Chapter 1

Consumer Behavior:
Its Origins and
Strategic Applications

Consumer Behavior,
Ninth Edition

Schiffman & Kanuk

Copyright 2007 by Prentice Hall

 Chapter Outline
• Overview of Consumer Behavior
• The Marketing Concept
• The Marketing Mix and Relationships
• Digital Technologies
• Societal Marketing Concept
• A Simplified Model of Consumer
Decision Making

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 Consumer Behavior
The behavior that consumers display in
searching for, purchasing, using,
evaluating, and disposing of products
and services that they expect will satisfy
their needs.

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 Customers Search for Products

weblink

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 Personal Consumer
The individual who buys goods and
services for his or her own use, for
household use, for the use of a family
member, or for a friend.

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 Organizational Consumer
A business, government agency, or other
institution (profit or nonprofit) that buys
the goods, services, and/or equipment
necessary for the organization to
function.

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 Development of the Marketing Concept

Production
Concept

Product Concept

Selling Concept

Marketing
Concept

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 The Production Concept
• Assumes that consumers are interested
primarily in product availability at low
prices
• Marketing objectives:
– Cheap, efficient production
– Intensive distribution
– Market expansion

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 The Product Concept
• Assumes that consumers will buy the
product that offers them the highest
quality, the best performance, and the
most features
• Marketing objectives:
– Quality improvement
– Addition of features
• Tendency toward Marketing Myopia

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 The Selling Concept
• Assumes that consumers are unlikely to
buy a product unless they are
aggressively persuaded to do so
• Marketing objectives:
– Sell, sell, sell
• Lack of concern for customer needs
and satisfaction

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 The Marketing Concept
• Assumes that to be successful, a
company must determine the needs and
wants of specific target markets and
deliver the desired satisfactions better
than the competition
• Marketing objectives:
– Make what you can sell
– Focus on buyer’s needs

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 Discussion Question
• What two companies do you believe
grasp and use the marketing concept?
• Why do you believe this?

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 The Marketing Concept
Implementing the
Marketing Concept
• Consumer • The process and
Research tools used to study
• Segmentation consumer behavior
• Targeting • Two perspectives:
– Positivist approach
• Positioning – Interpretivist
approach

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 The Marketing Concept
Implementing the
Marketing Concept
• Consumer • Process of dividing
Research the market into
• Segmentation subsets of
• Targeting consumers with
common needs or
• Positioning
characteristics

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 Discussion Question
• What products that you regularly
purchase are highly segmented?
• What are the different segments?
• Why is segmentation useful to the
marketer for these products?

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 The Marketing Concept
Implementing the
Marketing Concept
• Consumer The selection of one or
Research more of the segments
• Segmentation to pursue
• Targeting
• Positioning

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 The Marketing Concept
Implementing the
Marketing Concept
• Consumer • Developing a distinct image
Research for the product in the mind of
the consumer
• Segmentation
• Successful positioning
• Targeting includes:
• Positioning – Communicating the
benefits of the product
– Communicating a unique
selling proposition

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This product is
positioned as a
solution to
facial redness.
 The Marketing Mix
• Product
• Price
• Place
• Promotion

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 Successful Relationships

Customer Customer
Value Retention

Customer
Satisfaction

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 Successful Relationships
Value, Satisfaction,
and Retention
• Defined as the ratio between
• Customer the customer’s perceived
Value benefits and the resources
• Customer used to obtain those benefits
Satisfaction • Perceived value is relative
and subjective
• Customer
• Developing a value
Retention
proposition is critical

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 Discussion Question
• How does McDonald’s create value for
the consumer?
• How do they communicate this value?

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 Successful Relationships
Value, Satisfaction,
and Retention
• Customer • The individual's perception of
the performance of the product
Value
or service in relation to his or her
• Customer expectations.
Satisfaction • Customers identified based on
• Customer loyalty include loyalists,
apostles, defectors, terrorists,
Retention
hostages, and mercenaries

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 Successful Relationships
Value, Satisfaction,
and Retention
• The objective of providing value
• Customer is to retain highly satisfied
Value customers.
• Customer • Loyal customers are key
Satisfaction – They buy more products
– They are less price sensitive
• Customer – They pay less attention to
Retention competitors’ advertising
– Servicing them is cheaper
– They spread positive word of
mouth
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 Customer Profitability-Focused
Marketing
• Tracks costs and revenues of individual
consumers
• Categorizes them into tiers based on
consumption behavior
• A customer pyramid groups customers
into four tiers

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 Customer Profitability-Focused
Marketing

Tier 1: Platinum
Tier 2: Gold
Tier 3: Iron
Tier 4: Lead

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 Traditional Marketing Concept Vs. Value and Retention
Focused Marketing
Table 1-2

Traditional Marketing Value and Retention

Concept Focused Marketing
Make only what you can sell instead Use technology that enables
of trying to sell what you make customers to customize what
you make

Do not focus on the product; focus on Focus on the product’s

the need that it satisfies perceived value, as well as the
need that it satisfies

Market products and services that Utilize an understanding of

match customers’ needs better than customer needs to develop
competitors’ offerings offerings that customers
perceive as more valuable than
competitors’ offerings

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 Impact of Digital Technologies
• Consumers have more power and access to
information
• Marketers can gather more information about
consumers
• The exchange between marketer and
customers is interactive and instantaneous
and goes beyond the PC.
• Marketers must offer more products and
services

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 Societal Marketing Concept
Marketers adhere to principles of social
responsibility in the marketing of their
goods and services; that is, they must
endeavor to satisfy the needs and
wants of their target markets in ways
that preserve and enhance the well-
being of consumers and society as a
whole.

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 Consumer Behavior Is
Interdisciplinary
• Psychology
• Sociology
• Social psychology
• Anthropology
• Economics

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 A Simplified Model of Consumer Decision
Making – Figure 1-1

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Buyer Behaviour Models
 The Economic Model
According to the economic model of buyer
behaviour, the buyer is a rational man and his
buying decisions are governed by the concept of
utility.
If he has a certain amount of purchasing power, a
set of needs to be met, and a set of products to
choose from, he will allocate this amount over the
set of products in a very rational manner with the
intention of maximising the utility / benefit / need
satisfaction.
 The Learning Model
According to the learning model, which takes
its cue from the Pavlovian stimulus-response
theory on learning-buyer behaviour can be
influenced by manipulating the drives, stimuli
and responses of the buyer.
The model rests on the human ability of
learning, forgetting, and discriminating.
 The Psychoanalytical Model
The psychoanalytical model draws mainly
from Freudian psychology. According to this
model, a consumer has a complex set of
deep-seated motives that drive him towards
certain behaviour. The buyer has a private
world with all his hidden fears, suppressed
desires and totally subjective longings.
Appealing to these desires and longings can
influence his buying action.
 The Sociological Model
According to the sociological model, the
individual buyer is influenced in his buying
behaviour by society – by intimate groups as
well as social classes.
His buying decisions are not totally governed
by utility; he has a desire to emulate, follow,
and fit in with his environment. And, several of
his buying decisions may be governed by the
compulsions arising out of his being a social
creature.
 The Systems Model
There have also been some efforts to build some
models on buyer behaviour using totally the
standpoint of the marketing man. They belong to
a category called the systems model, where the
human being is analysed as a system, with
stimuli as the input to the system and behaviour
as the output of the system.
Two important models in this category are:
1.The Nicosia Model
2.The Howerd and Sheth Model
 The Nicosia Model
The model tries to establish the links between
a firm and its consumer – how the activities of
the firm influence the consumer and result in
his decision to buy.
The messages from the firm first influences
the predisposition of the consumer towards
the product. Depending on the situation, he
develops a certain attitude towards the
product.
 The Nicosia Model …Contd.
It may lead to a search for the product or an
evaluation of the product. If these steps have
a positive impact on him, it may result in a
decision to buy. This is the sum and
substance of the ‘activity explanations’ in the
Nicosia model. The model groups these
activities into four basic fields as shown in
next two slides:
 The Nicosia Model …Contd.
o Field One with two sub-fields – the firm’s
attributes and the consumer’s attributes. An
advertising message from the firm reaches
the consumer’s attributes. Depending on
the way the message is received by the
consumer, he develops a certain attitude
and this becomes the input for Field Two.
 The Nicosia Model …Contd.
o Field Two is the area of search and
evaluation of the advertised product and
other alternatives. If this process results in a
motivation to buy, it becomes the input for
Field Three.
o Field Three consists of the act of purchase.
o And Field Four consists of the use of the
purchased item. There is an output from
Field Four – feedback of sales results of the
firm.
 The Howard-Sheth Model
The logic of the model runs like this
- There are inputs in the form of stimuli
- There are outputs beginning with attention
to a given stimulus and ending with
purchase
- In between the inputs and the outputs,
there are variables affecting the
consumers’ perception and learning. These
variables are considered ‘hypothetical’
since they cannot be directly measured at
the time of occurrence.
 The Howard-Sheth Model …Contd.
Model explains buyer decision process using
four major sets of variables, as applicable to
individual consumer:
1. Inputs
2. Perceptual and learning constructs
3. Outputs
4. Exogenous or external variables
 The Howard-Sheth Model
Perceptual Learning Outputs
Constructs Constructs
Inputs
Stimulus Display
Intention Purchase
Significative
a)Quality
b)Price
c)Distinctiveness Overt Intention
d)Service Confidence
Search
e)Availability

Symbolic
a)Quality
Stimulus
b)Price Attitude Attitude
c)Distinctiveness Ambiguity
d)Service
e)Availability
Choice Brand
Social
Motives criteria Comprehension Brand
a)Family Comprehension
b)Reference Groups
c)Social Class

Attention
Perceptual
Attention Satisfaction
bias
Solid lines show flow of info.-Dashed lines indicate feedback effects
 The Howard-Sheth Model …Contd.
Inputs – by three distinct types of stimuli
Significative Stimuli – In the form of physical,
tangible product characteristic.
Example – Briefcase – Physical appearance,
sturdiness, finish, spaciousness, actual price.
Symbolic Stimuli – In the form of intangible,
perceptual product characteristics.
Example – Briefcase – overall quality perceived
by purchaser perception – price is reasonable /
high / good bargain
Social class – provides third type of stimuli
 The Howard-Sheth Model …Contd.
Perceptual and Learning Constructs
Two factors that may influence consumer’s
interpretation
1.Stimulus Ambiguity
2.Perceptual Bias
Stimulus Ambiguity – Occurs when the
consumer is not sure about the meaning of the
stimulus received.
Perceptual Bias – Occurs when he distorts the
information he receives to fit his established
needs or experiences.
 The Howard-Sheth Model …Contd.
Brand Comprehension – The manner in
which the consumer interprets the stimuli leads
him to the stage of brand comprehension.
- It refers to consumer’s understanding and
overall rating of the brand.
- If the consumer rates it high, it results in
confidence and eventually purchase
decision.
 The Howard-Sheth Model …Contd.
Output – Purchase Decision is the Output
After product usage – if consumer is satisfied:
- It will reinforce his positive attitude and
purchase intention about the product and
brand.
- Positive attitude makes the consumer
more attentive to the product’s / brand’s
stimuli and further increases his brand
comprehension.
 The Howard-Sheth Model …Contd.
If the Consumer is Dis-satisfied
It will trigger off reaction of negative attitude,
low attention to the product stimuli, poor brand
comprehension and negative intention to
purchase
 The Howard-Sheth Model …Contd.
Exogenous or External Variables
These are not directly a part of decision
making process.
They are important as they influence the
consumer.
They vary from one consumer to another and
include:
o Consumer personality traits
o Social class
o Importance of the purchase
o Financial status etc.
Engel-Blackwell-Kollat Model of Buyer
Behaviour
The Engel-Kollat-Blackwell Model consists of
four components
1. Information processing
2. Central control unit
3. Decision process
4. Environmental influences
Engel-Blackwell-Kollat Model of Buyer Behaviour
Information Central Control Environment
Processing Unit Influences
Exposure Info. and
Stimuli experience

Personality
Attention F Income
I Culture
L Evaluative Family
Comprehension T criteria
E
Social Class
R Physical
Attitude Other
Retention

Problem recognition
HOLD
Int. search & alternative Output
Ext. Info. evaluation Decision
feedback HOLD Process
Search
Ext. search & alternative
evaluation
HOLD
Purchasing process

Outcomes

Post purchase evaluation Further behaviour

Solid lines show flow of info.-Dashed lines indicate feedback effects
Engel-Blackwell-Kollat Model of Buyer
Behaviour …Contd.
Information Processing
This component comprises of consumer’s
o Selective exposure
o Attention
o Comprehension and
o Retention of stimuli
Relating to a product / brand received from
marketing / non-marketing sources.
Engel-Blackwell-Kollat Model of Buyer
Behaviour …Contd.
As a MKTR.
The first step is to ensure that:
o A consumer is exposed to your message
(stimuli)
o Pays attention to it.
o Understands what it is all about and
remember it.
Engel-Blackwell-Kollat Model of Buyer
Behaviour …Contd.
Central Control Unit
The stimuli received and retained is processed
in Central Control Unit stimuli is processed and
interpreted with the help of four psychological
filters:
1. Stored information and past experience
about the product / brand which serves as
a memory for comparing different
alternatives.
Engel-Blackwell-Kollat Model of Buyer
Behaviour …Contd.
Central Control Unit …Contd.
2. Evaluating criteria which the consumer
uses in judging the alternatives.
3. General and specific attitudes which
influence the purchase decision.
4. Basic personality traits which influence
how the consumer is likely to respond to
various alternatives.
Engel-Blackwell-Kollat Model of Buyer
Behaviour …Contd.
Decision Process
The decision process component of the model
consists of:
a. Problem recognition
b. Internal search and evaluation
c. External search and evaluation
d. Purchase processes
e. Decision outcomes
Engel-Blackwell-Kollat Model of Buyer
Behaviour …Contd.
Decision Process …Contd.
If the purchase decision is such that it requires
EPS, the consumer would go through all the 5
stages.
In case of L.P.S. or R.R.B, some of the
intervening stages may be skipped and the
consumer may directly reach the purchase
decision.
Engel-Blackwell-Kollat Model of Buyer
Behaviour …Contd.
Environmental Influences
The factors that may influence the consumer’s
purchase decision are:
- Income
- Culture
- Family
- Social class and
- Physical situations
Engel-Blackwell-Kollat Model of Buyer
Behaviour …Contd.
Environmental Influences …Contd.
Depending on the specific product under
consideration, these factors may have a
favourable / un-favourable influence on the
purchase decision.
factors influencing consumer behaviour

CONSUMER BEHAVIOUR
4 MAIN TYPES OF FACTORS INFLUENCING CONSUMER
BEHAVIOUR:

1. Cultural factors (Culture and societal environment,

Sub-cultures, Social classes, Cultural trends)
2. Social factors (Reference groups and membership
groups, Family, Social roles and status)
3. Personal factors (Age and way of life, Purchasing
power and revenue, Lifestyle, Personality and self-
concept)
4. Psychological factors (Motivation, Perception,
Learning, Beliefs and attitudes)
CONSUMER BEHAVIOUR

Is the study of individuals, groups, or

organisations and the processes they use to
select, secure, and dispose of products,
services, experiences, or ideas to satisfy needs
and the impacts that these processes have on
the consumer and society.
I. CULTURAL FACTORS
 Culture and societal environment:

Culture is crucial when it comes to understanding

the needs and behaviours of an individual.
Throughout his existence, an individual will be
influenced by his family, his friends, his cultural
environment or society that will “teach” him values,
preferences as well as common behaviours to their
own culture.
 Sub-cultures :

Society is composed of several sub-cultures in

which people can identify. Subcultures are
groups of people who share the same values
based on a common experience or a similar
lifestyle in general. Subcultures are the
nationalities, religions, ethnic groups, age
groups, gender of the individual, etc.
 Social classes:

Defined as groups more or less homogenous

and ranked against each other according to a
form of social hierarchy. Even if it’s very large
groups, we usually find similar values ,lifestyles,
interests and behaviours in individuals
belonging to the same social class.
 Cultural trends:

Cultural trends or “Bandwagon effect” are

defined as trends widely followed by people and
which are amplified by their mere popularity
and by conformity or compliance with social
pressure. The more people follow a trend, the
more others will want to follow it.
II. SOCIAL FACTORS

 Reference groups and membership groups :

The membership groups of an individual are
social groups to which he belongs and which
will influence him. The membership groups are
usually related to its social origin, age, place of
residence, work, hobbies, leisure, etc..
 Family:

Family is maybe the most influencing factor for

an individual. It forms an environment of
socialization in which an individual will evolve,
shape his personality, acquire values. But also
develop attitudes and opinions on various
subjects such as politics, society, social
relations or himself and his desires.
 Social roles and status:

The position of an individual within his family, his

work, his country club, his group of friends, etc.. –
All this can be defined in terms of role and social
status. A social role is a set of attitudes and
activities that an individual is supposed to have
and do
according to his profession and his position at
work, his position in the family, his gender, etc.. –
and expectations of the people around him.
III. PERSONAL FACTORS:

 Age and way of life:

A consumer does not buy the same products or
services at 20 or 70 years. His lifestyle, values
,environment, activities, hobbies and consumer
habits evolve throughout his life.
 Purchasing power and revenue:

The purchasing power of an individual will have,

of course, a decisive influence on his behaviour
and purchasing decisions based on his income
and his capital. This obviously affects what he
can afford, his perspective on money and the
level of importance of price in his purchasing
decisions.
 Lifestyle:

The lifestyle of an individual includes all of its

activities, interests, values and opinions. The
lifestyle of a consumer will influence on his
behaviour and purchasing decisions.
 Personality and self-concept:

is the set of traits and specific characteristics of

each individual. It is the product of the
interaction of psychological and physiological
characteristics of the individual and results in
constant behaviours.
IV. PSYCHOLOGICAL FACTORS

Motivation:

Motivation is what will drive consumers to

develop a purchasing behaviour. It is the
expression of a need is which became pressing
enough to lead the consumer to want to satisfy
it. It is usually working at a subconscious level
and is often difficult to measure.
 Perception:

Perception is the process through which an

individual selects, organizes and interprets the
information he receives in order to do
something that makes sense. The perception of
a situation at a given time may decide if and
how the person will act.
 Learning:

Learning is through action. When we act, we

learn. It implies a change in the behaviour
resulting from the experience. The learning
changes the behaviour of an individual as he
acquires information and experience.
 Beliefs and attitudes:

BELIEF is a conviction that an individual has on

something. Through the experience he acquires, his
learning and his external influences (family, friends,
etc..), he will develop beliefs that will influence his buying
behaviour.
ATTITUDE can be defined as a feeling, an assessment of
an object or idea and the predisposition to act in a
certain way toward that object. Attitudes allow the
individual to develop a coherent behaviour against a
class of similar objects or ideas.
 The endddddddddddddd

 Tada!!!!!!!!!!!!!!!!!!!!!!!