BY

PROF. PRASHANT MISHRA

VIMR, SATNA.
 Introduction

Consumer behaviour is the study of how individual

customers, groups or organizations select, buy, use,
and dispose ideas, goods, and services to satisfy their
needs and wants.
It refers to the actions of the consumers in the
marketplace and the underlying motives for those
actions.
 Why CB

Marketers expect that by understanding what causes

the consumers to buy particular goods and services,
they will be able to determine:
A.Which products are needed in the marketplace
B.Which are obsolete
C.How best to present the goods to the consumers
 Definition

 According to Schiffman & Kanuk:“The behaviour that consumers

display in searching for, purchasing, using, evaluating, and
disposing of products and services that they expect will satisfy their
needs”.

 According to Engel, Blackwell, and Mansard, ‘consumer behaviour

is the actions and decision processes of people who purchase goods
and services for personal consumption’.

 According to Louden and Bitta, ‘consumer behaviour is the decision

process and physical activity, which individuals engage in when
evaluating, acquiring, using or disposing of goods and services’.
 We Need to Understand…

What they buy?

Why they buy?
When they buy?
Where they buy it?
How often they buy it?
How they evaluate it? (Post Purchase evaluation)
Impact of such evaluations on future purchases
How they dispose it?
 Field of study

It is an inter-disciplinary social science that blends

elements from 
Psychology
Sociology
Social anthropology 
Marketing
Economics (especially behavioral economics)
 Factors affecting CB

 Marketing factors such as product design, price, promotion, packaging,

positioning and distribution.

 Personal factors such as age, gender, education and income level.

 Psychological factors such as buying motives, perception of the

product and attitudes towards the product.

 Situational factors such as physical surroundings at the time of

purchase, social surroundings and time factor.

 Social factors such as social status, reference groups and family.

 Cultural factors such as religion, social class—caste and sub-castes.

Internal & External Factors
 Nature of CB

Undergoes a constant change

Varies from consumer to consumer
Information on consumer behaviour is important to
the marketers
Leads to purchase decision
Varies from product to product
 The study of CB Leads to…

Product design/model
Pricing of the product
Promotion of the product
Packaging
Positioning
Place of distribution
 Implementing the marketing Concept

Market Segmentation
Market Targeting
Positioning
Market Before Segmentation
Market Segmentation
Market Targeting
Market Positioning
 Customer Value

 Customer value is present when the benefits offered by a product are more

than the costs used to acquire that product. 

 Customer value can be determined by subtracting total customer costs

from total customer benefits.

 The benefits to customers can comprise of product quality, warranty,

after-sales services, maintenance and repair costs, free of cost delivery,
relationship of staff with customers, etc.

 The total cost include not just the cost of production, but also the time and
efforts used, risks involved, emotional stress etc.

 Customer value is essentially determined by some key factors like product

standards, price, brand, product alternatives, customer experiences etc.
 Customer Satisfaction

 Customer satisfaction refers to the evaluation by customers of how

well the value was delivered by the product, i.e. did the product
deliver the value that they expected to receive from it? Hence, it
takes place after the customer has purchased the product.
 Customer satisfaction is the degree to which the customer
expectations of the product were consistent with the way the
product actually performed.
 A person feels satisfied and does think not satisfied. Hence,
customer satisfaction is highly subjective and very difficult to
measure.
 The expectation of a customer may be affected by previous
experience, suggestions from friends, the promise made by the
seller and information about competitors. 
 Types of Customers

1. Loyalists: A completely satisfied customer who keeps purchasing.

2. Apostles: They are the delighted customers.
3. Defectors: Customers who feel neutral and may stop purchasing.
4. Terrorists: The customer who have negative experience and spreads
negative publicity.
5. Hostages: The unhappy customers who stay with the company due to
monopoly.
6. Mercenaries: A very satisfied group of customers who have no real
loyalty and may switch to other brand due to low price.
 Customer Retention

The customer retention definition in marketing is the

process of engaging existing customers to continue
buying products or services from your business.
Customer retention refers to the ability of a company
or product to retain its customers over some specified
period. 
You’ll spend five times less money on customer
retention.
The probability of selling to an existing customer is at
least 40 percent more likely than converting someone
new.
Research Facts
 Customer Retention Rate Calculation

 You have 50,000 customers at the start of a calculation period

of two months. During those two months, you acquire 1,000
customers, and at the end of the period, you have 40,000
customers.
 We’ll subtract 1,000 from 50,000 to get rid of customers
acquired during the testing period. That’s leaves us with
49,000. Now, we’ll divide 40,000 by 49,000 to get .81. If we
multiply that number by 100, we get a customer retention rate
of 81 percent.
 Customer Retention Strategies

 Set customer expectations

 Become the customers’ trusted advisor
 Use relationships to build trust
 Take a proactive approach to customer service
 Use social media to build relationships
 Go the extra mile
 Make it personal
 Benefits of Customer Retention

1. It's Cheaper than Acquisition.

2. Loyal Customers are More Profitable.
3. Your Brand Will Stand Out from the Crowd.
4. You'll Earn More Word of Mouth Referrals.
5. Engaged Customers Provide More Feedback.
6. Customers Will Explore Your Brand.
7. Loyal Customers are More Forgiving.
8. Customers Will Welcome Your Marketing.
 External influence

Firms Marketing Efforts Socio Cultural Environment

1. Family
1. Product
INPUT 2. Informal Source
2. Price 3. Non Commercial Sources
3. Place 4. Social Class
4. Promotion 5. Culture & Subculture

Consumer Decision Making

Psychological Fields
Need Recognition 1. Motivation
2. Perception
PROCESS 3. Learning
Pre Purchase Search 4. Personality
5. Attitude
Evaluation of alternatives
Experience
Post Purchase Behaviour
Purchase
1. Trial
OUTPUT 2. Repeat Purchase

Post Purchase Evaluation

 Information Search Process

 The term search refers to mental as well as physical

information seeking and processing activities which one
engages in to facilitate decision making.
 Consequently search may be undertaken in order to find out
about products, prices, stores, and so on, related to the
product.
 Search may be categorized as pre-purchase or ongoing (based
on the purpose of search) and as internal or external (based
on its source).
 Contd…

 One model of consumer decision making involves several steps.

 The first one is problem recognition—you realize that something
is not as it should be.  Perhaps, for example, your car is getting
more difficult to start and is not accelerating well.   
 The second step is information search—what are some
alternative ways of solving the problem?  You might buy a new
car, buy a used car, take your car in for repair, ride the bus, ride
a taxi, or ride a skateboard to work. 
 The third step involves evaluation of alternatives.  A skateboard
is inexpensive, but may be ill-suited for long distances and for
rainy days.  
 Finally, we have the purchase stage, and sometimes a post-
purchase stage (e.g., you return a product to the store because
you did not find it satisfactory). 
 Internal & External Search

 Internal search involves the consumer identifying alternatives from

his or her memory.  For certain low involvement products, it is very
important that marketing programs achieve “top of mind”
awareness.  For example, to get relief from headache the consumer
recalls a previously used brand Disprin. Thus, the consumer must
be able to retrieve from memory before it will be considered. 

 For high involvement products, consumers are more likely to use

an external search.  Before buying a car, for example, the consumer
may ask friends’ opinions, read reviews in Consumer Reports,
consult several web sites, and visit several dealerships. ., through
brochures, web sites, or news coverage.
 Awareness Set

 Evoked Set: It comprises of those brands that the consumer will evaluate
for the solutions of a particular problem.
 Inept Set: It is made up of the brands that have been rejected from
purchase considerations because of unpleasant experience of negative
feedback.
 Inert Set: It consists of those brands about which a consumer is aware but
would not consider buying and these brands are treated with a difference.
 Information
Yes Search
Terminates
Evaluative
Criteria

Performance
Is the information
level of each
enough to make a
solution on balanced decision
each criteria

Existing Information
Solutions No Search
Continues
 The 4 Basic Views

1. Economical View
2. Cognitive View
3. Passive View
4. Emotional View
 Economical View

 This model assumes that a consumer is a rational person and he

takes rational decisions. He compares various products, evaluates
its advantages and disadvantages and then make a purchase
decision on the basis of information collected. He is aware of all the
product alternatives and is capable of ranking them.

 Economic view believes in a world of perfect competition but in

true sense this model is inappropriate as there can never be a
situation of perfect competition.

 Besides it is also not possible for the consumer to make rational

decisions all the time because for making rational decisions a
consumer will have to be aware of all the products in the market, all
possible alternatives and their features.
 Example

 The economic view of a buyer depends on their personality of

seeking for the potential and value of the product. Buyers satisfy
their actualization needs by comparing price and quality of the
product with the available alternatives.
 Various marketers have been using the low pricing and the
economic view to attract their target market and thus increase their
sales.
 1 Dollar Store would be an ideal example of a company that tries to
make best of the economic view model.
 The company sells its merchandize at prices, which are lowest in the
market.
 The quality of the products though, is not as good as other in the
same market.
 Cognitive View

 According to Cognitive view, decision-making is an emotional

or reasoning process, which can be rational or irrational and
can be based on explicit assumptions or tacit assumptions.
 The most important characteristic of this view is that, a
consumer is in pursuit of information until a satisfactory
solution is found.
 Once the satisfactory solution is found, the process of
collecting information is terminated.
 Example

 For example, if a person is looking to buy a car he will first

decide what features does he want in his vehicle. Whether his
first preference is safety or performance. Based on this
evaluation he will evaluate various car models available in the
market.

 Another example of this can be seen as the “Free” or “Sale”

adverts. These adverts convey that something is free or there
is a sale on. This “Free” or “Sale” sticker on the window
display of store is enough to attract the consumers inside the
store.
 Passive View

 This model assumes that the consumers take decisions

according to the promotional efforts of the marketers and
respond directly to the sales and advertisement appeals
offered by the marketers.
 It is opposite to the economic model as it assumes people will
evaluate a product depending upon how it is promoted and
positioned in the market.
 Example

 This is mainly evident in case of tourism industry. Local

sellers and marketers in many places often manipulate
tourists. Since the tourists have very little market and product
knowledge, sales people can manipulate them.
 Emotional View

 Emotional view believes in targeting emotions and impulse of

the consumers.
 This view believes that there are certain feelings or emotions
like joy, love fear fantasy etc attached to every purchase of the
consumers
 A consumer is less likely to do pre-purchase evaluation and
search before emotional purchase.
 Example

 Over the years football clubs have sold their merchandize on

the basis of the emotional view.
 The various holiday packages use emotions to attract the
customers.
 Many real-estate seller promote their homes and other
properties with a tag line “Your Home” etc just to attract the
emotional aspect to their product.
 The Body Shop has been using the emotional model attract its
consumers.
 Introduction

The consumer uses certain decision rules. The decision

rules help a consumer simplify the decision process.
The various evaluative criteria are structured and
integrated so as to simplify the evaluation process.
There can be two kinds of Decision Rules, viz.,
Compensatory rules and Non-compensatory rules.
The consumer decision rules are often referred as
heuristics, decision strategies and information
processing strategies.
 Compensatory Decision Rule

 Compensatory rules: Under compensatory rules, the various

evaluative criteria are listed as attributes.
 These attributes are scored and rated for the various alternative
brands.
 A lower rating on an attribute may be offset by a higher rating on
another; i.e. a higher rating on one attribute would compensate for
a lower rating on another.
 Based on the final scores, the brands are ranked, the one with the
highest score, being regarded as the best.
 The consumer would then select the brand that scores the highest
among the various alternatives that have been evaluated.
Mazda = 4(5)+3(3)+2(5)+5(3)+1(1) = 55
Honda =
Toyota =
Nissan =
Hyundai =

According to the compensatory rule, Toyota is the best choice.

Compensatory rules allow for the positive evaluation of one brand

attribute to balance out the negative attributes. 
 Non – Compensatory Decision Rules

 Non-Compensatory rules: Here, a negative evaluation of any one

attribute eliminates the brand from consideration.
 A lower rating on an attribute cannot be offset by a higher rating on
another; i.e. a higher rating on one attribute would not compensate
for a lower rating on another.
 The consumer would then select the brand that scores the highest
among the various alternatives that have been evaluated.
 Non-compensatory rules could assume three forms:
 Conjunctive
 Disjunctive
 Lexicographic.
 Elimination By Aspect.
 Disjunctive Rule

In disjunctive rule, a minimally required

performance level is assigned for each important
attribute. All brands that meet or exceed at least one
criteria are acceptable.
Under this rule, Mazda, Toyota, and Hyundai meet the minimum for at
least one important attribute and are acceptable.
 Conjunctive Rule

The conjunctive rule is the mirror image of the

disjunctive rule. In a conjunctive rule, a brand must
have all of its features above the minimum
acceptability levels to be acceptable
Mazda, Toyota, Nissan, and Hyundai are all eliminated because they do
not meet the minimum standards. Therefore, according to the conjunctive
rule, only Honda is acceptable.
 Elimination-By-Aspects

Elimination by aspects is a model of a decision making

technique developed by Amos Tversky in the 1970s.
When faced with multiple options this method first
identifies a single attribute or feature that is most
important to the decision maker.
When an option doesn't meet the criteria or 'cut off' for
an attribute then it is eliminated from being a
possibility.
Different attributes and features are applied until a
single 'best' option is left.
Step 1: Price eliminates Hyundai

Step 2: Fuel economy eliminates Mazda

Step 3: Ride and Handling eliminates Nissan

Step 4: Safety eliminates Honda

This leaves Toyota.

 Lexicographic Rule

The lexicographic decision rule, consumers first

rank the attributes in terms of perceived importance.
Then, the consumer selects the brand that performs
best on the first attribute. If two or more brands tie,
they are evaluated on the next most important
attribute until one brand outperforms all the others 
Using the same ranking as the previous rule, Mazda is the best brand
option based on best price, the consumer’s most important attribute.
 Sr.No Decision Rule Example

1 Compensatory rule The consumer chooses that laptop which

he judges as the best when he balances
the good and bad ratings with each other.

Non Compensatory rules

2 Conjunctive rule The consumer chooses that laptop that

has no bad features.

3 Disjunctive rule The consumer chooses that laptop that

has at least one good feature.

4 Lexicographic rule The consumer chooses that laptop that is

the best on the most important of all
features.
 Cognitive Dissonance

 Cognitive Dissonance: This is a feeling of tension and anxiety that a

consumer experiences after the purchase of a product. The
consumer begins to have a feeling of uncertainty with respect the
performance of the product and begins to doubt his purchase
decision “whether the decision was the right one?”.
 He begins to ask himself the following questions:
 a) Have I made the right choice?
 b) Have I purchased the right brand?
 c) Have I got value for money?
The Fox and the Sour Grapes is a perfect example of Cognitive
Dissonance.
 Reducing Consumer Dissonance

Consumers try to reduce this dissonance by:

 Gaining more product information
 Discussing with other satisfied customers who have bought
the same product/brand
 Going back to the dealer and asking for reassurances.