance, a consumer might prefer a
particular laptop but settle for another if the desired model is out of stock or if a competitor offers a
significant discount.

Finally, the process culminates in post-purchase behavior, where the consumer evaluates whether
the product met their expectations. A positive experience leads to satisfaction, fostering brand
loyalty and repeat purchases. On the other hand, dissatisfaction may result in complaints, negative
reviews, or a shift to alternative brands.

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The Business Buyer Decision Process

It begins with problem recognition, where a business identifies a need that requires resolution. This
need could arise from various triggers, such as equipment failure, a change in production
requirements, or new business opportunities. For instance, a company experiencing frequent
breakdowns of its production machinery may recognize the need to upgrade or replace it to maintain
operational efficiency. Problem recognition serves as the foundation of the business buying process,
as it defines the scope of what needs to be addressed.

The next stage is the general need description, where the business defines its requirements in
broader terms. At this point, stakeholders identify the primary objectives the purchase must fulfill,
such as increasing efficiency, reducing costs, or improving quality. This stage ensures all stakeholders
align on the purpose of the purchase, creating a framework for further decision-making.

Following this, businesses delve into product specification, a more detailed phase where technical
specifications are outlined. This stage often involves input from technical experts or engineers who
translate the broad requirements into precise attributes, such as dimensions, materials, and
performance metrics. For instance, the company requiring new machinery might specify exact
production speeds, material compatibility, and automation capabilities. These detailed specifications
serve as a benchmark against which potential suppliers’ offerings are evaluated.

Once specifications are established, the business engages in a supplier search to identify potential
vendors that can fulfill its requirements. This stage may involve researching suppliers online,
attending trade shows, or consulting with industry peers.

Next is the proposal solicitation stage, where the business formally requests bids or proposals from
shortlisted suppliers. At this point, suppliers provide detailed information about how their products
or services meet the specified requirements, along with pricing, delivery timelines, and terms.

With proposals in hand, the business moves to supplier selection, a critical phase where the best-fit
supplier is chosen. This decision is influenced by multiple factors, including price, quality, reputation,
and service guarantees. Some businesses use formal evaluation tools, such as scoring models, to
ensure an objective and comprehensive decision.

After selecting a supplier, the business finalizes the details in the order-routine specification stage.
This involves drafting contracts that outline the terms of purchase, including quantities, delivery
schedules, payment terms, and warranties. For example, the company purchasing machinery might
specify staggered deliveries to match production timelines and negotiate extended warranty
coverage. Clear and detailed agreements reduce the likelihood of misunderstandings or disputes
later.

The process concludes with the performance review, where the business evaluates the supplier’s
performance post-purchase. This evaluation considers factors like product quality, adherence to
timelines, and customer service. For instance, after using the new machinery, the company might
assess whether it meets production goals and reliability expectations. The performance review helps
businesses decide whether to continue the supplier relationship or explore alternatives for future
needs.

Institutional and Government Market

Institutional markets consist of organizations such as schools, hospitals, charities, and other non-
profit entities. These organizations purchase goods and services to support their operational
objectives, which often focus on serving the public or specific communities rather than generating
profits. For example, a hospital might buy medical equipment, pharmaceuticals, and cleaning
supplies, while a school may purchase te+xtbooks, computers, and furniture.
The purchasing behavior of institutional markets is typically characterized by budget constraints and
a focus on cost-efficiency. Since many institutions operate on limited funds or receive donations and
grants, they aim to maximize value within their financial limitations. For example, a charity might
seek bulk discounts or negotiate lower prices to stretch its budget further. Additionally, institutional
buyers often prioritize products and services that align with their mission, such as eco-friendly
supplies for environmentally-focused organizations or nutritious food for school lunch programs.

Government markets comprise local, state, and national government agencies that procure goods
and services to fulfill public service needs. These purchases can range from office supplies, vehicles,
and construction materials to complex systems like defence equipment or infrastructure projects

Government purchasing is highly regulated and often follows strict procurement processes to ensure
transparency, fairness, and accountability. Contracts are typically awarded through competitive
bidding, where suppliers submit proposals detailing their capabilities and pricing. For example, a
government might issue a tender for constructing a bridge, inviting qualified construction firms to bid
on the project. The evaluation process often considers not only cost but also compliance with
technical specifications, timelines, and past performance.

While both markets focus on serving public needs, their objectives differ. Institutional markets often
emphasize service quality and affordability to achieve their missions, whereas government markets
prioritize efficiency, compliance, to ensure transparency fairness and accountability.

1. Segmentation, targeting, and positioning (STP) are integral to crafting a marketing strategy
that creates a competitive advantage.

Segmentation involves dividing the market into smaller, manageable groups of consumers
who share common characteristics. These characteristics can be demographic, like age or
income, geographic, such as location or climate, psychographic, which includes lifestyle and
values, or behavioural, focusing on aspects like usage patterns and brand loyalty. By
understanding these differences, businesses can identify distinct groups with specific needs
and preferences.

Once the market is segmented, targeting comes into play. This step involves selecting one or
more of these segments to focus marketing efforts on. Companies may choose to target
broadly, using a mass marketing approach, or more narrowly, through differentiated
marketing for multiple segments, concentrated marketing for a niche, or even
micromarketing that caters to individuals or small groups. Targeting allows businesses to
allocate their resources efficiently, ensuring that their efforts resonate most with their
chosen audience.

Positioning is the final step in the STP process. It focuses on establishing a unique identity for
a product or service in the minds of the target audience. Effective positioning communicates
the value the brand offers, whether through highlighting unique product attributes,
emphasizing the balance of price and quality, showcasing advantages over competitors, or
specifying the product’s application or usage. By doing this, companies ensure that their
product stands out and occupies a desirable place in the consumer's perception.

When executed effectively, STP provides a competitive edge. By focusing on relevant

segments, companies can deliver more personalized solutions, fostering loyalty and
satisfaction. It also allows for efficient resource allocation and helps establish differentiation
in a crowded market. For instance, Coca-Cola’s strategy reflects how segmentation,
targeting, and positioning can work together. They segment their market demographically
and psychographically, target specific groups like health-conscious individuals with Coke Zero,
and position themselves as a brand synonymous with happiness and refreshment. Through
this approach, they secure a strong competitive position in the beverage industry.

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