NEW HORIZON COLLEGE

MARATHALLI, BANGALORE
(Affiliated to Bangalore University)
A Recipient of Prestigious Rajyotsava State Award 2012 conferred by the Government of Karnataka

VI SEM BBM (MARKETING SPECIALIZATION) STUDY MATERIAL

CONSUMER BEHAVIOR

Prepared By

RICHA PATHAK

Ring Road, Bellandur Post, Near Marathalli, Bangalore - 560 103

Tel : +91-80-6629 7777 Fax : +91-80-2844 0770
E-mail : principalnhc.edu@gmail.com
Web : www.newhorizonindia.edu
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S.NO TITLE PAGE NUMBER

1. UNIT I: INTRODUCTION TO 4 - 12
CONSUMER BEHAVIOUR

2. UNIT II 13 - 18

3. UNIT III 19 - 22

4. UNIT IV: LEARNING 23 - 27

5. UNIT V: PERCEPTION 28 - 31

6. UNIT VI 32

7. UNIT VII: DIFFUSION OF 33 - 42

INNOVATION
43 - 56
8. UNIT VIII: OPINION LEADERSHIP

9. UNIT IX: BUSIINESS BUYING 57 - 58

10. PREVIOUS YEAR QUESTION 59 - 62

PAPER

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 UNIT I: INTRODUCTION TO CONSUMER BEHAVIOUR

Introduction

Consumer Behaviour is the study of Individuals or Organizations and theactivities undertaken

by them to select, procure and use products orservices to satisfy their needs and wants. In this
unit, we will be studying thebasics of consumer behaviour from a management perspective,
along withan overview of the concepts of consumer orientation and the
competitiveadvantages of such a practice.

Meaning and Definition of Consumer Behaviour

Vignette

Proctor and Gamble (P&G) is an American Global Corporation establishedin 1837 with
several successful current brands like Tide and Ariel detergentpowders, Duracell batteries,
Gillette safety razors, Max Factor cosmetics, Pantene hair care products, Pampers brand
diapers, etc. When theyentered the Japanese market for Pampers in 1977, they used
Americanproduct range, American advertising and American sales and promotionalstrategies.
The product was quite thick designed for American mothers whowould leave the diapers on
their babies for long periods. The Japanese mothers were however highly cleanliness minded
and wouldchange the diapers on their babies at least twice as much as the Americanmothers
do. Seeing this opportunity many Japanese companies introducedthinner leak proof diapers
better suited to Japanese mothers. This resulted in Pampers market share crashing to 7% in
1985 from a high of 90% in1977. The company realized their mistakes after a market study
and animproved product with one third of the original thickness was introduced.This resulted
in their improving their share to about 35% in 1990 and thesame product was introduced in
the American market with a new brandname- ―Ultra Pampers‖The above example is a classic
case of how a study of consumer behavior is most important to the success or otherwise of
products and for anymarketing oriented company, such a study should be the basic starting
pointfor all marketing strategy decisions

Definition of Consumer Behaviour

“Consumer Behaviour is the study of Individuals or Organizations and the activities

undertaken by them to select, procure and use products or services to satisfy their needs
and wants.

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Consumer Behaviour is defined as the behavior that consumers display in searching for,
using evaluating and disposing of products and services that they expect will satisfy
their needs.

The activities undertaken by the consumer can be either of the following:

1.Psychological activities involving thinking processes like considering theneed for the
product or service, whether to purchase, what to purchase,when to purchase, how to purchase,
comparing the various features andprices, reading the customer reviews etc.

2. Physical activities like going to a shopping, looking and enquiring about thealternatives,
visiting an e-commerce site, transacting on the e-commercesite, etc.

Sheth& Mittal have further expanded this definition by including the study ofvarious roles
played by a customer like

1.The user (who uses or consumes the product or service)

2.The payer (who pays for such a product or service)

3.The buyer (who physically acts to procure the product or service).

The same person may play all the three roles and in several situations,there may be more than
one person playing different roles. Depending onthe roles being played, the behaviour and
decision making process maychange.Understanding consumer Behaviour is quite
complicated since it involvesthe following factors, which have strong influence on it:

1.Cultural factors

2.Social factors

3.Personal factors

4.Psychological factors

One has to study both internal factors and the external environment to havea better
knowledge of such behaviour. Only when we are able to decipherthis process, such
knowledge can be used in taking decisions that would bemost effective in achieving the
marketing objectives

Application of consumer behaviour knowledge to marketing

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Consumer behaviour – Consumer and Managerial Perspectives

Consumer Behaviour can be studied with two different perspectives. Themost popular
traditional way is to focus on this subject as a pure science,wherein the research findings
from behavioural sciences like Psychologyand also from social sciences like Sociology,
Anthropology and Economics,are drawn to explain the various facets of Consumer
Behaviour. The otherperspective is to analyse this subject as an applied science, with
emphasison its application in business organizations.

A) Consumer Perspective

In this approach, Consumer behaviour study is focused on enquiring intohow people buy,
what they buy, when they buy and why they buy more as a pure science not necessarily for
applying to marketing decision-making. Itblends elements from psychology, sociology,
socio-psychology,anthropology and economics. It attempts to understand the
buyerconsumption process, both individually and in groups. It studiescharacteristics of
individual consumers such as demographics,psychographics, and behavioural variables in an
attempt to understandpeople's wants. It also tries to assess influences on the consumer
fromgroups such as family, friends, reference groups, and society in general. This approach
focuses more on the nature of consumption experiencerather than the purchase process. This
approach may throw many insights that may or may not be actionablefrom a marketer’s
perspective. There is no sufficient emphasis on consumerpurchase decision process. Hence
this approach may have limited use formarketers, since they must understand how consumers
take purchasedecisions if they have to influence the consumers

b) Managerial Perspective

In this approach, consumer behaviour is studied as an applied social science and the main
objective of such an approach is to find a basis formarketing strategies in business
organizations. In a managerial perspective, the stress is on predicting the action sequence of a
consumer decisionprocess to help a marketer in deciding on suitable marketing strategies. As
an improvement of this, a new approach was enunciated by Sheth&Mittal, who expanded the
study of Consumer Behaviour to include severalfacets, which would be more practical while
applying this knowledge topractical situations in business organizations. There are two
variations inthis approach, which are more meaningful from the managerial perspective:

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a)All the different aspects of consumer Behaviour study have been appliedin this new
approach to ―Business Organisations‖ as consumers.Normally most textbooks limit such
analysis to individual consumers andsome of them extend it to households. But in the new
approach,thebehavioural aspects are looked at from the angle of business-to- business
transactions,which are very relevant and useful in suchsituations.

b)The second approach is in extending the consumer behaviour study, toinclude different
roles of a customer in understanding the decisionmaking process. Traditionally the consumer
is the ―User‖ of the productor service and most of the studies limit the application of this
knowledgeto understand the behaviour of customers as Users/Consumers.

The new approach considers three roles of the customer viz. User, Payer and Buyer as
important, to apply this knowledge in real life situations inbusiness organizations. In fact the
title of the study is called as―Customer Behaviour‖ instead of ― Consumer Behaviour‖ to
make itamply clear that all three roles of the customer have to be looked at inorder to analyze
& apply the various research findings more effectively

Consumer Orientation

a)Organizational orientations

Depending on the internal and external environments of organizationsand also the top
management philosophy, the organizations havedifferent orientations towards their marketing
policies and strategies.Some of these orientations are as follows:

1. Production Orientation:

This is prevailing in most of the old traditionally managed businesseswherein the competition
is less severe and the economy is in adevelopmental stage. The management of such firms
concentrates onimproving on their production facilities and their strategies willconcentrate on
factors like:

a)Improving production efficiencies

b)Reducing wastages and rejections in their factories

c)Lowering costs of production

d)Resorting to mass production techniques

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e)Wide distribution, etc.

The underlying assumption of such organizations is that, theconsumers are mainly looking
for a cheaper product that is readilyavailable. The classic example of this attitude is that of
Henry Ford,who introduced the concept of assembly line manufacturing ofautomobiles. His
management orientation was clear from his widelyquoted statement-―My customer can have
a car painted in any colorthat he wants so long as it is black".

2.Product Orientation:

Many company management believes that, the consumers willpurchase those products, which
offer the best quality, a wide rangeof innovative features, best performance, excellent service,
etc. Suchmanagements focus their efforts on making superior products andcontinuously
improve the quality of their products. Such companiesassume that the consumer
automatically goes for a superior productand that; he can efficiently evaluate the product
performance andquality. They often don’t bother about getting more information fromthe
market place either about the consumer like and dislikes, or thecompetitors’ products and
activities.

3.Sales Orientation:

This is another very common orientation of many firms. They believethat their customers
voluntarily do not purchase enough quantity oftheir products, if left alone. Hence they resort
to pressurized sellingand aggressive sales promotions. The underlying assumption is thatthe
consumers have a lot of mental resistance to buy and they needconstant persuasive efforts to
buy. They also assume that their salesand promotion efforts are most efficient in achieving
their salesobjectives. One of the examples is that of Sergio Zyman the formerChief Marketing
Officer of Coca Cola whose famous quote was-―Thepurpose of Marketing is to sell more
stuff to more people more oftenfor more money in order to make more profit.‖

4.Consumer Orientation:

This is the new Marketing Concept. This is adopted successfully bymany organizations and
they shifted the focus of managementefforts to finding out the consumer preferences and then
modifyingtheir products and marketing strategies to suit the consumer needs. Consumer
satisfaction is considered as the most important objectiveof the organization and all the
corporate policies and strategies aredecided from this perspective

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The Emerging ‘new’ consumers

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CONSUMER BEHAVIOUR: THE DECISION MAKING PROCESS

When consumers show an interest in buying a certain product, many of them will follow a
decision making process which follows the next steps: problem recognition (unsatisfied
need), information search, evaluation of expected outcome, purchase, post-purchase
behaviour. This process is a guideline for studying the way consumers make decisions, but it
is important to remember that they can abandon the whole idea at any stage, and they do not
necessarily continue with this decision making process up to a purchase.

The first stage in the buying decision is problem recognition. Problem recognition occurs
when a consumer is faced with an unsatisfied need (the need for a holiday) and desires a
fulfilled outcome that satisfies this need. Problem recognition is triggered by either external
stimuli (advertisements) or internal stimuli (hunger or thirst). Consumers can recognise
unfulfilled wants in several ways, for example when an old product is not performing as well
as it should, or when consumers are made aware of a new technology that will enhance their
current product experience (new HD televisions). The core of a marketer’s goal is to make
consumers aware of possible unsatisfied needs, and to show the consumer how the product or
service will fulfil that need.

The second stage in the buying decision is the search for information and the organization of
this information within the individual’s frame of reference. The information search involves
exposure to different sources, such as promotional material and displays of the product,
actively researching the product, or relying on historic information in the consumer’s mind,
such as preconceived ideas about a product or a previous experience (good or bad) with such
a product. Not all buying decisions rely this heavily on the gathering of information, and the
extent to which a consumer conducts an information search depends largely on the perceived
risk of the purchase. Buying a tube of toothpaste is not perceived as a high risk purchase, and
the extent to which a consumer will search for information will almost certainly not exceed
the scope of his own previous experience. However, a high risk purchase, such as buying a
new car, might involve an extended search effort on the part of the consumer, because the
trouble and time that is spend in finding the information are minimal compared to the risk of
buying the wrong car.

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The third stage of the decision making process, is the evaluation of expected outcome. The
consumer is now ready to make a decision based on all the information gathered, and those
discarded. The consumer has now developed a set of criteria against which he will base this
decision, and will most likely be able to narrow his search down to only a few products. The
goal of the marketing manager is to determine which attributes of a product will convince a
consumer to buy it. Recent studies have shown that attributes which plays on emotions (such
as perceived trustworthiness, perceived comfort, perceived excellence or perceived status) are
the ones that weighs the heaviest in decision making processes.

This stage of the decision making process is critical, because many consumers are not able to
make a rational decision by weighing up alternatives, and if they have reached this stage, the
more emotional consumer has reached an uncritical blindness in which they become obsessed
with buying the product.

The next step in the decision making process is to purchase the product. The consumer has
decided which product to buy, or not to buy anything at all. If he decides to make a purchase,
the next step in the process is an evaluation of the product after the purchase.

Post purchase behaviour – now that the consumer has made the purchase; he expects certain
outcomes from his decision. The level of satisfaction that the consumer will experience will
depend largely on how many of his expectations were met.

Psychological Factors Influence Buyer Behavior

Motives

Psychological factors include the concept of motives. A motive is an internal energizing

force; it is something that orients a person's activities toward satisfying a need or achieving a
goal. The actions of individuals are usually affected by a set of motives, and not by just one.
Major marketers understand that if they can identify consumer motives, then they can
develop a better marketing mix that will be more effective in reaching targeted consumers.

Abraham Maslow’s ―Hierarchy of Needs‖ model (shown above) is one of the tools marketers
have used to help them better understand motives. Maslow's theory says one must satisfy
lower level basic needs before going on to pursue the meeting of higher level growth needs.

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People desire to move up the hierarchy, but can encounter setbacks along the way that can
disrupt progress. For example, losing a home to foreclosure can cause an individual to
fluctuate between self-actualization and the meeting of basic needs for food and shelter.

Marketers desiring to utilize Maslow's model must determine what level of the hierarchy
targeted consumers are at, to get a better idea about what things might motivate their
purchases. Because motives often operate at a subconscious level, they are difficult to
measure.

Perception

Perception is another psychological element that marketers must be concerned with. Why?
Because, your perception is your reality. What you think you see is as important to you as is
what is actually there. And what you see from observing something might be different from
what I see. What you hear might be different from what I hear, even when listening to the
same thing. Why? Because we're individuals, and we process information as individuals. Our
own unique impressions and ability to comprehend come to bear, while the information
inputs we receive and process are the result of sensations we get through sight, taste, hearing,
smell and touch.

Perception is the process of selecting, organizing and interpreting information as inputs, to

produce meaning. As individuals, we can "selectively" choose what information we pay
attention to. After that, we organize and interpret what we see.

---------Selective Exposure

Through "selective exposure," we select inputs to be exposed to our awareness. For example,
you might be more likely to notice marketing efforts that are linked to an event. While
watching hundreds of television commercials in a day, the one you remember might be
advertising an event you've wanted to attend in the past, and plan to go to in the near future.
Or, you might pay closer attention to marketing messages about food as it gets closer to lunch
time. If you've placed yourself on a tight budget, messages announcing sharp price drops in
items you need might be more likely to get your attention.

--------Selective Distortion

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Perception also involves something called "selective distortion." Marketers need to be aware
of this because people tend to change/twist information that is inconsistent with their beliefs.
Because this is true, advertisers using comparative advertisements (pitching one product
against another), have to be very careful that consumers don't selectively distort the facts,
perceiving the advertisement was forthe competitor.

The old "Energizer Bunny" television commercials provide a good example of this. Using a
cute pink bunny pounding a drum, the product (a battery) was pitted against rival Duracell.
But, many consumers, when asked, said they thought the bunny commercial was for Duracell
batteries. Perhaps some of the confusion was caused by the fact that the energizer ads were
based on a commercial by Duracell in which a group of small rabbit toys were shown and
said to be powered by Duracell batteries.

---------Selective Retention

People are also selective in what they remember. Called "selective retention," we tend to
remember inputs that support our beliefs, and we forget those that don't. We are exposed, on
the average, to close to two thousand advertisement per day. We will remember only some of
them. Interpreting information is based on what is already familiar, on knowledge that is
stored in the memory.

Along with knowledge come attitudes that can also drive perception. Consumers screen
information that conflicts with their attitudes. We also distort information to make it
consistent with our beliefs, and selectively retain information that reinforces our attitudes.
This can be good for marketers we like, because it's the foundation of brand loyalty.

Attitude involves positive and negative feelings about people and things: An object, an
activity, a person, a place, a time of year, etc. Attitude involves learned behavior. Note,
however, that there is a difference between attitude and intention to buy (ability to buy). As
consumers, our attitudes toward a company/marketer and its products can greatly influence
the success or failure of the company's marketing strategy. Attitudes and attitude change are
influenced by consumers’ personality and lifestyle.

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 UNIT II

DEFINITION OF CONSUMER BEHAVIOUR

• It is defined as the behavior that consumers display in searching for, purchasingusing,
evaluating and disposing of products and services that they expect will satisfy their
needs.

• It is the mental and physical activities undertaken by household and business

customers that result in decisions and actions to pay for, purchase and use products
and services.

Consumers perspective on Consumer Behavior

• Managers: They Seek product info. So as to come out with product offering. They
also Come out with strategies which are product or brand specific and view
competition as threat

• Consumers:Evaluate info for making better decision on purchase choice and have
tendency to evaluate brands before purchasing. They also have availability of more
brands and have an opportunity to compare them.

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Why study consumer behavior?
• Enables marketers to understand and predict market behavior of consumers in market
place

• It is concerned with what consumers buywhy they buy? When where and how they
buy? How often they buy?How they consume and dispose it ?How
satisfied/dissatisfied they are after using a product

• Important to understand consumer psychology in order to understand and predict

consumer choices

• Making prediction on how consumer respond to marketing action can generate profits.

• Economic decision making process.

Trends in consumer behavior

• Customer Demographic trends:
• Technological Trend
• Public policy

Rights of Consumers:
• Consumer Protection act passed in 1986 to grant rights to consumer and to provide for
remedies if these rights are not taken care by business houses.

Rights of consumer under Consumer Protection Act,1986:

• Right to safety

• Right to choose

• Right to be heard

• Right to be informed

• Right to seek redressal

• Right to consumer education

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MODELS OF CONSUMER BEHAVIOR

 HOWARD SHETH MODEL:

According to this there are 4 variables which determines buyer’s behavior

 Stimulus—Input variables
 Internal variables—buyers motives, attitudes, experiences and perception
 Exogenous Variables—These are those internal state of the buyer i.e. his
social class, financial status
 Response out variables—They are based on interactions between three
mentioned variables

Limitations:

 Consumer behavior is generally repetitive in nature.

 The brand choice in one’s purchasing decision is affected by:
 One’s set of motives
 Different alternative choice of products and brands

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NICOSIA MODEL
• This Model concerns with the Inter-relationship between:
• The firms marketing communications
• The attributes of the consumer
• The consumers decision process including
 Search and evaluation process
 Actual decision process
• The feedback of the consumers response to the firm.
• This is a Dynamic Model

• Field 1: Represents the output of a commercial message from the firm in the form of
advertising or other forms of promotion and its effect on consumer

 Sub Field 1 Product Attribute Company’s Communications to the Targeted Audience

 Sub Field 2 Consumer Attribute What the consumer makes out of the
Communications

 Field 2: If the process results in motivation to buy, it becomes the input for Field 3

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 Company’s Input (Field 1) creates certain Attitude Evaluation of the advertised
product and other alternatives takes place .

 Field 3 :Represents the act of purchase Transformation of the motivation into the act
of buying Act of Purchase (or Non Purchase)

 leads to certain purchasing behaviour

 Evaluation of Options leading to Motivation would result in Action Field 3

 Decision (Act of Purchase)

 Field 4: Use of Purchased Item including Use and Storage of the Product by the
Consumer Act of Purchase

 Retention of the experience by the consumer as an influence on future purchase

 Feedback of sales to firm

 Feedback Purchasing Behavior Consumption Experience

Engel -Kollat -Blackwell Model

• Consumer behavior as decision making process in the form of five steps which occur
over a period of time. Related variables grouped into five categories:

• Information input

• Information Processing

• Product /Brand Evaluation

• Motivating Influence

• Environmental Influences

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• The private and interpersonal procedures which cause people to feel, think, and
behave in ways which are aligned with cultural standards, principles, and
norms(Normative Influence)

• Normative Compliance :Extent to which consumer is influenced by other people like

friends, family etc

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 UNIT III

CONSUMER DECISION MAKING MODEL

Decision making is the process of choosing between two or more alternatives; Consumer
decision making may be defined as a process of gathering and processing information,
evaluating it and selecting the best possible option so as to solve a problem or make a buying
choice. Consumer Decision Making pertains to making decisions regarding product and
service offerings.

It consists of following steps:

 Problem recognition
 Search for information
 Pre-purchase evaluation
 Purchase
 Consumption
 Post purchase Behavior
 Disinvestment

The decision-making process consists of a series of steps which the consumerundergoes. First
of all, the decision is made to solve a problem of any kind. This maybe the problem of
creating a cool atmosphere in your home.For this, information search is carried out, to find
how the cool atmosphere canbe provided, e.g. by an air-conditioner or, by a water-cooler.
This leads to theevaluation of alternatives and a cost benefit-analysis is made to decide which
productand brand image will be suitable, and can take care of the problem suitably
andadequately. Thereafter the purchase is made and the product is used by theconsumer. The
constant use of the product leads to the satisfaction or dissatisfactionof the consumer, which
leads to repeat purchases, or to the rejection of the product.The marketing strategy is
successful if consumers can see a need which a company’s product can solve and, offers the
best solution to the problem. For asuccessful strategy, the marketer must lay emphasis on the
product/brand image inthe consumer’s mind. Position the product according to the customers
likes anddislikes. The brand which matches the desired image of a target market sells
well.Sales are important and sales are likely to occur if the initial consumer analysis
wascorrect and matches the consumer decision process. Satisfaction of the consumer,after the

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sales have been affected, is important for repeat purchase. It is moreprofitable to retain
existing customers, rather than looking for new ones.

Evaluation Criterion in Decision Making

Different evaluation criterion is used to make comparisonbetween different products and

brands.

• Quality
• Size
• Quantity
• Price
• Reliability
• Style
• Finishing
• Sales personnel

• Cleanliness of store

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Psychological problems in Price & Distribution:

Consumer psychological very important in marketing

• Two types of consumer emerge as a result of psychology:

• Water Tight Consumer- thick skinned customer, very rigid

• Easy going consumer- Flexible, try new products

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Variables in consumer psychology which affect price and distribution:

• Motivation: Inner drive that instigates a person to take particular action

• A motive is an internal energizing force; it is something that orients a person's

activities toward satisfying a need or achieving a goal.

• Major marketers understand that if they can identify consumer motives, then they can
develop a better marketing mix that will be more effective in reaching targeted
consumers.

• Learning:It includes individual behavior arising from experiences and observations.

• Perception: It is a process of selecting, organizing and interpreting information as

inputs, to produce meaning.

• Selective exposureis a concept that is defined as the tendency of favoring information

that strengthens pre-existing views while avoiding conflicting information.

• It is that act of being in acceptance with that which seems to confirm our actions and
approaches and ignoring the rest

• Selective Distortion: Selective distortion is the tendency to interpret information in a

way that will fit our preconceptions. Consumers will often distort information to be
consistent with prior brand and product beliefs.

• Selective Retention:People have the tendency to retain some of the information in

their minds that support their ideas and beliefs.

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 UNIT IV

LEARNING

What is Consumer Learning?

Consumer learning is the process by which individuals acquire the purchase and consumption
knowledge and experience they apply to future related behavior .Most of the learning is
incidental. Some of it is intentional. Basic elements that contribute to an understanding of
learning are:

Motivation

1. Cues

2. Response

3. Reinforcement

There are 2 theories on how Individuals learn:

Behavioural Theory

1. Cognitive Theory

Both contribute to an understanding of consumer behaviour.

Behavioural Theorists view learning as observable responses to stimuli, whereas Cognitive

Theorists believe that learning is a function of mental processing.

Major Behavioural Learning Theories are :

1. Classical Conditioning: Includes Repetition, Stimulus generalization and Stimulus

discrimination.
2. Instrumental Conditioning: Instrumental Learning theorists believe that learning
occurs through a trial and error process in which the positive outcomes in the form of
results or desired outcomes lead to repeat behavior like Repeat Purchase or Repeat
Positive Word of Mouth. Both positive and negative reinforcement can be used to
encourage the desired behavior. The timing of repetitions influences how long the
learned material is retained. Learning usually persists longer with distributed re-

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 enforcement schedule, while mass repetitions produce more initial
learning’s.
3. Observational Conditioning or Vicarious Learning:

Cognitive learning theory holds that the kind of learning most characteristics of
humans is problem solving. Cognitive theorists are concerned with how information is
processes by the human mind: how it is stored, retained, and retrieved. Involvement
theory proposes that people engage in limited information processing in situations of
low relevance to them and people engage in extensive information processing in
situations of high relevance.

Consumer Habit

Habitual buying behaviour occurs under condition of low consumer involvement and
little significant brand difference. Consumers have little involvement in product
category they simply go to the store and reach for a brand. If they keep reaching for
the same brand, it is out of habit rather than strong brand loyalty. Consumer appears
to have low involvement with most low costs, frequently purchased products.

• Habit: It is a repetitive behavior

• Brand Loyalty is a result to habitual purchasing behavior.

 Routinized decision making

 Complexed decision making.

Consumer Buying Behavior

• Complex buying behavior: Consumer want to purchase expensive product like

refrigerator, laptop etc.

• Dissonance reducing behavior: Consumer already using brand product but not fully
satisfied .Shift from one brand to another.

• Habitual buying behavior: Do not involve complex decision making procedure. For
example: salt, atta, cold drinks etc.

• Variety seeking behavior

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Brand Loyalty

• Refers to the degree to which a consumer regularly purchases the same brand with a
product class.

• ―True Brand loyalty exist when consumers have a highly relative attitude towards the
brand through his or her repurchase behavior‖ For e.g. Coca-cola ,Pepsi

• Consist of consumer’s involvement or consumer commitment to purchase the brand.

Characteristics of brand loyalty

• The consumer who are brand loyal towards product class, tends to be more self
confident in his or her approach.

• They are ready to pay more for the same quality and quantity.

• Brand is not just a representation of company’s product rather a symbol of company

itself and increases the reputation and goodwill of the company in a highly
competitive environment.

Behavioral Approach to loyalty

• Consistent purchasing of one brand over time as an indication of brand loyalty

• Based on database collection of the consumers.

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 • Purchases recorded electronically

• Information regarding people preferences, likings and disliking.

• It is based on how people behave while purchasing.

Limitations

• Measurement of loyalty is based on past behavior give misleading results.

• Inspite of regular purchasing there are other four patterns of purchasing
 Reversion—Switch back to original brand
 Conversion—Loyal to same brand
 Vacillation—Continuously switching between brands
 Experimentation– Systematic trail of other brands

Cognitive Approach to brand loyalty

• To overcome the limitation of behavioral approach.

• Attitude towards the brand in addition to purchasing it repeatedly.

• Includes both attitude and behavior of consumer

Challenges of brand loyalty

• Difficulty in sustaining & crating brand loyalty

• Difficulty in implementation of loyalty program

• Growing trends towards brand switching

• Increase in sales promotion techniques

• Concern towards price.

Purchase involvement and Consumer Behavior

• Purchase involvement refers to the level of concern or interest in the purchase process
relevant to particular purchase.

• It is divided into 3 parts:

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 • Habitual decision making

• Limited decision making

• Extended decision making

Habitual decision making:

Complex decision making and habitual decision making are two extremes on a side.

1. Firstly problem is recognized then it may be possible that long term memory provides
a single preferred brand.

2. Secondly brand is purchased.

3. Limited post purchase evaluation takes place.

4. Fourthly the purchase decision is associated with low involvement

Finally it may be associated with repeat purchase and brand loyalty.

• Limited decision making

There is a little involvement of consumer

Basically for products which have significant brand differences like soaps, washing
powder.

• Extended Decision making

Can be called as complex decision making

Final decision involves comparatively increased information search.

High involvement of customer before going for final purchase

It also passes through post purchase evaluation

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 UNIT V

PERCEPTIONINDUVIDUAL DETERMINATS OF BEHAVIUOR

INTRODUCTION

To understand the buyer and to make a customer out of him is the main purpose of thestudy
of consumer behavior. Though this problem has been analyzed from different viewpoints
under different premises, it still remains a complex one. On the other hand the buyeris a
riddle. He is a highly complex entity. His needs & desires are innumerable. Some are latent,
some manifest and some others are highly dominant. These have different priorities inthe
scheme of things. The buyer has his own ideas & plans about realizing these needs &desires.
The first & foremost task of the marketer is to get close to the buyer and understandhis need-
structure & priorities. There are four major factors which influence the behavior of the
consumers.

They are:

1.Psychological factors influencing Customer Behavior

2.Social Psychological factors influencing Customer Behavior

3.Sociological factors influencing Customer Behavior

4.Economic factors influencing Customer Behavior

PSYCHOLOGICAL FACTORS

These are the factors which are the personal attributes of an individual. We shall study
Fiveofthem: Attitude, Motivation, Perception, Personality and Learning.

Perception

Different people see things, events, and ideas from different view point, and hold
differentopinions, views for them. In other words they have different ―Perception‖ of the
world.

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Definition of perception:

Perception is defined as the process by which the individual selects, organizes, and
interpretsvarious stimuli into a meaningful & coherent picture of the world. Marketers are
deeplyinterested in such perceptions the consumers hold about their products & services,
brands, company etc.

Elements of perception:

The following are the elements of perception:

1. Sensation– is the immediate & direct response of the sensory organs to stimuli. Astimulus
is a single input of any of the senses. Human beings have sensory receptorscalled sensory
organs. They are: a. Eyes for sights & seeing,b.Ears for sounds & hearing,c.Nose for smells
&smelling, d.Tongue for tastes & tasting,e.Skin for textures, touch & feeling,

2.Marketers try to stimulate the sensory organs of a consumer to create a favorableperception

towards their products.

3. Absolute threshold – is the minimum level that the individual can experience a sensation.
In other words, he can distinguish the difference between something & nothing. This
levelvaries from person to person & varies with time, place & environment. Marketers often
tryto provide stimuli more than this level

4. Differential Threshold or Just Noticeable Difference (JND) – is the minimal difference

thatcan be detected between two similar stimuli. German scientist Ernst Weber
discoveredthat the JND between two stimuli is not absolute, but an amount relative to the
intensityof the first stimulus. Thus marketers try to change certain attributes which are just
shortof JND.

5. Subliminal Perception – there are certain types of stimuli which are not strong enough
toexceed the absolute threshold, but somehow stimulate the subconscious mind &
getrecorded there, sometimes without the knowledge of the preceptor. At a later stage
thismight surface as some form of expression or perception. Here the marketers try
tostimulate the subconscious mind of an individual. Some think it’s unethical, but thereare
several positive outcome of this method if applied in a constructive way.

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Information processing:

is a series of activities where the stimuli are perceived & processed to convert/transformthem
to information, and then stored (very similar to computer data processing). Later thisinfo is
used in selecting a product.1.Exposure: Exposure occurs when our senses detect some
external cue from the variousthings we come in contact with. We are all exposed to a plethora
of marketing addscontinuously. This becomes the starting point of all information processing.
But people end to perceive things they need or want. The stronger the need, the greater
thetendency to ignore unrelated stimuli. Hence ―Selective Perception‖ occurs when
theconsumer selects the stimuli from the environment on the basis of interaction of
expectations & motives with the stimulus itself. These factors give rise to four
importantconcepts concerning perception: a. Selective exposure – where the consumers want
to avoid unpleasant or painfulmessages & seek those which are sympathetic, interesting and
pleasant.b.Selective attention or perceptual vigilance – where the consumers exercise
selectivityin terms of their attention to commercial stimuli. They have a heightened
attentionregarding the stimuli that meet their needs, & minimal attention to the onesirrelevant
to their needs. People also vary in terms of kind of info like price, quality, features etc., forms
of messages & type of medium they prefer.c.Perceptual defence – where consumers
subconsciously screen out stimuli that arethreatening or damaging even if the exposure has
already taken place. Likewisesometimes they unconsciously distort the information that is not
matching theirneeds, values, & beliefs. This may be due to psychological factors or
anyunfavorable past experience.d.Perceptual blocking – where consumers protect themselves
from being exposed byblocking such stimuli from conscious awareness. They do it for self
protectionbecause of the visually overwhelming nature of the world we live in.

2. Attention: Normally all the stimuli of a message come thro’ the various sensory
organssimultaneously. But an individual can remember only one of them; usually the
strongerstand tries to take action on that basis. Marketers try to exploit that situation to
theiradvantage, to leave an impact in the consumer. This is known as attention

Stimulus – is the one which prompts an individual to initiate an action by creating

anattention. It has the following characteristics: Size & Intensity; Color&
Movement;Position; Format & Design; Isolation; Contrast or Distinction; Information
extent.b.Individual factors – The attention of a consumer depends on the following factors
:Interest & Needs; Ability; Involvement, etc.c.Situational factors – Often the situation,

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condition, environment or the surroundingof the consumer have an effect on its attention of
certain stimuli. Hence themarketers should devise certain methods to help overcome
that.3.Interpretation – Just like people’s exercise of selective perception on the basis of
certainpsychological principles, the interpretation of these stimuli is also highly
individualbecause it is based on what the individuals expect to see in the light of their
previousexperience, motives, interests, reasoning at the time of perception. In the case of
anyambiguous stimuli, the individuals usually interpret these in such a way to serve theirown
needs, interests, wishes, etc.

Consumer Imagery:

Consumers have a number of enduring perceptions or images of themselves. Products

&brands have also a symbolic value for consumers, who evaluate them on the basis of
theirconsistency (congruence) with the perception of themselves. This is the consumers’ self-
image& they attempt to preserve or enhance it by buying products & brands or patronizing
services which they believe are congruent with their self-images and avoiding which are not.
Thisphenomenon is known as consumer imagery.1.Product Image - where the consumer
compares his self-image with his perception of theproduct or brand.2.Service Image - where
the consumer compares his self-image with his perception of theservice or its provider.

Perception in Marketing:

Marketers have realized that understanding the perception process of consumers help themto
design better ways to help them perceive favorably. The main methods of stimuli are thro’
advertising, communication, messaging, company news etc. Thus the marketers have
todevelop specific stimuli thro’ these methods so that the consumers perception about
theirproducts clearly & enduringly. These are some techniques:

1.Brand development & Perceptual Mapping – This technique helps the marketers
todetermine how the products or services appear to the consumer in relation the
othercompetitive brands on one or more relevant attributes of the products or services.

2.Retail Stores – In retail stores normally all the brands in a particular category of
productsare arranged at the same place, so they have a direct competitive setting. The brands
which claim to be special in any respect should be specially displayed to gain attention.

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 UNIT VI

Personality

• It is a particular combination of emotional, attitudinal and behavioral response pattern

of an individual.

• Customer personality is a function of two factors:

 Genetic Determination

 Environmental/societal conditioning

Personality & Marketing

• Studying of personality characteristics can work as valuable guide to understanding of

consumer behavior.

• A new study in Psychological Science a publication of the Association for

Psychological Science suggests that advertisements can be more effective when they
are tailored to the unique personality profiles of potential consumers.

• Major marketers study and utilize what they see as a link between personality and
consumer purchasing behavior.

Self Concept

• Self concept denotes the totality of individual thoughts feelings having reference to
them as an object.

• Who they think they are(actual self)

• Who they would like to be (Ideal self)

• In marketing it recognizes that what consumers buy and own is a reflection of who
they feel they are

The self concept seems to have three components:

a) The Ideal self concept-The person you would like to be

b) The public self concept-The people you think people have on you

c) The Real self concept- What you really think about yourself

Important question:

1. What is personality and state various components of personality?

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 UNIT VII
GROUP INFLUENCE AND DIFFUSION OF INNOVATIONS

GROUP

Meaning of Group
It consist of two or more persons who have common goals and interact with each other to
accomplish the goal ,are aware of one another and perceive themselves to be part of the
group. It can also be defined as ―Social unit consisting of two or more interdependent,
interactive people striving for common goals‖.

• Interaction

• Dependence

• Satisfaction

Meaning of Reference Group:

It is the group to which the individual relates or aspires to relate himself or herself
psychologically

Common characteristics of a group:

• People must interact with each other

• Common interest or goals

• See themselves as member

• Two or more people needed to form a group

Individuals join groups for following reasons:
• To improve their effectiveness in a task

• For security

• To facilitate learning

• To exert greater influence over their environment

• They believe that group membership will be useful to them in achievement of some
goal in future.

TYPES OF GROUPS:

1. Formal groups—Established by the organization to perform organizational work.

a. Command group—
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Specified by the organization chart and comprised of employees who report directly to a sup
ervisor.

b. Task group
Comprised of employees who work together to compete a particular task/project; e.g., self ma
naged teams (SMTs).

2. Informal groups

Natural groupings of employees that form to fulfill social needs, evolving naturally.

a. Interest group
established to meet a mutual objective (a group formed to lobby management for more fringe
benefits).

b. Friendship group—formed because members have something in common.

STAGES OF GROUP DEVELOPMENT

Groups proceeds through five stages of development. These stages and their characteristics ar
e as follows:

1. Forming

a. Characterized by uncertainty about the group's purpose, structure, and leadershipb. Activiti
es focus on efforts to understand and define their objectives, roles, and assignments

c. Interaction patterns tried out, discarded, or adopted.

d.The more diverse the group, the more difficult is forming; particularly sensitive stage for m
ulticultural groups

2. Storming

a. Characterized by conflict and confrontation

b. Involves redefinition of group's tasks and goals.

c. Members may begin to withdraw.

d. If conflict is not suppressed at this stage, it will hinder future stages

3. Norming

a. Characterized by cooperation and collaboration.

b. Cohesiveness begins.

c. Open communication, significant interaction, and efforts to agree on goals occur.

d. Behavioral norms are established.

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4. Performing

a. Group is fully functional.

b. Structure and roles are set and accepted.

c. Some groups attain a level of effectiveness that remains more or less constant; others
continue to change.

5. Adjourning

a. Termination of group activities resulting from task completion or goal attainment.

b. May be marked by very positive emotion well as feelings of loss, isappointment, or anger.

CONCEPT OF REFERENCE GROUP

It may be defined as any person or group that serves as a point of comparison or reference for
an individual in the for an individual in the formation of either general or specific values,
attitudes or behavior.

Types of reference groups on the basis of their membership

1. Contactual Group: It is a group in which person do not hold permanent membership

and does not have face to face contact but he is in contact with the group. It serves as
a positive influence on that person’s attitude nature, perception and behavior.
2. An Aspirational Group: Under this neither the person is the member of the group
nor he has got face to face contacts but he is aspirant to be the member of that group.
It often serves as a positive influence on that person’s attitude, perception and
behavior.
3. A Disclaimant Group: It is of individual who have face to face contact but
disapproves its norms, values and standard. So it has a negative influence on the
attitude and behavior of the individual and he tends to behave opposite to the norms
of the group.
4. An Aviodance Group: In such a group the individual does not hold membership and
also does not have face to face contacts. But at the same time he does not approve the
norms of the group so he tends to behave just opposite to the norms of the group.

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CONCEPT OF DIFFUSION OF INNOVATION

• Introduction of new product and service vital for customer and for marketers. How
consumer accepts new products? For marketers introduction of new product as an
opportunity.

• Meaning of Diffusion Process:Process by which the acceptance of an

innovation(new product, new service ,new practice) is spread by communication
(mass media, sales person) to the target market.

• How new products or ideas spread? And how they are assimilated.

Elements of Diffusion Process

1. Innovation: New product or new idea or new service. The concept of innovation can
be defined as:

 Firm oriented approach: When product is new to the company whether the product is
new ro market or to competitors.

 Product oriented approach: Features associated with products and effect of those
features of products on consumers.

• Continuous Innovation: It aims at modification of alteration of a product rather than

bringing totally new products e.g. new models of mobiles, laptop, and automobiles.

• Dynamically Continuous Innovation: Creation of new products.

 It does not totally change behavior patterns

 Dynamically alteration of existing product.

 For example: Wall size T.V, digital cameras

• Discontinuous Innovations:

 Changing the existing behavior pattern.

 Establishment of new behavior pattern.

• Discontinuous innovations lead to disruption of usage and consumption behavior

patterns; there is a change not only in the technology, but also requires consumers to
change to new behavioral patterns in terms of usage and consumption.

For example,

• the postal mail giving way to email and internet,

• the radio/record player giving way to portable music

• the telephone giving way to the mobile phone

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 2. Market Oriented approach: It focusses to judge the newness of a product in terms of the
exposure consumer have to new product.

i. A product is considered new if it has been purchased by small of fixed percentage of

potential market.

ii. Also if it has been on market for a relatively short or specified period of time.

3. Consumer Oriented Approach:

• A new product is a product that potential consumer perceives to be new.

• It can be said that newness of a product is judged by the consumer’s perception of the
product rather based on principal features of the product.

ADOPTION PROCESS

• Adoption is a micro concept that lays emphasis on the various phases or stages
through an individual consumer passes while accepting/rejecting a new product or
service offering. It is a major step in diffusion of Innovation. It is how consumer
decides whether or not to try and adopt innovative product/services.

Stages in Adoption Process

Generally speaking, the consumer passes through five stages of adoption

• Awareness

• Interest

• Evaluation

• Trial

• Adoption (or Rejection)

i) Awareness: This is the first stage in the adoption process, where the consumer is
exposed to the new product/service offering, and gets to know of the product. The
marketers’ objective here is to provide some awareness about the innovation, the
features and benefits as also the brand. The consumer is generally passive and acts as
a mere recipient of information. He becomes aware but lacks sufficient knowledge
about the new offering.

ii) Interest: In this next stage, the consumer begins to develop some interest in the
innovative offering, and thereby puts in some effort to know more about it. The
consumer becomes active in his search for information and tries to elaborate on the

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 information received at the awareness stage. He actively searches for information
about the new product /service and tries to assess how it can benefit him.

iii) Evaluation: The consumer who has acquired knowledge about the innovation,
now begins to evaluate; he evaluates whether, i) more information search is necessary
with respect to the innovation as well as to the brand; ii) he is sufficient with the
product/service information that he possesses. The consumer also evaluates the
innovative offering in terms of the attributes, features, and overall benefits, as
compared to existing alternatives; he assess the ―value‖ of the product/service
offering and the brand. If he feels that the offering provides ―value‖, he goes in for the
next stage which is trial; else the process is aborted, and the innovation rejected.

iv)Trial: The consumer goes and tries out the innovative offering, but there is not yet
any further purchase (repurchase) commitment. The product/service is experienced on
a small scale and used on a limited basis only, to determine the worth or usefulness.

v) Adoption (Rejection): Based on the trial stage, and the resultant experience, the
consumer would decide to decision to use/reuse/patronize the offering. If the
experience is satisfying, and the evaluation favorable, the innovative offering would
be accepted, else it would be rejected.

Barriers to Diffusion of Innovation /Adoption Process.

There are certain factors that negatively affect diffusion of innovation and subsequently the
adoption process. These barriers have been dealt with extensively by consumer researchers
and
incorporated even in models on innovation resistance. They could range at the micro level
from
product characteristics, to the more macro, socio-cultural, economic, situational and
technological forces. While product characteristics like relative advantage, compatibility,
trialability, and observability, do boost the rate of diffusion and adoption, perceived
complexity in purchase and usage of innovative offerings, retard the process. Innovations
could also meet resistance from socio-cultural, economic, situational and technological
forces. The innovative offering may not with compatible with social norms, values and
lifestyle; or may not go well with the economic strata; or be technologically complex, leading
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to fear to usage, obsolescence and risk. The basic barriers to the diffusion process and
subsequent adoption are as usage, value, risk and psychological factors.
a) Usage: ―Usage‖ as a barrier to innovation diffusion and adoption is said to exist when the
social system (the target market) finds it incompatible to the existing usage and consumption
behaviors and thus, finds it difficult to accept and use; in other words, they .find it to be
incompatible with their existing behaviors. The barrier is more psychological, based on deep
rooted values, beliefs, attitudes and perception, resultant in such behavior of non-acceptance
and non-usage. For example, people are often reluctant to enter into online monetary
transactions for fear of loss of privacy and fraud. Communication from the marketer based on
rational and informational may not be sufficient to overcome such a barrier; he would need to
use credible spokespersons, celebrities and experts to motivate people to change their existing
lifestyle patterns and resultant behavior, and adopt the innovation.
b) Value:Consumers could also resist acceptance of an innovation, as they may feel low
about the perceived value; consumers may perceive the new product/service offering to be
the same as existing offerings, and ―nothing new‖ or ―better in value.‖ For example, while
assessing mobile charges, people compare the post-paid plans with the pre-paid plans in
terms of rental as well as call charges, and conclude that the former are cheaper, inspite of
rental being high.The perceived lack of value may be i) the product/service does not provide
much benefit over the existing alternatives; ii) the product/service is costly, and doesn’t seem
to be of worth the price. Consumers’ perception of ―high price‖ always takes over the
perception over product value or
product benefit; in fact, values is always assessed in terms of price; Also, price is a ―catchy‖
issue than the benefits attached; price appears more tangible, than benefits; and, consumers
generally tend to know more quickly about price, than they do about the benefits that the
product brings along with it.
c) Risk: Risk also acts as a barrier to diffusion of innovation. Consumers show reluctance to
use an innovative product/service offering out of fear of taking risks. There could be six types
of risks that a consumer could face, viz., functional risk (would the product perform as
expected), physical risk (would the product usage and or consumption pose a threat), social
risk (would it cause risk of social embarrassment), financial risk (would the product will be
worth the cost), psychological risk (would the innovation hurt consumers’ ego), and time risk
(would it lead to wastage of time spent while making the purchase). The perceived risk
barrier acts as a big barrier to the diffusion and adoption process; consumers are fearful of

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purchase, usage and consumption of innovative offerings, and thereby continue to patronize
the existing alternatives, rather than adopt new ones (for fear of making a wrong decision).
In order to overcome this problem, the marketers could make use of both marketing
communication (via audio-visual or print media, or company salespersons), as well as
interpersonal communication (opinion leadership, word-of-mouth communication). Trials
(free or discounted) as well as interpersonal communication with peers, colleagues and
friends can also encourage personal experience by the consumer and help overcome this risk.

d) Psychological factors: Psychological factors also prevent a consumer from adopting a new
Product/service offering. These factors relate to a person’s background, attitude and belief,
Perception, values, lifestyles, culture etc. They may find the innovation to be psychologically
threatening. The two common threats are i) tradition barrier, and ii) image barrier.

Tradition barrierrelates to socio-culturally accepted norms of behavior that are regarded as

―right and appropriate,‖ by the consumer segment. Anything that is new and does not support
traditional patterns is regarded as psychologically threatening; this includes usage and
adoption of innovative products and services. For example, wearing western outfits is a taboo
for women in the Middle East, and as such they would never attempt to wear skirts or
trousers. Another example, Kelloggs Cornflakes, found it difficult to penetrate the Indian soil,
primarily because it was positioned as a quick breakfast cereal to be had in cold milk, as
opposed to the traditional Indian concept of cornflakes or cereal in hot milk.
Image barrierrefers to the consumer’s attitude and feelings about the product/service
offering,
the brand, or the dealer, or even the country of origin. It also relates to personality and self
image
(actual and ideal). Consumers’ may resist adoption of new products/services if they are
patriotic and ethnocentric; or if they do not regard the innovation or the marketer/dealer to be
of their ―class‖ in terms of socio-economic status or even quality. Thus, marketers try to
come up with variants in offerings, and have separate names for separate variants depending
upon the segment(s) for which they are aimed.
―Adopter categories‖ refer to a classification scheme amongst members’ of the target
segment(s), which illustrates where one consumer stands in relation to another consumer with
respect to time, that has lapsed between the introduction of the new product and service and
the adoption by a consumer(s). Researchers have classified consumers into adopter and non-
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adopter categories, which range from two or three or five category classifications. It is
noteworthy that the consumers would be classified based on the nature of the good or service.

Roger’s has proposed a classification of adopters, according to which consumers can be

divided
into five categories based on the time taken by them to adopt a product. These five adopter
categories are innovators, early adopters, early majority, late majority, and laggards. Based
on research, it has been observed that the five categories when plotted on a graph, lead to a
bell-shaped normal distribution curve. The five categories are explained as follows:

a) Innovators: Innovators comprise 2.5 percent of the target market(s) adopters; they are
those
consumers’ who are the first to go and purchase a new product or service offering. They
purchase the new product and service offering not because they possess a need, but because
they desire new ideas and concepts, and seek product and service innovations. They are high
on self-confidence, and are always eager to try out new products/services. They have access
to information about such new offerings, and are quick to purchase; one, because they have
the interest and inclination to buy the ―new‖; and two, because they have the purchasing
power and the access. It is important to mention here, that innovators are not ―generic‖; they
are in most cases ―specific‖ to a product and service type.

b) Early adopters: The next 13.5 percent of the target market(s) adopters are called early
adopters. These are those consumers’ who purchase the new product and service offering not
because they are fascinated towards the ―new‖, but because they possess a need. They
generally tend to have some idea on the product/service category, and after gathering some
more information about the product and or brand, they go in for purchase. Early adopters rely
on group norms and also turn out to be good opinion leaders, and could be easy targets for the
marketer.

c) Early majority:The early majority is similar to the early adopter in the sense that they buy
the product/service offering because they possess a need and want to fulfill it; however, they
are
not as quick as the early adopters and take longer to enter into purchase. This is because
unlike the earlier two categories, the early majority does not have much interest in the
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product/service category. Thus, the consumers that fall into this category have to collect
information, evaluate it, deliberate carefully and then take a decision; thus, the process takes
longer. The early majority make up the next 34 percent of the adopters.

d) Late majority: The next 34 percent of the adopters are referred to as the late majority.
They
are referred to as ―late,‖ because i) members of their social class, reference group and peer
group have already made the purchase; and the social influence is strong, and ii) they
themselves have evaluated the new product and or service and are ready to buy it. They have
a need, and after careful thought and deliberation as well as with social influence and
pressure, the ―late majority‖ makes the purchase. By nature they are skeptical and confirm to
social pressure. Interpersonal communication has a major role to play.

e) Laggards: The laggards are the last to adopt a new product or service offering, and as such
make up the last 16 percent of the target market. They are slow in buying the innovative
offering because,
i) They are uninvolved with the product and service
ii) They do not possess much information;
iii) They remain uninfluenced by social pressure, and social ties are not very strong; iv)
they believe in making routine purchases and prefer to buy the ―familiar‖, than the
―unfamiliar‖.

IMPORTANT QUESTIONS:
1. What is diffusion of innovation and state barriers to diffusion of innovation?

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 UNIT VIII

PERSONAL INFLUENCE AND THE OPINION LEADERSHIP PROCESS

Word-of-Mouth (WOM) communication

The informal interpersonal communication that occurs between two people is referred to as
Word-of-Mouth (WOM) communication. In terms of marketing, such a conversation relates to
purchase activity and consumption behavior, and thus pertains to anything and/or everything
about product and service offerings. The major characteristic features of WOM
communication are:

i) WOM is informal in nature.

ii) It is interpersonal and takes place between two or more people. The people could be actual
consumers or prospects; and are in no way representative of the marketer.
iii) Unlike commercial sources, the people involved in WOM communication do not have
ulterior or hidden motives of making a sale and earning profit.
Word-of-mouth communication generally relates to face-to-face informal
communication. However, it could also occur through a telephonic conversation or chatting
and blogging on the Internet. It could assume verbal and non-verbal forms (in the form of
behavior).
As people communicate with each other in a purchase decision making situation, one
of those involved in the informal communication process is able to influence the attitude and
purchase decision of others. He is an Opinion Leader and the process is known as Opinion
Leadership. Schiffman defines Opinion Leadership as ―the process by which one person (the
opinion leader) informally influences the actions or attitudes of others, who may be opinion
seekers or merely opinion recipients‖.
An identification of Opinion Leaders, their behavior and the very dynamics of the Opinion
Leadership process is helpful to the marketer. Once the marketers have identified the Opinion
Leaders, marketers can target their marketing efforts to them. They can provide product
information and advice to them and Opinion Leaders through WOM can make the task easier
for marketers.

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OPINION LEADERS AND OPINION RECEIVERS/SEEKERS

One of those people who indulge in informal product related communication, usually
provides information about a product or product category, whether it would useful to buy,
how it would be used etc. He would also offer advice as to which of several brands is the best
and from where it should be bought. This person is known as the Opinion Leader and the
process is known as Opinion Leadership.
In some cases, the Opinion Leader just likes to talk and discuss about a product or
service category. He voluntarily provides information about the product and product category
and/or about brands. The people who form the audience and listen to him are called Opinion
Receivers.
In other cases, prior to a purchase, people could approach an Opinion Leader and
request him for information and advice about the product category and/or about brands. That
is, the Opinion Leader would provide information only when asked for. In such cases, the
persons (audience/or the receiver of information) are known as Opinion Seekers. Individuals
who on their own seek information and advice about products and brands are called Opinion
Seekers.
There is a two-way exchange of information, and both opinion leaders and opinion
receivers/seekers interact with each other. Opinion leaders provide the receivers/seekers with
product information, advice, and relate to them their experiences. In return for this, they
gather more information, personal opinion and personal experiences from the
receivers/seekers.
Opinion Leaders are not generic in nature; they are specific to a product category and
the Opinion Leader for a product category would become an Opinion Receiver/Seeker for
another product category.
Opinion leaders play a key role and act as a vital role between the marketer and the
consumer. He communicates informally about product and service offerings and/or brands;
he gives product news and advice to consumers (current and potential) and also narrates his
personal experience to others. The major roles played by opinion leaders are, i) authority
figure; ii) trend setter; and iii) local opinion leader. These roles are discussed as follows:
i) Authority figure: The role that is played by an Opinion Leader when he gives product
news and advice, and also narrates his personal experiences to consumers, is known as the
authority figure role. By providing product news and advice, as also narrating his personal
experiences, he helps current and potential consumers satisfy their needs and wants.

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ROLE PLAYED BY OPINION LEADERS:
Opinion leaders are highly involved with a product category. They gather information about
new, technically complex and risky products by reading about them in newspapers, journals
and magazines (also special interest magazines). They attend product launch parties, trade
fairs and trade shows, conferences and symposiums etc. They also enter into conversations
and discussions with subject experts, researchers, scientists, and even innovators. Innovators
provide them with accounts of their first hand experience. It is noteworthy that sometimes
even Opinion Leaders act as innovators and are the first to try out a new product offering in
the product category of their interest.
Opinion Leaders are said to be performing the authority figure role as they act as
experts and authorities for a particular product category. They have knowledge, expertise and
experience with the product category. They are aware of the various evaluative criteria on
which the product and service offerings should be assessed and they are also aware of the
decision rules that need to be applied to make a final purchase decision. Opinion Leaders are
also aware of the various brands that are available, and the value associated with each. So
they are in the best position to provide information and advice to consumer as to i) whether to
make a purchase? ii) If yes, which brand to buy? Because of this role that they perform as
experts, consumers prefer approaching them for information and advice. This helps the
consumers i) reduce the level of physical and cognitive effort associated with a purchase; ii)
reduce the level of risk associated with the purchase.
Opinion Leaders enjoy playing this role because of the prestige and pride associated with it.
As mentioned above, they may voluntarily play this role and enjoy talking about a product
category, or they may be approached and requested for it by the consumers. In any case, they
derive pleasure and pride in acting out the expert’s role.
Opinion Leaders are specific to a product or service category. It is very rare that an Opinion
Leader is an expert or authority for more than one product category. This is because of the
fact that it would involve a lot of effort and would difficult for a person to be well informed
and educated about any and every product category. Further, the expertise would be
maintained only if it is an ongoing effort of information gathering, storage and retention. It
would involve a huge amount of effort to develop and maintain expertise in more than one or
few areas. Thus, as an expert, Opinion Leaders specialize in one product category. However,
Opinion Leadership could tend to overlap across certain

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combinations of interest areas, i.e., Opinion leaders in one product category can often be
Opinion Leaders in related areas, like kitchen ware and household goods, fashion apparel and
cosmetics, computers and mobiles, tourism and travel.
ii) Trend setter: Opinion Leaders act as trend setters. They are inner oriented and do not
bother about what others in the society say or do. They are also innovative and often go in for
purchase of new product and service offerings (of their interest category) and through the
purchase and usage, they set the trend.
Opinion Leaders play the trend setter role when they narrate accounts of their
personal experiences to others to copy and emulate. In other words, if they purchase a new
innovative product of their interest, they speak of their experience as acts of behavior that the
audience (opinion receivers/opinion seekers) should emulate.
Unlike the authority role (of providing news and advice), they emphasize more on
narrating their personal experiences. Rather than knowledge and expertise being the source of
credibility, it is the personal experience that provides credibility.
Once a trend is set by trend setters, people begin to copy them. In fact they act as a reference
group for others who want to use the same product and service offerings that are used by
former. As trend setters, Opinion Leaders could belong to membership or non-membership
reference groups.
iii) Local Opinion Leader: People like to behave like others in their reference groups. They
desire social approval from contactual (membership) and aspirational (non-membership)
groups. People from such groups directly or indirectly provide information and advice that
helps consumers to make purchase decisions, and buy such goods and services and/or brands
that the contactual and aspirational groups approve off.
Opinion Leaders are said to act a local opinion leaders when a) they constitute a
person’s positive reference group; and b) they provide information about such product and
service offerings and/or brands that help satisfy their needs and wants of the consumer group
in a manner that is consistent with group values and norms. As local opinion leaders, they
provide knowledge and advice, and narrate personal experiences about product and service
offerings. Their credibility lies in the fact that as they belong to the same group as others who
approach them, they are able to advise on the ―good‖ or ―bad‖, and thereby guarantee social
approval and appreciation.
Both Opinion Leaders and Opinion Receivers/seekers have their own reasons for
providing information and receiving/seeking product information and advice. Opinion
Leaders give product related information and advice sometimes voluntarily on their own and
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sometimes when are approached and asked for. Similarly Opinion Receivers/Seekers request
for information or listen with listen with patience to all that the Opinion Leader has to say.
There are various reasons as to why such communication exchange takes place between
Opinion Leaders and Opinion Receivers/Seekers, be they relatives, friends, acquaintances or
even strangers. Some of the reasons why Opinion Leaders provide information and why
Opinion Receivers/Seekers receive or seek information and advice are discussed below.
These explain the motives behind the Opinion Leadership process.
i) Why do Opinion Leaders provide information?
- Opinion Leaders like to give product news, provide expert advice and also love to share
their experiences with others. This is because they are involved and interested in a product or
service category, and love to talk about it (product involvement).
- WOM communication gives them an opportunity to talk about their interests to others.
Further they may feel so positively and favorably or negatively and unfavorably about a
product and/or brand that they feel like telling about it to others (product involvement, self
involvement and social involvement)
- As they possess knowledge, expertise and experience with a product category, they feel
important and powerful when people approach them for information and advice. It confers
upon them a sense of superiority or special status over others. They take pride in providing
information and advice (self gratification, power and pride). They also feel that others to
whom they have given information and advice on new products or services have bought them
because of them.

They may be genuinely be benevolent and generous, and out of altruistic concerns may like
to help others, especially family, friends, relatives and neighbors (selfless motive: social
involvement).
- Opinion Leaders may be also trying to reduce their own level of post-purchase cognitive
dissonance (self-interest).
- Interestingly true, many provide information as a) they may be wanting to try out a new
product or service offering after someone else buys and uses it first; or b); or c) they may
themselves be trying to reassure themselves of their own purchase decision by recommending
it to others; and d) they may be dissatisfied with a purchase and like to complain about the
purchase of the product and service and/or brand and/or company and/store from where it has
been purchased
ii) Why do Opinion Receiver/Seekers request for information?
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- Opinion Receivers/Seekers gather information so that they can make the right purchase
decision, with respect to the right product and service offering, the right brand, at the right
price, from the right store and at the right time. Especially in cases of high involvement
products, a person may be less knowledgeable and less involved and can take advice from
someone who is more experienced and knowledgeable for that product category.
- They obtain information about new-product or new-usage.
- It reduces the physical and cognitive effort that the Opinion Receivers/Seekers has to take to
gather information, evaluate alternatives and take the right decision. They also save on time
required to gain information about product and the varying brands.
- Product knowledge and advice reduces the level of uncertainty associated with a purchase.
It helps them reduce the perceived risk as they are able to gain product and/or brand
knowledge from experts, who are also many a times innovators and first-time users of the
product (Opinion Leaders are innovative by nature and this has been discussed in the
previous lesson).
- They prefer word-of-mouth communication over other marketing communication as they
believe that while the latter have an ulterior interest in making sales, the former is more
credible with no ulterior motives.

People also turn to Opinion Leaders so as to confirm their purchase decisions. This is
particularly true for high involvement products, as also for products that need social approval
and/or match social class and social status.
The Opinion Leadership process is highly dynamic in nature. Opinion Leaders communicate
informally about product and service offerings and/or brands. They offer product information
and advice, and narrate experiences. They are not generic in nature; they are specific to a
product category, and an expert in one product category would not be an expert for another
product category. Thus, a person may be an Opinion Leader for a product category and an
Opinion Receiver for another. The dynamic nature of Opinion Leadership is discussed as
follows:
Opinion Leaders provide product information, advice and narrate experiences: Opinion
Leaders communicate informally about product and service offerings and/or brands; they
give product news and advice to consumers (current and potential) and also narrate their
personal experience to others. As such they act as authority figures, trend setters and local
opinion leaders.

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Opinion Leaders provide both positive and negative information: Opinion Leaders
provide both favorable and unfavorable information about product and service offerings
and/or brands, and this adds to their credibility. Compared to positive and neutral information
and/or evaluation, the impact of negative information and/or evaluation is much greater and
has a bigger impact on Opinion Receivers/Seekers. Thus, they would avoid such product and
service offerings and/or brands that are spoken negatively by Opinion Leaders.
Opinion Leaders are influential and persuasive: Opinion Leaders are highly influential
and very effective at persuading people around them. They are credible informal sources of
product knowledge, information and advice. People look up to them for advice and they are
good at influencing the former because of the following:

DYNAMICS OF OPINION LEADERSHIP PROCESS:

The Opinion Leadership process is highly dynamic in nature. Opinion Leaders communicate
informally about product and service offerings and/or brands. They offer product information
and advice, and narrate experiences. They are not generic in nature; they are specific to a
product category, and an expert in one product category would not be an expert for another
product category. Thus, a person may be an Opinion Leader for a product category and an
Opinion Receiver for another. The dynamic nature of Opinion Leadership is discussed as
follows:
Opinion Leaders provide product information, advice and narrate experiences: Opinion
Leaders communicate informally about product and service offerings and/or brands; they
give product news and advice to consumers (current and potential) and also narrate their
personal experience to others. As such they act as authority figures, trend setters and local
opinion leaders.
Opinion Leaders provide both positive and negative information: Opinion Leaders
provide both favorable and unfavorable information about product and service offerings
and/or brands, and this adds to their credibility. Compared to positive and neutral information
and/or evaluation, the impact of negative information and/or evaluation is much greater and
has a bigger impact on Opinion Receivers/Seekers. Thus, they would avoid such product and
service offerings and/or brands that are spoken negatively by Opinion Leaders.
Opinion Leaders are influential and persuasive: Opinion Leaders are highly influential
and very effective at persuading people around them. They are credible informal sources of

49
product knowledge, information and advice. People look up to them for advice and they are
good at infl

MEASUREMENT OF OPINION LEADERSHIP:

As Opinion Leaders act as a vital link between marketers and consumers, the marketers are
always concerned with i) the identification of such people in a social structure who are
Opinion Leaders; ii) the identification of people who have the potential to become Opinion
Leaders; and iii) the measurement of Opinion Leadership.
In order to measure Opinion Leadership, it is essential that Opinion Leaders with
respect to the product/service category are identified. It is also important that people who
have the potential to become Opinion Leaders are also identified. There are three ways in
which Opinion Leaders can be identified; these are listed as follows:
a) Marketers directly ask the consumers whether they are Opinion Leaders.
b) They ask a subject expert to identify who the Opinion Leaders are.
c) They study the communication patterns and flows among consumers, interpret the
dynamics and identify the leaders
These methods, in particular the third one help marketers to identify the traits and
characteristics that make up an Opinion Leader for a type of product or service category. It
also helps the marketer understand the behavior of Opinion Leaders and the dynamics
underlying the Opinion Leadership process. Marketers are interested in identifying,
measuring and analyzing the impact of the opinion leadership process on consumption
patterns and consumption behavior.
An understanding of the traits and characteristics of Opinion Leaders, their behavior and the
very dynamics of the Opinion Leadership process is helpful to the marketer. Once the
marketers have identified the general traits and characteristics of Opinion Leaders, they can
target their marketing efforts, particularly the communication influencing the former.

Opinion Leadership Measurement techniques

• Techniques designed for measuring the impact of opinion leadership on the

consumption behavior.

• Four types of measuring opinion leadership techniques are--

 The self-designating method

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  The Socio metric method

 Key information method

 The objective method

The Self Designating Method

• In this Respondents are asked to evaluate the extent to which they have provided
information to others about a product category, specific brand or influenced purchase
decision of others.

• Researchers divide consumers into two parts

 Those who influence others

 Those who do not influence others.(Non-opinion leaders)

The Socio metric method

 In this market Researchers have two options:

 They can study a self-contained community

 They can study more widespread respondent sample.

Study of self contained community:

 Study of all residents in particular residential area.

Key information method

• This is a technique for measuring opinion leadership in which key-informant is a

person who is keenly aware or knowledgeable about the nature of social
communication among members of a specific consumer group.

Objective Method

• This method artificially places individuals in a position to as opinion leaders and

measures result of their efforts.

• It identifies and measures Opinion Leadership by placing people in controlled

environments (just as controlled experiments)

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 • People are chosen, given information about new products and service categories, and
then asked to act out as Opinion Leaders

• It measures the results of their efforts and assesses how successful their impact is on
consumption behavior

Advantages:

It measures people’s abilities to provide news and advice and influence purchase decisions
in controlled environments.

Disadvantages:

It is time consuming as it requires setting up of experimental designs. It is a complex

process and requires subject experts and trained psychologists.

GROUP MARKETING COMMUNICATION

―Communication is a tool used by marketers to force consumers to act in a desired manner

―

The word communication describes the process of conveying message ,facts ,ideas
,attitudes and opinions from one person to another so that they are understood

Marketing Communication tools--

• Personal Selling

• Advertising

• Sales Promotion

• Publicity

• Point of Purchase communication

Integrated Marketing Communication (IMC)

It is a management concept that is designed to make all aspects of marketing

communication such as advertising, sales promotion, public relations, and direct
marketing work together as a unified force, rather than permitting each to work in
isolation. Goal of IMC is to effect directly or indirectly the channels of

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 communication and behavior of targeted audience. The following are the features of
IMC:-

• It uses all forms of communication tools.

• It builds relationship between the brand and the customer.

• Affect behavior of audience.

• In IMC customer is the king.

Components of integrated marketing communications--

IMC weaves diverse aspects of business and marketing together. These include:

Organizational culture

The organization's vision and mission

Attitudes and behaviors of employees & partners

Communication within the company

Four P's

Price, pricing plans, bundled offerings

Product (product design, accessibility, usability)

Promotion

Place (point of purchase, in-store/shopper experience)

Advertising

Broadcasting/mass advertising: broadcasts, print, internet advertising, radio, television

commercials

Outdoor advertising: billboards, street furniture, stadiums, rest areas, subway advertising,
taxis, transit

Online advertising: mobile advertising, email ads, banner ads, search engine result pages,
blogs, newsletters, online classified ads, media ads

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  Direct marketing: direct mail, telemarketing, catalogs, shopping channels, internet
sales, emails, text messaging, websites, online display ads, fliers, catalog distribution,
promotional letters, outdoor advertising, telemarketing, coupons, direct mail, direct
selling, grassroots/community marketing, mobile

 Online/internet marketing

E-commerce

Search engine optimization (SEO)

Search engine marketing (SEM)

Mobile Marketing

Email marketing

Content marketing

Social Media (Facebook, Twitter, LinkedIn, Google +, Foursquare, Pinterest, YouTube,

Wikipedia, Instagram)

Sales &customer service

Sales materials (sell sheets, brochures, presentations)

Installation, customer help, returns & repairs, billing

Public Relations

Special events, interviews, conference speeches, industry awards, press conferences,

testimonials, news releases, publicity stunts, community involvement, charity involvement &
events

Promotions

Contests, coupons, product samples (freebies), premiums, prizes, rebates, special events

Trade shows

Booths, product demonstrations

Corporate philanthropy

Donations, volunteering, charitable actions

When these diverse aspects of business and marketing are weaved together properly an
effective campaign can be achieved. Effective campaigns are demonstrated on the Integrated

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Brands showcase which recognizes brands that are innovative, strategic and successfully
growing their sales. By effectively leveraging each communication channel greater impact
can be achieved together than achieved individually.

Stages of Development in IMC

Level 1: Tactical Coordination and Marketing Communications Initial IMC focus is on

the tactical coordination of diverse marketing such as advertising, promotion, direct response,
public relations, and special events. This level focuses on delivering ―one sight, one sound‖
via marketing communication.

Level 2: Redefining the Scope of Marketing Communication The organization begins to

examine communications from the customer’s point of view. Marketing communication
begins to give consideration to all sources of brand and company contact a customer has with
the product or service. Management broadens the scope of communication activities to
encompass and coordinate internal marketing employees, suppliers, and other business
partners and align with the existing external communication programs

Level 3: Application of Information Technology An organization’s application of

empirical data using information technology to provide a basis identity, value, and monitor
the impact of integrated internal and external communication programs to key customer
segments over time.

Level 4: Financial and Strategic Integration The emphasis shifts to using the skills and
data generated in the earlier stages to drive corporate strategic planning using customer
information and insights. Organizations re-evaluate their financial information infrastructure

Importance of integrated marketing communications

Integration has become an essential concept in marketing because technological advances

have changed how business stakeholders interact. Marketing theory that was established
during the discipline’s formative years has been overtaken by the complexities of real-time,
multimodal, multi directional communication.[9]

A few examples help illustrate the growing importance of integration:

Search marketing: When someone is considering buying a product or service they will often
conduct an online search. What they find, on Google and other search engines, as well as

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information from news sites, review sites, directories, videos and place-based searches, are
presented together, so like it or not, there is a level of integration. The online experience will
affect their attitudes towards a brand and their behavior. Marketers therefore need to concern
themselves with making sure their brand is found ahead of competitors' and then ensuring
their audience has a positive and helpful experience.

Accessibility and convenience: Consumers expect information and services that relate to a
brand to be conveniently accessible via its website. For instance when a consumer visits
Virgin.com they are able to book a flight, manage their money, top up their mobile phone
plan or find up-to-date news about the company.

Aggregation of information and services: The traditional demarcation between a company,

its suppliers and customers has become confused. For instance the Apple iTunes app store
aggregates software and information from app makers, along with reviews provided by
consumers. Product promotion, delivery, service and information from many different
sources are seamlessly presented together.

Social media: Traditionally businesses were largely in control of their brand

communications. Now brand communications are multidirectional as consumers can easily
share, comment and create content. Brands can use this to their advantage by creating
appealing content. For instance Unilever’s campaign for Dove, The Dove Real Beauty
Sketches went viral with over 54 million views on YouTube.

Growth of mobile: The growing penetration of smartphones with fast internet connectivity
means that marketers need to take into consideration integration between the online
experience and place-based experiences. For instance when a consumer downloads the Target
app they are able to receive coupons to their mobile phone and redeem them at the checkout
by presenting the coupon barcode to the cashier.

IMPORTANT QUESTIONS:

1. What is opinion leadership & explain various methods for measuring opinion
leadership?
2. What is integrated marketing communication?

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 UNIT IX

BUSINESS BUYING BEHAVIOUR & DIFFERENCE BETWEEN INDUSTRIAL

BUYING & CONSUMER BUYING

BUSINESS BUYING BEHAVIOUR

• Bigger segment as compare to individual buying behavior

• Organization

 Public & Private organization

 Social

 Religious

• Their decision process and buying behavior are different from customer behavior.

• Business buying process is much larger and complex

• Lot of factors are involved

• Post purchase behavior is important as compared to consumer buying.

• It is a Group buying process.

Features of Business buying process

• More risk is involved as quality of buying is very high and regular in nature.

• More complicated and advanced as it has to go through different factors & processes.

• High risk involved as any unsuccessful purchase decision possesses greater and
longer impact.

• Interdependence between industrial buyer and industrial seller.

Factors influencing Business buying behavior

• Economic &non economic factors.

1. Environmental factors:

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 • Political, social, competitive, technological

Political :

 Change of government

 Trend

 Liking of ruling government

 Change in economic and industrial law.

Competitive environment

 Pricing policies

 Product policies

 Marketing & promotional policies of competitors.

Organizational factors:

 Objectives, policies & procedures of making purchase

 Centralized or decentralized purchase

 Different buying decision process depending on individual policies, procedures ,

strategies, vision.

IMPORTANT QUESTIONS

1. What is the difference between business buying and individual buying?

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