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Behavioral psychology of a Consumer

Consumer behavior is the study of how people buy, what they buy, when they buy and why they buy.
It attempts to understand the buyer decision making process, both individually and in groups. It
studies characteristics of individual consumers such as demographics, psycho graphics, and
behavioral variables in an attempt to understand people's wants. It also tries to assess influences on
the consumer from groups such as family, friends, reference groups, and society in general.

Activities directly involved in obtaining, consuming and disposing of products and
services, including the decision processes that precede and follow these actions.
This study draws on concepts from various other disciplines like Psychology, Sociology,
Anthropology, Economics and Marketing.

Customer behavior study is based on consumer buying behavior, with the customer
playing the three distinct roles of user, payer and buyer. Relationship marketing is an influential asset
for customer behavior analysis as it has a keen interest in the re-discovery of the true meaning of
marketing through the re-affirmation of the importance of the customer or buyer. A greater importance
is also placed on consumer retention, customer relationship management, personalization,
customization and one-to-one marketing. Social functions can be categorized into social choice and
welfare functions.
Each method for vote counting is assumed as a social function but if Arrow’s possibility
theorem is used for a social function, social welfare function is achieved. Some specifications of the
social functions are decisiveness, neutrality, anonymity, monotonicity, unanimity, homogeneity and
weak and strong Pareto optimality. No social choice function meets these requirements in an ordinal
scale simultaneously.
The most important characteristic of a social function is identification of the interactive
effect of alternatives and creating a logical relation with the ranks. Marketing provides services in order
to satisfy customers. With that in mind, the productive system is considered from its beginning at the
production level, to the end of the cycle, the consumer (Kioumarsi et al., 2009).
“Belch and Belch” define consumer behavior as 'the process and activities people
engage in when searching for, selecting, purchasing, using, evaluating, and disposing of products and
services so as to satisfy their needs and desires'.

Why We Need To Study Consumer Behavior?

You cannot take the consumer for granted any more.
Therefore a sound understanding of consumer behavior is essential for the long run success of any
marketing program “Consumers” or the

“Customers” play a very critical role as these are the people who finally BUY the goods & services of
the organization, and the firm is always on the move to make them buy so as to earn revenue. It's
crucial from both the points of view as given below:

1. From the customers' point of view: Customers today are in a tough spot. Today, in the highly
developed & technologically advanced society, the customers have a great deal of choices &
options (and often very close & competing) to decide on.
1. They have the products of an extreme range of attributes (the 1st P - Product),
2. they have a wide range of cost and payment choices (the 2nd P - Price),
3. they can order them to be supplied to their door step or anywhere else (the 3rd P - Place),
4. And finally they are bombarded with more communications from more channels than
ever before (the 4th P - Promotion).
How can they possibly decide where to spend their time and money, and where they should give their

1. From the marketers' point of view: "The purpose of marketing is to sell more stuff to more
people more often for more money in order to make more profit". This is the basic principle of
requirement for the marketers in earlier days where aggressive selling was the aim. Now it can't
be achieved by force, aggression or plain alluring. For the customers are today more informed,
more knowledgeable, more demanding, and more discerning. And above all there is no dearth of
marketers to buy from. The marketers have to earn them or win them over.
The global marketplace is a study in diversity, diversity among consumers, producers, marketers,
retailers, advertising media, cultures, and customs and of course the individual or psychological
behavior. However, despite prevailing diversity, there also are many similarities. The object of the
study of consumer behavior is to provide conceptual and technical tools to enable the marketer to apply
them to marketing practice, both profit & non-profit.
The study of consumer behavior is very important to the marketers because it enables
them to understand and predict buying behavior of consumers in the marketplace; it is concerned not
only with what consumers buy, but also with why they buy it, when and where and how they buy it,
and how often they buy it, and also how they consume it & dispose it. Consumer research is the
methodology used to study consumer behavior; it takes place at every phase of the consumption
process: before the purchase, during the purchase, and after the purchase. Research shows that two
different buyers buying the same product may have done it for different reasons; paid different prices,
used in different ways, have different emotional attachments towards the things and so on.

According to Professor Theodore Levitt of the Harvard Business School, the study of
Consumer Behavior is one of the most important in business education, because the purpose of a
business is to create and keep customers. Customers are created and maintained through marketing
strategies. And the quality of marketing strategies depends on knowing, serving, and influencing
consumers. In other words, the success of a business is to achieve organizational objectives, which can
be done by the above two methods. This suggests that the knowledge & information about consumers
is critical for developing successful marketing strategies because it challenges the marketers to think
about and analyze the relationship between the consumers & marketers, and the consumer behavior &
the marketing strategy.

Consumer behavior is interdisciplinary; that is, it is based on concepts and theories about
people that have been developed by scientists, philosophers & researchers in such diverse disciplines as
psychology, sociology, social psychology, cultural anthropology, and economics. The main objective of

the study of consumer behavior is to provide marketers with the knowledge and skills that are
necessary to carry out detailed consumer analyses which could be used for understanding markets and
developing marketing strategies. Thus, consumer behavior researchers with their skills for the
naturalistic settings of the market are trying to make a major contribution to our understanding of
human thinking in general.

The study of consumer behavior helps management understand consumers' needs so as to recognize the
potential for the trend of development of change in consumer requirements and new technology. And
also to articulate the new thing in terms of the consumers' needs so that it will be accepted in the
market well.

The following are a few examples of the benefits of the study of consumer behavior derived by the
different categories of people:

1. A marketing manager would like to know how consumer behavior will help him to design better
marketing plans to get those plans accepted within the company.

2. In a non-profit service organization, such as a hospital, an individual in the marketing
department would like to know the patients' needs and how best to serve those needs.

3. Universities & Colleges now recognize that they need to know about consumer behavior to aid
in recruiting students. "Marketing Admissions" has become an accepted term to mean marketing
to potential students.

Consumer behavior has become an integral part of strategic market planning. It is also the
basis of the approach to the concept of Holistic Marketing.
The belief that ethics and social responsibility should also be integral components of every
marketing decision is embodied in a revised marketing concept - the societal marketing concept -
which calls on marketers to fulfill the needs of their target markets in ways that improve society as a


The study of consumers helps firms and organizations improve their marketing strategies by
understanding issues such as how

• The psychology of how consumers think, feel, reason, and select between different alternatives
(e.g., brands, products);
• The psychology of how the consumer is influenced by his or her environment (e.g., culture,
family, signs, media);
• The behavior of consumers while shopping or making other marketing decisions;
• Limitations in consumer knowledge or information processing abilities influence decisions and
marketing outcome;

for making better marketing campaigns. by understanding that consumers are more receptive to food advertising when they are hungry. a number still became pregnant while taking the drug. Since many environmental problems result from product disposal (e. In the 1980s.. we learn that • Companies that introduce new products must be well financed so that they can stay afloat until their products become a commercial success • It is important to please initial customers. Marty Fishbein. Unfortunately. or ideas to satisfy needs and the impacts that these processes have on the consumer and society. motor oil being sent into sewage systems to save the recycling fee. or organizations and the processes they use to select. experiences. To get consumers’ attention. a marketing professor. was introduced. By understanding that new products are usually initially adopted by a few consumers and only spread later. For example. • How consumer motivation and decision strategies differ between products that differ in their level of importance or interest that they entail for the consumer. the Federal Drug Administration (FDA) took the step of requiring that very graphic pictures of deformed babies be shown on the medicine containers. and dispose of products." Although it is not necessary to memorize this definition. The best solution. use. because this may influence how a product is best positioned or how we can encourage increased consumption. it brings up some useful points: • Behavior occurs either for the individual. It was also determined that the practice of sharing needles was too . or aggressive marketing of easy credit. For example. Although physicians were instructed to warn their female patients of this. One "official" definition of consumer behavior is "The study of individuals.e. • A second application is public policy. Product use is often of great interest to the marketer. however. to the rest of the population. we learn to schedule snack advertisements late in the afternoon. would be if we could get illegal drug users to stop. obviously. groups. • Consumer behavior involves the use and disposal of products as well as the study of how they are purchased.g. This. services. • Social marketing involves getting ideas across to consumers rather than selling something. Acutance. or in the context of a group (e. There are four main applications of consumer behavior: • The most obvious is for marketing strategy—i.g. Acutance resulted in severe birth defects if taken by pregnant women. • The impact of consumer behavior on society is also of relevance. aggressive marketing of high fat foods. was deemed to be infeasible.. and • How marketers can adapt and improve their marketing campaigns and marketing strategies to more effectively reach the consumer. friends’ influence what kinds of clothes a person wears) or an organization (people on the job make decisions as to which products the firm should use). secure. and then only gradually. or garbage piling up at landfills) this is also an area of interest. went on sabbatical to work for the Centers for Disease Control trying to reduce the incidence of transmission of diseases through illegal drug use.. a near miracle cure for acne. since they will in turn influence many subsequent customers’ brand choices. • Consumer behavior involves services and ideas as well as tangible products. may have serious repercussions for the national health and economy.

“In which city and state were you born? ____________) or closed-ended. As a result. and that the respondent is not being influenced by seeing a list of responses. observation. for example. if you are thinking about starting a business making clothes for tall people.S. and consumers seemed to prefer the taste. Surveys. Coca Cola did a great deal of research prior to releasing the New Coke. however. you don’t need to question people about how tall they are to find out how many tall people exist—that information has already been published by the U.. Secondary research involves using information that others have already put together. It is also important to ascertain whether the research has been complete.. The wording of a question can influence the . Consumer Research Methods Market research is often needed to ensure that we produce what customers really want and not what we think they want. studying consumer behavior should make us better consumers. Surveys come in several different forms. However. but not many questions can be asked because many answer options have to be repeated and few people are willing to stay on the phone for more than five minutes. Primary vs. For example. using knowledge of consumer attitudes. Surveys are useful for getting a great deal of specific information. but response rates are typically quite low—typically from 5-20%. For example.g. ingrained in the drug culture to be stopped. “__Male ___ Female. sample sizes of over 100 are usually required because precision is essential. but it cannot take the risk away entirely. For example. if a market share of twenty percent would result in a loss while thirty percent would be profitable. Common sense suggests. Primary research. a confidence interval of 20-35% is too wide to be useful. and focus groups. are vulnerable to bias. Mail surveys are relatively inexpensive. Research will often help us reduce risks associated with a new product. Government.. secondary research methods. where the respondent is asked to select answers from a brief list (e. Mall intercepts are a convenient way to reach consumers.g. For example. • As a final benefit. Surveys can contain open-ended questions (e. is research that you design and conduct yourself. Phone-surveys get somewhat higher response rates. In general. and coding them can be quite a challenge. In other words. you may need to find out whether consumers would prefer that your soft drinks be sweater or tarter. Primary Methods. open-ended questions are often skipped by respondents. you often pay a size premium by buying the larger quantity. in contrast. Fishbein created a campaign that encouraged the cleaning of needles in bleach before sharing them. but respondents may be reluctant to discuss anything sensitive face-to-face with an interviewer. as any kind of research. that if you buy a 64 liquid ounce bottle of laundry detergent. for surveys to yield meaningful responses. However.g. you should pay less per ounce than if you bought two 32 ounce bottles.” Open ended questions have the advantage that the respondent is not limited to the options listed. knowing this fact will sensitize you to the need to check the unit cost labels to determine if you are really getting a bargain. Several tools are available to the market researcher—e. in this case. phone surveys. mail questionnaires. a goal that was believed to be more realistic. There are two main approaches to marketing. Dr. consumers were not prepared to have this drink replace traditional Coke. In practice.

they watch public television rather than soap operas or cook fresh meals for their families daily) even if that is not true.e. necessary. we avoid biasing the participants into thinking only in terms of the specific product brought out. This means that: • Consumers will often say things that may make them look good (i. This will result in an n of 4(10) =40. weight control. This would be an important concern in the marketing of sugar-free cookies.outcome a great deal. Thus. • Consumers may be reluctant to speak about embarrassing issues (e. Personal interviews involve in-depth questioning of an individual about his or her interest in or experiences with a product. if one did not think to ask about something. instead of having consumers think primarily in terms of what might be good or bad about the product. The group is usually led by a moderator. too. instead of having consumers merely discuss what they think about some sugar-free cookies that we are considering releasing to the market. Because of the cost of running focus groups. we can have consumers speak about their motivations for using snacks and what general kinds of benefits they seek.. By not mentioning the product up front. focus groups are very good for getting breadth—i. finding out what kinds of issues are important for consumers in a given product category. The respondent may catch on and say something more positive than his or her real opinion. Here. For example. Suppose you run four focus groups with ten members each. chances are that few consumers would take the time to write out an elaborate answer. and the focus group moderator can ask the consumer to elaborate. it is helpful that focus groups are completely “open-ended: The consumer mentions his or her preferences and opinions. by virtue of the nature of the product. For example. For example. Finally. a response bias may occur—if only part of the sample responds to a survey. we can ask them to discuss more broadly the ultimate benefits they really seek. unconsciously an interviewer that works for the firm manufacturing the product in question may smile a little when something good is being said about the product and frown a little when something negative is being said. Interviewer bias occurs when the interviewer influences the way the respondent answers.. Probing on the meaning of wholesomeness. In a questionnaire.e. In general. For example. A focus group usually involves having some 8-12 people come together in a room to discuss their consumption preferences and experiences. Focus groups are useful when the marketer wants to launch a new product or modify an existing one. Focus groups also have some drawbacks. consumers might indicate a desire to avoid artificial ingredients. more people answered no to the question “Should speeches against democracy be allowed? Than answered yes to “Should speeches against democracy be forbidden?” For face-to-face interviews. only gradually moving toward the specific product of sugar-free cookies. a focus group aimed at sugar-free cookies might first address consumers snacking preferences. only a few groups can be run. the respondents answers may not be representative of the population. Therefore. for example: • They represent small sample sizes. but might not have come up if consumers were asked to comment directly on the product where the use of artificial ingredients is. interviewer bias is a danger.. Focus groups are well suited for some purposes.g. Such a discussion might reveal a concern about healthfulness and a desire for wholesome foods. The benefit here is that we can get really into depth (when the respondent . birth control). who will start out talking broadly about topics related broadly to the product without mentioning the product itself. but poorly suited for others. which is too small to generalize from. focus groups cannot give us a good idea of: • What proportion of the population is likely to buy the product? • What price consumers are willing to pay? • The groups are inherently social.

Consciously. or to tell a story about a person in a picture who is or is not using a product. Although this type of conditioning will not get a completely negative respondent to say all positive things. people will tend to respond more openly about “someone else. or preferences. Observation of consumers is often a powerful tool. it may help to try a common tool of psychologists and psychiatrists— simply repeating what the person said. It has been found that in such cases. What is being reported here. then. this will often not be noticeable. some American manufacturers were concerned about low sales of their products in Japan.. For example. Unconsciously. The main problem with this method is that it is difficult to analyze responses. He or she is not influenced by a new question but will. (e.g. it may “swing the balance a bit so that respondents are more likely to say positive thoughts and withhold. Consumers benefit.” Thus. . the cumulative effect of several facial expressions are likely to be felt. He or she will often become uncomfortable with the silence that follows and will then tend to elaborate. Observation may help us determine how much time consumers spend comparing prices. This approach has the benefit that it minimizes the interference with the respondent’s own ideas and thoughts. many older executives may not be comfortable admitting to being intimidated by computers. Observing Japanese consumers. and the respondent often will not consciously be aware that he or she is being “reinforced and “punished for saying positive or negative things. Personal interviews are highly susceptible to inadvertent “signaling to the respondent. from stores that are designed effectively to promote efficient shopping. If it is found that women are more uncomfortable than men about others standing too close. Looking at how consumers select products may yield insights into how they make decisions and what they look for. but this method of research is costly and can be extremely vulnerable to interviewer bias. The elaborate context that has to be put into place takes time and energy away from the main question. To get a person to elaborate.says something interesting. The intent is not to find “juicy observations specific to one customer. it should be noted that there is no particular interest in what the individual customer being watched does.S. the areas of the store heavily trafficked by women can be designed accordingly. who may or may not be able to see through the ruse. for example. Although an interviewer is looking to get at the truth. but at an unconscious level. feelings. go more in depth on what he or she was saying. instead. are averages and tendencies in response. it was found that many of these Japanese consumers scrutinized packages looking for a name of a major manufacturer—the product specific-brands that are common in the U. he or she may have a significant interest in a positive consumer response. or whether nutritional labels are being consulted. he or she may inadvertently smile a little when something positive is said and frown a little when something negative is said. For example. Tide) were not impressive to the Japanese. The question is what consumers—either as an entire group or as segments—do. Projective techniques are used when a consumer may feel embarrassed to admit to certain opinions. who wanted a name of a major firm like Mitsubishi or Proctor & Gamble. The video clip with Paco Under hill that we saw in class demonstrated the application of observation research to the retail setting. There may also be real differences between the respondent and the third party. Projective techniques are inherently inefficient to use. Saying or thinking about something that “hits too close to home may also influence the respondent. negative thoughts. Although there may be cause for some concern in that the particular individuals have not consented to be part of this research. By understanding the phenomena such as the tendency toward a right turn. then. or limit the duration of. we can ask him or her to elaborate). A question arises as to whether this type of “spying inappropriately invades the privacy of consumers. we may ask them to explain reasons why a friend has not yet bought a computer.

going straight to question 17 instead of proceeding to number 9. such as difficulty finding a product. Nielsen will actually recognize the face of each family member when he or she sits down to watch). and thus.. It is also possible to identify problem areas where customers may be overly vulnerable to the “but brush. Ford vs.g. this type of response bias is probably not significantly greater than that associated with other types of research methods. educational level of adults in the household. It is possible to see how frequently various terms are used by those who use a firm’s web site search feature or to see the route taken by most consumers to get to the page with the information they ultimately want. Here. would address issues related to this shopping experience.S. If the respondent answered “yes. a mirror. or overly close encounter with others. One potential benefit of online surveys is the use of “conditional branching.. Toyota. . A more serious problem is that it has consistently been found in online research that it is very difficult—if not impossible—to get respondents to carefully read instructions and other information online—there is a tendency to move quickly. consumers are often eligible for considerable discounts on selected products. Hyundai. along with the next several ones. for example. Ford vs. There are certain drawbacks to online surveys. “torturous route to information frequently accessed. he or she would be instructed to go to the next question which.. Today. a number of consumers receive small payments and/or other incentives to sign up to be part of a research panel. If a respondent is asked which brands he or she considered. If consumers take a long. The consumer’s shopping record is usually combined with demographic information (e. and Toyota vs. This makes it difficult to perform research that depends on the respondent’s reading of a situation or product description. On line research methods: The Internet now reaches the great majority of households in the U. the need to include this term in online content can be seen in search logs. he or she will be asked to skip ahead several questions—e. Nearly all retailers in the area usually cooperate. and whether the family owns and rents) and the family’s television watching habits. Suppose. however. On line search data and page visit logs provides valuable ground for analysis. ages of children. it would be possible to ask the subject questions about his or her view of the relative quality of each respective pair—in this case.the location of merchandise can be observed. a changing room.” In conventional paper and pencil surveys. It is now possible to track what the consumer bought in all stores and to have a historical record. it may be appropriate to redesign the menu structure and/or insert hyper links in “intermediate pages that are found in many users routes. If consumers use a certain term frequently that is not used by the firm in its product descriptions. Hyundai. This method can be used to identify problems that the customer experiences. occupations of adults. it is also possible to customize brand comparison questions to those listed. income. C. or a store employee for help.g. (Electronic equipment run by firms such as A. online research provides new opportunity and has increased in use.” In return for signing for a card and presenting this when making purchases. Conditional branching allows the computer to skip directly to the appropriate question. Toyota. Scanner data: Many consumers are members of supermarket “clubs. and Hyundai. If the respondent answers “no. They then receive a card that they are asked to present any time they go shopping. Researchers use a more elaborate version of this type of program in some communities. Some consumers may be more comfortable with online activities than others—and not all households will have access. that the respondent considered Ford. one question might ask if the respondent has shopped for a new car during the last eight months.

in contrast. Scanner data analysis is most useful for frequently purchased items (e. food items. would not be as effective in effectively distinguishing the effects of different factors—e. This most likely results from the reality that one must pay greater attention while channel surfing than when watching a commercial in order to determine which program is worth watching.  Whether. paper towels. allowing for sampling error. pricing of the product and competitors. these products would be purchased quite infrequently.  Whether any brand had preferential display space. and if so.g.  Whether the target brand (and/or a competing one) is on sale during the store visit. Scanner data is. or a series of past. or buy nothing at all depending on the status of the brand of interest and competing brands. Thus. laundry detergent. In the case of items that are purchased frequently. The selection is truly random since each household. there may be promotions associated with several brands . It is not available for most non-grocery product items. and availability of a coupon—since we have at most one purchase instance during a long period of time during which several of these factors would apply at the same time. and toilet paper) since a series of purchases in the same product category yield more information with greater precision than would a record of one purchase at one point in time. A “split cable technology allows the researchers to randomly select half the panel members in a given community to receive one advertising treatment and the other half another. buy a competing product. Even if scanner data were available for electronic products such as printers.g. if so. as opposed to neighborhood. shelf space. beverages. for example. Interestingly. it has been found that consumers tend to be more influenced by commercials that they “zap through while channel surfing even if they only see part of the commercial.. its value. and toilet paper. In the case of the purchase of an MP3 player. the be result of advertising exposure since there are no other systematic differences between groups.. then. A single purchase.  What brand in a given product category was bought during the last. advertising. and MP3 players. It is now possible to assess the relative impact of a number of factors on the consumer’s choice —e. food items. computers. the consumer has the opportunity to buy a product. how many times a consumer has seen an ad for the brand in question or a competing one. drinks. only available for certain grocery item product categories— e.  The impact of income and/or family size on purchase patterns.. observed differences should. snacks. is selected to get one treatment or the other.g. and  Whether a coupon was used for the purchase and. purchase occasions. cleaning items. at the present time.g.

In a variation of direct physiological measures. effectively looking at different segments to make sure that differences between each did not cancel out effects of the different segments.. Therefore. By attaching a tiny camera to plain eye glasses worn by the subject while watching an advertisement. if more than one type of research is to be used.g. In general. Republican strategist used this technique during the impeachment and trial of Bill Clinton in the late 1990s. A subject may. Focus groups and interviews are flexible and allow the researcher to follow up on interesting issues raised by participants who can be probed. Mind-reading would clearly not be ethical and is. Physiological measures are occasionally used to examine consumer response. because the sample sizes are small and because participants in a focus group are influenced by each other. a sample size of forty would give very imprecise results. We might conclude. Even if we assume that these are independent. for example. There will still be some sampling error.going on at the same time. be demonstrating good characteristics—such as appropriate level of arousal and eye movement—during some of the ad sequence and not during other parts. if at one point Democrats reacted positively and Republicans responded negatively with the same intensity. This is usually no more precise than what we already reasonably new. indicating lower levels of attention. it is possible to measure brain waves by attaching electrodes. Independents. advertisers may want to measure a consumer’s level of arousal during various parts of an advertisement. However. and each may advertise. are highly inflexible. in contrast. and approval by moving a lever or some instrument (much like one would adjust the volume on a radio or MP3 player). we can assess whether this movement is going in the intended direction. then. (For example. we would have a total of forty responses. the average result of apparent indifference would have been very misleading). Research sequence. he or she is likely either not to be paying as much attention as desired or to be confused by an overly complex sequence. a subject may be asked. we can use our insights from focus groups and interviews to develop questionnaires that contain specific questions that can be asked to a larger number of people. This. it was found that viewers tended to respond negatively when he referred to “speaking truthfully but favorably when the President referred to the issues in controversy as part of his “private life. By watching approval during various phases of a speech by the former President. not possible in any event. to indicate his or her level of interest. for example. In situations where the subject’s eyes do move. Questionnaires. but it is possible to distinguish between beta waves—indicating active thought and analysis—and alpha waves. we can track whether the respondent is following the sequence intended. at various points during an advertisement. comfort. gives some guidance as to which parts of the ad are effective and which ones need to be reworked. For example. few data points are collected. These readings will not reveal what the subject actually thinks. An important feature of physiological measures is that we can often track performance over time. It is not possible to ask follow-up questions. If we run five focus groups with eight people each. liking. at the present time. it is possible to determine where on screen or other ad display the subject focuses at any one time. surveys and scanner data) are used. It may also be that the purchase was motivated by the breakdown of an existing product or dissatisfaction or a desire to add more capabilities. and Republicans. for example. This can be used to assess possible discomfort on the negative side and level of attention on the positive side. the more flexible and less precise method—such as focus groups and/or individual interviews—should generally are used before the less flexible but more precise methods (e. However. If the focus remains fixed throughout an ad sequence where the interesting and active part area changes.” The Republican researchers were able to separate average results from Democrats. If he or she is not. that somewhere between 5% and 40% of the target market would be interested in the product we have to offer. but with a .

research should only be commissioned when it is worth the cost. However. a range that is much more meaningful. Overall Model of Consumer Behavior Overall Model of Consumer Behavior External Influence Culture Sub-Culture Demographics Decision Process Social Status Problem Recognition Reference Groups Self Concept Information Research Family And Learning Alternate Evaluation and Marketing Activities Selection Internal Influence Outlet Select and Purchase Perception Post Purchase Processes Learning Memory Motives Personality Emotions Attitudes Influence on the consumer . and often is. One example of misleading research. although this finding was reported without question in the media. First.2% of soldiers listening to the Armed Forces Network wanted to hear Rush Limbaugh. Managers frequently have their own “agendas (e. reported that only 4. a way to get your way is to demonstrate through “objective research that your opinions make economic sense. say. Thus. it was later found that the conclusion was based on the question “What single thing can we do to improve programming?” If you did not write in something like “Carry Rush Limbaugh. Often. Cautions: Some cautions should be heeded in marketing research.75 or $2.g. we may be able to narrow the 95% confidence interval for the percentage of the target market that is seriously interested in our product to. abused.” The Pentagon.000+ responses. 17-21%. you were counted as not wanting to hear him. in general. marketing research can be. within a year of the election of Democrat Bill Clinton. research should normally be useful in making specific decisions (what size should the product be? Should the product be launched? Should we charge $1.. which was reported nationwide in the media. involved the case of “The Pentagon Declares War on Rush Limbaugh.25?) Secondly. they either would like a product to be launched or would prefer that it not be launched so that the firm will have more resources left over to tackle their favorite products).sample size of 1.

sneaker manufacturers are eager to have their products worn by admired athletes. however. An American will usually not bargain with a store owner. etc) to better understand and predict the behavior of existing and prospective customers for business decision-making.Often. consumer behavior is influenced by learning—you try a hamburger and learn that it satisfies your hunger and tastes good.g. UNDERSTANDING consumer behavior is the key to success in the marketplace. Article Based on Consumer Behavior. firms have to invest in the right technology. consumers seek to imitate others whom they admire. Among the many tools is data analytics. analyzing and using data (related to demographic information. The social environment can include both the mainstream culture (e. data analysis and strategy implementation. Analyzing consumer behavior (Vineet Hemrajani)(The author is Business Analytics Manager. Physical factors also influence our behavior. Social factors also influence what the consumers buy—often. . The common tools used to conduct data analytics range from simple cross tabulations and segmentation analysis to more sophisticated statistical methods such as multivariate and logistic regression. Companies are constantly looking at customer behavioral patterns to predict future trends. you may consider another hamburger. and may buy the same brands. and the next time you are hungry.g. and food manufacturers have found that it is more effective to advertise their products on the radio in the late afternoon when people are getting hungry. is a common practice in much of the World. data analytics can be described as the process of collecting. which is preferred in many Asian countries) and a subculture (e. hire the right people and develop standardized and robust processes of data collection. we take cultural influences for granted. data retrieval. This. Thus. for example. Americans are more likely to have corn flakes or ham and eggs for breakfast than to have rice.. past behavior trends. GE- SBI Credit Cards.) To reap the maximum benefits from data analytics. Broadly speaking.. but they are significant. A person’s self-image will also tend to influence what he or she will buy—an upwardly mobile manager may buy a flashy car to project an image of success. We are more likely to buy a soft drink when we are thirsty. Finally. rap music often appeals to a segment within the population that seeks to distinguish itself from the mainstream population).

. Isaac & Company (FICO) in the United States. Empowered with this information. telemarketing and inbound call channels. The data analytics techniques have been extensively used in the credit card businesses to decide on credit and cash line assignments and dynamic authorization and fraud detection activities. On the risk management front. direct mail. These analytical CRM platforms allow firms to make suitable offers to its customers and optimize campaigns through e-mail. The same techniques can help an insurance firm decide the premium for its policyholders. behavioral data includes information of customer's prior performance like transaction history and delinquency behavior. income. Today. deep sell and retention strategies. pharmaceutical and telecoms companies. data retrieval. What do companies need to do to use data analytics effectively? Experts believe that to reap the maximum benefits from data analytics. data analytics techniques can help a bank develop an approval strategy for its mortgage and auto loan applications and also help to determine the optimal lending rate. the uses of data analytics in the form of response models helps companies design and execute cross sell. data analysis and strategy implementation. While the data analytics methods have been extensively used in FMCG. Contact information includes history of prior offers and contacts made to the customer. Data analytics is also effectively used in managing the collections functions of the consumer finance companies. etc. These credit scoring models or scorecards were used to predict customer default. so much so that the `Prime' and `Sub Prime' markets are defined on the basis of this score. Once the data mart is ready. personal and auto loan and insurance portfolios. The recent years have seen increased use of data analytics in driving business strategies across various industries. In India. Using statistical modeling.discriminant analysis and cluster analysis. With the exponential increase in computing power and application of information technology in business processes. it is common for major banks and financial services companies to use data analytics to better manage their credit card. housing. acquisitions and securitization deals. the companies are able to predict the likelihood of contacting a customer and chances of receiving a payment from him. the FICO Risk score is the benchmark for credit decision process in the US. In the long run. firms have to invest in the right technology. the company needs to build efficient and robust systems for . On the marketing side. This data are mainly of three types: demographic. Risk Management. more and more data analytics techniques and statistical tools are now being applied for Marketing. firms are able to devise suitable strategies to better manage their respective businesses. hire the right people and last but not the least develop standardized and robust processes of data collection. The wide scale applications of predictive data analytics started almost four decades ago in the form of credit scoring models pioneered by Fair. But why are businesses increasingly adopting the use of data analytics in their day-to-day working? Clearly because it allows these firms to predict the behavior of existing and potential customers. use data analytics to evaluate the quality of consumer loan and insurance portfolios during mergers. where the credit bureaus are fairly developed. optimization tools and machine learning algorithms such as neural networks and genetic algorithms have also been used to perform advanced data analysis. Pricing and NPI functions in the consumer finance industry. behavioral and contact information. While demographic data refers to information about customer characteristics like age. a company may invest in a separate analytics data mart to capture the relevant customer data. up sell. In the last few years. For example. their mainstay has been the consumer finance industry. This information is helpful in choosing the right collections strategies that optimize collection efficiency and effectiveness. Consumer finance companies in the US. creative use of past customer data through predictive modeling helps companies in building powerful and effective analytical CRM (customer relationship management) platforms.

. The above process requires firms to make investments in technology — database packages. However if the right IT infrastructure exists and process planning is rigorous then implementation can be accomplished with minimal disruption of business processes and limited impact on the company's resources. we will look at the role played by the buyer’s culture. The market for consumer finance products is growing at a rapid rate in India. statistical software. however the use of specialized statistical software such as SAS. systems that enable easy execution and tracking of analytically driven targeted marketing campaigns are also being increasingly used by consumer finance companies. and tracking and allows companies to `test and learn' and thereby helps them gain a competitive edge. implementation platforms. use of data analytics is no more a luxury but a necessity. teams of econometric and statistical modelers and business analysts that can effectively perform strategic analysis and build predictive models need to be developed. Major financial services firms in India have built internal data analytics and business intelligence teams of data analysts and statistical modelers that support marketing and risk management activities. the companies need to measure the performance of the business strategy and make sure that the results can be tracked effectively for future use. subculture. The pressures to make high profits remain high in the face of increasing competition. After the required data analysis is completed and a suitable strategy using data analytics has been devised. and psychological factors. SPSS for predictive modeling and of reporting and analysis tools such as Business Objects and COGNOS is common. For the most part. The process of continuous designing. Major Factors Influencing Consumer Behavior Consumers do not make their decisions in a vacuum. new financial services firms are entering the industry and the existing banks are increasingly focusing on retail portfolios. Campaign management packages. software that integrate with a company's work flow and account receivable systems to implement the risk and marketing strategies are now available. To conduct data analytics. To facilitate easier and faster implementation. The implementation of analytically driven strategies has been rather `painful' process for most companies. Cultural Factors: In a diversified country like India cultural factors exert the broadest and deepest influence on consumer behavior. Most major software companies have developed data mining and analytics software. executing. A significant number of independent third party data analytics companies that provide end- to-end data analytics solutions have also mushroomed in the last couple of years. it is important to ensure that strategies are implemented efficiently and accurately. and reporting and analysis tools. To seize this opportunity. they are “non controllable” by the marketer but must be taken in to account. We want to examine the influence of each factor on a buyer’s behavior.extracting and analyzing data from the data mart. personal. After a particular business strategy (a new risk policy or marketing campaign) has been implemented. Their purchases are highly influenced by cultural social. For consumer finance companies. Firms that invest in data analytics now will reap in the benefits for a long time to come. A team of systems specialists and data analysts is required to develop and maintain efficient data marts and robust implementation and analysis systems. and social class.

” The belief among ancient Chinese that they were in the center of the universe greatly influenced their thinking. The definition of culture offered in one textbook is “That complex whole which includes knowledge. on the other hand. For example. even though in most civilized countries this law. One may violate the cultural norms of another country without being informed of this. We will consider the mechanics of learning later in the course. In Japan. In other countries. and any other capabilities and habits acquired by man person as a member of society. culture represents influences that are imposed on the consumer by other individuals. bowing and a strong desire to avoid the loss of face are unified in their manifestation of the importance of respect. For example. the name for China in Chinese literally means “The Middle Kingdom. morals.  Other issues are relevant. may be reflected in the rather arbitrary practice of wearing ties in some countries and wearing turbans in others.Culture is part of the external influences that impact the consumer. That is. Culture is a problematic issue for many marketers since it is inherently nebulous and often difficult to understand. “Chunking. one cannot show up to class naked. On the other extreme. belief. by the way. Notice.  Conscious awareness of cultural standards is limited. Failure to behave within the prescribed norms may lead to sanctions. would itself be considered highly immoral. Morality may be exhibited in the view in the United States that one should not be naked in public.  Cultures fall somewhere on a continuum between static and dynamic depending on how quickly they accept change. and any degree of explicit racial prejudice.  Knowledge and beliefs are important parts. For example. while the culture of Saudi Arabia has changed much less. but wearing anything from a suit and tie to shorts and a T-shirt would usually be acceptable. For example. custom. as a “complex whole. art. American culture has changed a great deal since the 1950s. and people from different cultures may feel uncomfortable in each other’s presence without knowing exactly why (for example. Art. we make the following observations:  Culture. Culture has several important characteristics:  Culture is comprehensive. the law that once banned interracial marriages in South Africa was named the “Immorality Act. Dealing with culture.  Culture is manifested within boundaries of acceptable behavior. for example. This means that all parts must fit together in some logical fashion. it may be believed that differences in outcome result more from luck. One American spy was intercepted by the Germans during World War II simply because of the way he held his knife and fork while eating. women in some Arab countries are not even allowed to reveal their faces.  Culture is learned rather than being something we are born with. ranging from being hauled off by the police for indecent exposure to being laughed at by others for wearing a suit at the beach. .” From this definition. two speakers may unconsciously continue to attempt to adjust to reach an incompatible preferred interpersonal distance). In the U. we know and believe that a person who is skilled and works hard will get ahead. that what at least some countries view as moral may in fact be highly immoral by the standards of another country. is a system of interdependent components. in American society.S. groups of men and women may take steam baths together without perceived as improper..

often accepting long periods before profitability is obtained.” Many cultures observe significantly greater levels of formality than that typical in the U. Note that there are often significant individual differences within cultures. while Indonesia and West Africa rank toward the collectivist side. The U. individualistic rather than collectivist).. is close to the middle. seen as a reflection of the quality of the “real product. For example. Note. and the Netherlands rate toward individualism. collectivism: To what extent do people believe in individual responsibility and reward rather than having these measures aimed at the larger group? Contrary to the stereotype. Packaging. Research in social psychology has suggested a strong tendency for people to perceive an “out group as more homogeneous than an “in group.S. Japan is one of the more masculine countries. There is.S.g. managers like to see quick results. • Power distance: To what extent is there a strong separation of individuals based on rank? Power distance tends to be particularly high in Arab countries and some Latin American ones..S. one must be careful not to over-generalize about traits that one sees. and Japanese negotiator tend to observe long silent pauses as a speaker’s point is considered. while it is more modest in Northern Europe and the U. Cultural lessons. “Masculine” values involve competition and “conquering nature by means such as large construction projects. a fifth dimension of long term vs. a Dutch researcher. . often a large correlation of these cultural values with the status of women. When observing a culture. femininity involves a somewhat more nebulous concept.S. The U. where there is a tendency to focus on the contents which “really count. while “feminine values involve harmony and environmental protection. the dog is considered a “dirty animal. even when they knew what members had been assigned to each group purely by chance. • Masculinity vs..Warning about stereotyping. Hofstede’s Dimensions. Japan actually ranks in the middle of this dimension. is in the lower range of the distribution. Gert Hofstede. and found that cultural differences tended to center around four key dimensions: • Individualism vs. in general.S. In the U.. slightly toward the masculine side. Few countries are very low in any absolute sense. Britain. We considered several cultural lessons in class. within the Muslim tradition. Hofstede’s research demonstrates a wide range between the most individualistic and collectivist countries. the important thing here is the big picture. is considerably more important in Asia than in the U. Cultural characteristics as a continuum. for example—some fall in the middle. while Japanese managers are known for take a long term view. Britain and Hong Kong are lower.. When there is often a “grain of truth to some of the perceived differences.S. There is a tendency to stereotype cultures as being one way or another (e. Japan ranks very high. countries with lower uncertainty avoidance tend to be more tolerant of risk. and the U.S. Although Hofstede’s original work did not address this. short term orientation has been proposed. however. while the Netherlands rank relatively low. the temptation to over-generalize is often strong. • Uncertainty avoidance involves the extent to which a “structured situation with clear rules is preferred to a more ambiguous one. (The fact that these values are thought of as “masculine or “feminine does not mean that they are consistently held by members of each respective gender —there are very large “within-group differences. however. so portraying it as “man’s best friend in an advertisement is counter-productive. but relatively speaking. was able to interview a large number of IBM executives in various countries. countries fall on a continuum of cultural traits.

individuals are able to move from one social class to another up or down during their lifetime. The Extent of this mobility varies according to the rigidity of social stratification a given society. and value orientation. self –worth. rather than by any single variable . the more the group is perceived to be a credible. automobiles. fourth. carpeting. husband and wives engage in more joint decision making. values. whereby the group specifies guidelines and sanctions for appropriate or inappropriate individual behaviors. (3) normative influences. and. politics. low context cultures: In some cultures. From parents a persons acquires an orientation towards religious. and social roles and statuses. the more likely that consumer is to conform to group values. such as the consumer’s reference group. For example. the greater the group's influence on individual consumption behavior. they can come from groups to which consumers already belong or from groups to which they aspire to belong (aspirational groups). In addition. The following products and services fall under such: Husband – dominant: life insurance. In countries where parents continue to live with their children. family.High vs. vacation. Housing. The family of orientation consists of one’s parents. and love. Stratification sometimes takes the form of a caste system where the members of different caste are reared for certain roles and cannot change their caste membership . persons are perceived as occupying inferior or superior positions according to their social class. and the more outwardly visible use of the product is to group and non-group members. their influence can be substantial. including: (1) informational influences where the group acts as a source for expert opinions. Person with in each social class tends to behave more alike than persons from two different social classes. outside entertainment. such as occupation.More frequently. “what you see is what you get” Social Class: Virtually all human societies exhibit social stratification. wealth. The influence of groups on consumer behavior tends to vary with a variety of group and product- related factors. First. Groups can exert a variety of influences on individuals. In case of expensive products and services. the parents influence on the unconscious behavior of the buyer can be significant. and individual information processing. Social Factors: A consumer’s behavior is also influenced by social factors. Second. The market needs to determine which member normally has the greater influence in the purchase of a particular products or services. Third. and economics and a sense of personal ambitions. a person’s social class is indicated by a number of variables. non –living – room furniture. television Wife – dominant: washing machines. valued source of approval or disapproval to the consumer. Social Classes have several characteristics. Even if the buyer no longer interacts very much with his or her parents. Group influences on consumer behavior can impact motivation. We can distinguish between two families in the buyer’s life. the more frequently group members interact. income. Either the husband or the wife. or they have equal influence. education . stratification takes the form of social classes. . (2) comparative influences such that the group provides opportunities to manage the individual's self- concept with respect to the group's identity. kitchenware Equal: Living – room furniture. Family Group: Members of the buyer’s family can exercise a strong influence on the buyer’s behavior.

like a physiological thirst that motivates a consumer to purchase a soft drink or the need to purchase a new suit for an interview. For instance..g. Consumers are also more likely to retain information if a person has a strong interest in the stimuli.) or variants of the Thematic Apperception Tests (TAT). seeing an ad) • Attention – an effort to recognize the nature of a stimuli (e. However.g. what ends up being stored inside us doesn’t always get there in a direct manner. sense of accomplishment. Motivation is the drive that initiates all our consumption behaviors. Most consumption activities are the result of several motives operating at the same time. compassionate. Trained moderators or interviewers are often able to tap into preconscious motives that might otherwise go undetected. independent. product has fun ads) How these steps are eventually carried out depends on a person’s approach to learning.g.. There are many theories of learning. • Exposure – sensing a stimuli (e.g. . To us this is our reality.. love and . Men who wear Old Spice are . recognizing it is an ad) • Awareness – assigning meaning to a stimuli (e.. Sentence completion tasks (e. someone talking to us. reading a newspaper story) and then make sense out of it. Researchers specially trained in uncovering motives often use qualitative research techniques in which consumers are encouraged to reveal their thoughts (cognitions) and feelings (affect) through probing dialogue.g. like a student's need to tote a Kate Spade book bag or wear Doc Martens to gain social approval.g. one person may be able to focus very strongly on a certain advertisement and be able to retain the information after being exposed only one time while another person may need to be exposed to the same advertisement many times before he/she even recognizes what it is. perception is the way we filter stimuli (e. Focus groups and in-depth interviews give consumers an opportunity to discuss products and express opinions about consumption activities. Consumer motives or goals can be represented by the values they hold. in which respondents are shown a picture and asked to tell a story surrounding it. Thus.g. Some of these are overt. . By learning we mean how someone changes what they know. honest) or a preferred end-state of being (e.e.. Other motives are more obscure. which in turn may affect how they act. If a person is in need of new car they are more likely to pay attention to a new advertisement for a car while someone who does not need a car may need to see the advertisement many times before they recognize the brand of automobile. and what motivates the consumer to purchase. Perception has several steps. however. Consumer motivation: A marketer's job is to figure out what needs and wants the consumer has. though it does not mean it is an accurate reflection on what is real. suffice to say that people are likely to learn in different ways.Internal Influence: Perception: Perception is how we see ourselves and the world we live in. and consumers have multiple motives. Often our mental makeup results from information that has been consciously or subconsciously filtered as we experience it. a process we refer to as a perceptual filter. a discussion of which is beyond the scope of this tutorial. or goals.. Values are people's broad life goals that symbolize a preferred mode of behaving (e. humorous ad for particular product) • Retention – adding the meaning to one’s internal makeup (i. are additional techniques that provide insight into underlying motives.

For new products or . Florida. Fast-food chains paint their walls in "hot" colors. We begin to perceive an external stimulus as it comes into contact with one of our sensory receptors—eyes. Perception of external stimuli influences our behavior even without our conscious knowledge that it is doing so. social recognition). This process is called selectivity. like the use of contrast in colors and sound. airline promotions for Florida. nose. In order to function in this crowded environment. Perception is the process of sensing. and interpreting stimuli in one's environment. repetition. Supermarkets steer entering customers directly into the produce section. Advertising and packaging is designed to grab our attention through a host of techniques. with the length of the linkages representing the degree of the association. to speed up customer turnover. and rearranged as new information comes in. If this information is rehearsed (mentally repeated). knowledge structures are changing to reflect the new I-Zone camera. selecting. you may even have laughed out loud at a few of them. we choose to perceive certain stimuli while ignoring others. for your vacation destination. and retrieve product information is critical to a brand's success.affection. and they create products and stores specifically designed to influence our behavior. where they can smell and touch the food. and contextual placement. like red. Information-processing theorists represent the storage of information in long-term memory as a network consisting of nodes (word. Consumer information processing: The consumer information-processing approach aids in understanding consumptive behavior by focusing on the sequence of mental activities that people use in interpreting and integrating their environment. only now you are selectively attending to them. Nodes are connected to each other depending on whether there is an association between concepts. mouth. the information is lost and forgotten. When Edwin Land invented the first Polaroid instant camera. if not. The complete network brought to mind when a product is activated is called the product schema. or learning takes place. Once transferred to long-term memory. say. Knowing the set of associations that consumers retrieve from long-term memory about a particular product or category is critical to a successful marketing strategy. updated. while not wasting our limited information-processing resources on irrelevant items. Understanding the means-end perspective can help marketers’ better position the product and create more effective advertising and promotion campaigns. they see product attributes as a means to an end. Did you watch TV last night? You may have paid attention to many of the ads you saw during the commercial breaks. When information is processed. whereas you previously filtered them out. retain. knowledge structures for cameras changed to reflect the association between photography and instant output. noises. Marketers continuously struggle to break through the clutter and grab consumers' attention. Consumers buy products that will help them achieve desired values. The sequence begins with human perception of external stimuli. and articles about Florida restaurants and attractions everywhere? Coincidence? Not really. Marketers and retailers understand this. There are just as many now as there were before. or short-term. A hungry shopper spends more money. ears. Figure 2 illustrates a network model of long-term memory. Now. it is transferred to long-term memory. Close your eyes and think for a moment about the hundreds of objects. stimulating hunger. or concept) and links (relationships among them). or skin. it is held for a very brief time (less than one minute) in working. there seems to be an abundance of ads for Florida resorts. But how many can you recall today? Consumers' ability to store. memory. Information in long-term memory is constantly reorganized. Selectivity lets us focus our attention on the things that provide meaning for interpreting our environment or on the things that are relevant to us. idea. Did you even notice that after you decide on. and smells surrounding you at this very moment. information is encoded or arranged in a way that provides meaning to the individual.

noncandy). and after the purchase of a product or service. Would Lifesavers brand toothpaste sell? Probably not. External economic. as time goes on. fruity) are not the same as those for toothpaste (mint. A popular perspective is that attitude has three components: cognitive. because the associations for Lifesavers (sweet. Did you ever look at old photos of yourself and wonder "What was I thinking wearing clothes like that? And look at my hairstyle!" Buyer Decision Process Buyer decision processes are the decision making processes undertaken by consumers in regard to a potential market transaction before. Marketers work hard to continuously monitor consumer attitudes toward their products. Generally speaking. Hush Puppies repositioned their basic comfort shoe as fashionable. "I like the Digital Club Network site") and the co native component reflects a behavioral tendency toward the object (e. vibrant colors. likelihood of future sales. Peak Freans' unique positioning as an adult cookie was accomplished by establishing a link between the concept "serious" and "cookie. On the other hand. It is important to note. attitudes are predispositions to behave in a certain way. If you have a favorable attitude toward a politician.g.. or selecting the brand image. The statement "I love Ben & Jerry's Vanilla Toffee Crunch" is a strong.g. Attitudes are dynamic. youth-oriented. Consumers can hold positive attitudes toward multiple brands but intend to purchase only one. success with a product or campaign. fruity rings has a much better match of"). Attitude formation and change: The set of beliefs consumers have stored in long-term memory provides another critical function to marketers: It provides the basis for a consumer's attitude toward a brand or an ad. attitudes can indicate problems with a product or campaign. a brand's image can fade or become diluted. The statement "I dislike the new Toyota ad" is a weak. as fads change. Sometimes consumers associate concepts that are not favorable to a brand. or personal factors often alter behavioral plans. and "cool. marketers reposition the brand. clean." Strategies for successful brand extensions also depend on the brand schema. "Digital Club Network is an on-line live music Internet site. and weakly or strongly held. which means they are constantly changing. . negatively valence attitude toward an advertisement. a Lifesavers brand sugared children's cereal with colorful. "I will become a registered user of digitalclubnetwork. that the link between attitudes and behavior is far from perfect. or action."). When this occurs. sugar. many marketers use attitude measures for forecasting future sales.g. Thus. social. idea. and integrated into all promotion and communication strategies. however. reinforced on product packaging. Attitudes can be positive or negative. the attitudes you once held with confidence may no longer exist. and co native. the affective component reflects feelings (e.. Introducing exciting. In the mid-1990s. you will likely vote for him or her in the next election. Over time.. Because of this. positively valence attitude toward a product. Hush Puppies shoes made a comeback after decades of low sales. a brand extension is more likely to be successful if the set of associations for the extension matches the set of associations of the core product. and overall strength of the brand or brand equity. Among other things. affective. As an individual learns new information. The cognitive component reflects the knowledge and beliefs one has about the object (e. using advertising and other marketing tools to help consumers create new links to positive association and discard links to the unfavorable ones. candy. An attitude is an overall evaluation of an object. marketers must first select the set of associations they want consumers to have." The brand position is then translated into clever ads. This is called positioning the product.

a decision will be immensely complex. In this model consumers were viewed as rational actors who were able to estimate the probabilistic outcomes of uncertain decisions and select the outcome which maximized their well- being. choosing which brands to use. In addition. Often we are influenced by emotional and non-rational considerations. They are qualitative rather than quantitative and build on sociological factors like cultural influences and family influences. The focus of this paper is to examine the major decision-making models. However. They typically blend both economic and psychological models. This model . More generally. This means that although we can never “see” a decision. Bernoulli developed the first formal explanation of consumer decision making. even though had been was viewed as the dominant Decision-making paradigm. John von Neumann. He also says that peoples' information processing ability is very limited. Decision making is said to be a psychological construct. led by Nicholas Bernoulli. though consumers are good at estimating relative frequencies of events. simpler model in the mid-1950s.These models concentrate on psychological and cognitive processes such as motivation and need recognition. They are: • Economic models . • Psychological models . decision making is the cognitive process of selecting a course of action from among multiple alternatives.These models are largely quantitative and are based on the assumptions of rationality and near perfect knowledge. and Oscar Morgenstern. See consumer theory. Strategies. Common examples include shopping and deciding what to eat. had serious shortcomings that could not be explained by the model. we can infer from observable behavior that a decision has been made. Nobel laureate Herbert Simon sees economic decision making as a vain attempt to be rational. Consumer Decision-Making Models.These are practical models used by marketers. so do the consumers they seek to reach– choosing which products and services to buy. we assume that people have made a commitment to effect the action. and which not to buy. Beginning about 300 years ago. as one might expect. When we try to be rational we are at best only partially successful. • Consumer behavior models . The consumer is seen to maximize their utility. He claims (in 1947 and 1957) that if a complete analysis is to be done. puzzled over this question. they typically have difficulty translating these frequencies into probabilities. As marketers manipulate the various principles of marketing. Three Decision-Making Models Early economists. Therefore we conclude that a psychological event that we call “decision making” has occurred. That is. It was later extended by von Neumann and Morgenstern and called the Utility Theory. This theory proposed that consumers make decisions based on the expected outcomes of their decisions. Game theory can also be used in some circumstances. and Theories How do consumers make decisions? This question is at the core of much of marketing examination over the past 60 or 70 years. This Utility model. The assumption of a perfectly rational economic actor is unrealistic. In general there are three ways of analyzing consumer buying decisions. or consistent. It is a construction that imputes commitment to action. and theories that underlie the decision processes used by consumers and to provide some clarity for marketing executives attempting to find the right mix of variables for their products and services. consumers are typically not completely rational. Nobel Laureate Herbert Simon proposed an alternative. strategies. and which brands to ignore. or even aware of the various elements that enter into their decision making. based on observable actions.

in which consumers got approximately where they wanted to go and then stopped the decision-making process. otherwise. developed the Prospect Theory. After all. With Satisfying. The second of these strategies. ELIMINATION BY ASPECTS. For example. In these strategies. if it fails another attribute.was called Satisfying. Seven Decision-Making Strategies: What this all led to was the development and exploration of a series of useful consumer decision-making strategies that can be exploited by marketers. sets a cutoff value for the most important attribute. Under the Utility Theory. consumers might just evaluate apartments within a certain distance to their desired location.” This theory. a high value in gas mileage might compensate for a lower value in seating space. it continues to the next most important attribute. while solving many of the problems that each presented. In these strategies. stops the decision process and selects that product. and form a linear equation based on all the pertinent variables. stopping when they found one that was “good enough. The attributes might have equal weight (EQUAL WEIGHT STRATEGY) or have different weights for the attributes (WEIGHTED ADDITIVE STRATEGY). For example. it is eliminated from consideration. still left significant room for improvement in the area of prediction. Two major elements that were added by Kahneman and Tversky were the concepts of value (replacing the utility found in Utility Theory) and endowment. consumers would evaluate every apartment in a market. The next three strategies are called non compensatory strategies. Value provided a reference point and evaluated both gains and losses from that reference point. if a marketing executive can’t predict consumer behavior. in which the first product evaluated to meet cutoff values for all attributes is chosen. LEXICOGRAPHIC. even if it is not the best. the first of these is SATISFICING. Additionally. in which an item is more precious if one owns it than if someone else. then what use is a decision-making paradigm? Simon and others have extended this area in the investigation of the field of bounded rationality. gains and losses have a marginally decreasing increase from the Reference point. An example of this would be in the search for a new apartment. From Simon. extending beyond the mathematical optimization of Utility Theory and the somewhat unsatisfying Satisfying Theory. If this is done. however. and then select the apartment that had the highest overall utility score. and even though a product may have a very high value on one attribute. . evaluates the most important attribute. there is a much greater value for the first incremental gain from the reference point than for subsequent gains. and allows all competing products that meet that cutoff value to go to the next attribute and its cutoff value. Following Simon. each attribute of a specific product is evaluated without respect to the other attributes. In the late 1970s. marketers can position their product in such a manner that the decision-making strategy leads consumers to select their product. two leading psychologists. marketers need to understand the specific decision-making strategy utilized by each consumer segment acquiring that product.An example of the latter might be to place twice as much importance on gas mileage than seating space. Daniel Kahneman and Amos Tversky. owns it. though robust enough to encompass many of the shortcomings of Utility Theory. The third strategy. The first two strategies are called compensatory strategies. which expanded upon both the Utility Theory and Satisfying Theory to develop a new theory that encompassed the best aspects of each. consumers allow a higher value of one attribute to compensate for a lesser value of another attribute. if a consumer is looking at automobiles. For each product. additional efforts were made to develop better understandings of consumer decision making. and if a product is clearly superior to others.

control for other confounding variables. The second partially compensatory strategy is called FREQUENCY OF GOOD AND BAD FEATURES. There are other expansions upon these seven basic consumer decision. two major areas of marketing theory also help to provide additional explanatory power to these strategies. However. the surveys have the potential of producing contradictory or misleading answers. and then the choices are decomposed to understand both the conscious and unconscious elements driving the consumer’s choices. Without this base. in which the increasing complexity of a decision produces more steps in the decision process. but they are generally captured as shown above. it is critical that a solid theoretical base be used. in which all products are simultaneously compared to the cutoff values for each of their relevant attributes. and the one that has higher values across more dimensions is again retained. more cognitive effort would be expended in evaluating members of the consideration set and reducing that number to an eventual choice.making strategies. a short list of restaurants that are actively considered is utilized for the decision-making process. in which the amount of cognitive effort applied to the decision-making process is directly related to the level of importance that the consumer places on acquisition of the specific product. This degree of involvement is not necessarily a function of the price. This winner is then evaluated against the next competitor. the seven decision-making strategies. there is rarely a significant amount of decision-making applied to the selection of a pack of chewing gum at the grocery store checkout counter. and the one that has higher values across More dimensions. but is more related to the perceived impact on the quality of life of the consumer. Consumers are presented with choices in controlled environments that. but there is a much greater amount of decision-making effort applied to the purchase of a new cell phone. hopefully. when a consumer first addresses the question of where to dine that evening. in which the first two competing products are evaluated across all attributes. or can come indirectly from the social accolades or sanctions provided by members of the peer group. or attributes. . The next two strategies are called partially compensatory strategies. Multistage decision- making models were summarized by Allan Shocker. Summary Application of the three decision making models. One caveat for practitioners is important to address at this point. The first of these strategies is called MAJORITY OF CONFORMING DIMENSIONS. The quality of life can come directly from the benefits supplied by the product. and the two marketing theories can be seen in current efforts by marketing practitioners and academicians to tease apart the complex decisions made by consumers. and the attempts to manipulate the variables at hand may produce less. In this theory. For example. consumers form a subset of brands from which the decision-making strategies are applied. Two Marketing Theories: The first marketing theory is called Consideration. the list might be quite extensive for most consumers. The second marketing theory is called Involvement. and the product that has the most “good” features that exceed the cutoff values is the winner. However. choice models and conjoint models are multivariate analysis techniques based on these understandings. In essence. in that strategies are evaluated against each other in serial fashion and higher values for attributes are considered. For example. When one is attempting to manipulate marketing variables such as price or promotion. if asked to enumerate all the restaurants that one could recall. For example. or even conduct research into consumer decision-making. are retained.

but it is not sufficient to grab their attention. Only if the experience is a success for the customer will it be turned into repeat purchases. This is a very simple model.and the overall decision-making process may accordingly be much more complex than most models allow for Problem Recognition: The Crucial First Stage of the Consumer Decision Process. or based on the strength of the product or services itself. and as such does apply quite generally. There is no adequate way of describing how this may be achieved. This simple theory is rarely taken any further - to look at the series of transactions which such repeat purchasing implies.once an interest is established. to persuade the reader to adopt a sufficiently positive attitude towards the product or service that he or she will purchase it. they will not act on it. no matter how powerful it is • INTEREST . thus. This may be no small achievement where the advertiser has just a few words. and this is where marketing research can come into its own. Its lessons are that you cannot obtain repeat purchasing without going through the stages of building awareness and then obtaining trial use. albeit as a trial. not the single purchase which is the focus of most models. The message must interest them and persuade them that the product or service is relevant to their needs. for these are where the profits are generated. which has to be successful. The earlier stages are merely a very necessary prerequisite for this. The content of the message(s) must therefore be meaningful and clearly relevant to that target audience's needs. perhaps weeks later. may take place some time later. or ten seconds. It is simply down to the magic of the advertiser's art. All the different models are. when the prospective buyer actually tries to find a shop which stocks the product. All the succeeding transactions are. Problem recognition results when there is a difference between one's desired state and one's . interdependent . • UNDERSTANDING .all the above stages might happen in a few minutes while the reader is considering the advertisement. These repeats. • PURCHASE . the prospective customer must be able to appreciate how well the offering may meet his or her needs. predictably. the first task must be to gain the attention of the target audience. The final buying decision. agreed on this first step.but the message must go even further. • REPEAT PURCHASE .but in most cases this first purchase is best viewed as just a trial purchase. industrial goods just as much as baked beans. on the other hand. If the audience never hears the message. Thus. again as revealed by the marketing research.AIUAPR Model: Most directly links to the steps in the marketing/promotional process is often seen as the most generally useful: • AWARENESS .before anything else can happen the potential customers must become aware that the product or service exists. The consumer's growing experience over a number of such transactions is often the determining factor in the later . It is a pattern which applies to all repeat purchase products and services.and future - purchases. are where the vendors focus should be. to convey their message. • ATTITUDES . in the comfort of his or her favorite armchair.

Sources of Problem Recognition: • An item is out of stock • Dissatisfaction with a current product or service • Consumer needs and wants • Related products/purchases • Marketer-induced • New products How can you measure problem recognition?  Activity analysis: This method focuses on a particular activity such as preparing dinner.actual state.  Emotion research: Focus groups and projective techniques are beginning to be used to help us understand the role of emotion in problem recognition.  Problem analysis: This method takes an opposite approach in that it starts with a list of problems and asks consumers to indicate activities.  In some instances a marketer may try to either reduce the discrepancy that is the cause of the problem recognition and/or attempt to reduce the importance attached to it. or lighting a fireplace fire. and purchase of a product that resolves the problem. evaluation.  For a problem recognition of little importance.  In the case of latent problem recognition. Many cigarette manufacturers attempt to do both in their cigarette advertising. This method attempts to determine what problems the consumer encounters in performing a particular activity. Generic problem recognition Generic problem recognition refers to a problem that a particular type of product (like milk or tuna) can solve. place or promotion) to resolve a particular problem and improve on the existing level of performance (actual state). Consumers are motivated to address this discrepancy and therefore they commence the buying process. or brands that are associated with these problems. thereby reducing the intensity of the problem. products. price.  Human factors research: This approach looks at the capabilities of humans. Ways can marketers react to problem recognition:  Modify the marketing mix (product. Selective problem recognition Selective problem recognition refers to a problem that can only be solved by a specific brand or . maintaining a lawn. the marketer may stimulate problem recognition and direct search.  Product analysis: This method focuses on the purchase and/or use of a particular product or brand in an attempt to determine what problems a consumer may encounter in purchasing or using this product. the marketer may bring greater attention to this problem (increase its perceived importance) while indicating a solution to this problem. and attempts to design products in light of these capabilities.

2. It is an industry wide cooperative effort. Many personal care and social products take this approach. Sources of information include: • Personal sources • Commercial sources • Public sources • Personal experience The relevant internal psychological process that is associated with information search is perception. Generally. hoping that these benefits will become desired by consumers. the firm can attempt to influence the size of the discrepancy by altering the desired state or the perceptions of the existing state. Such an ad would directly or indirectly indicate that a potential problem is not really a problem. Belch and Belch (2007) explain that consumers undertake both an internal (memory) and an external search. Suppress problem recognition? Advertisements can be designed that will aid in the suppression of problem recognition. Causes of problem recognition Problem recognition is a function of the (1) Importance (2) Magnitude of a discrepancy between the desired state and an existing state. selects. Also. It is also possible to influence perceptions of the existing state through advertisements.product like Good pasture Milk or Al’s Tuna. Perception is defined as 'the process by which an individual receives. and package inserts are commonly used for this purpose. . "Even your best friend won't tell you . External search after problem recognition is apt to be limited. they search for information on products and services that can solve that problem. .” are examples of messages designed to generate concern about an existing state. Marketers often advertise the benefits their products will provide. a firm will attempt to influence generic problem recognition when the problem is latent or of low importance and: 1.”or “Kim is a great worker but this coffee . Information Search: Seeking Value The information search stage clarifies the options open to the consumer and may involve.Once the consumer has recognized a problem. It is early in the product life cycle. . effective quality control. Thus. distribution. packaging. organizes. Or. . the firm can attempt to influence the perception of the importance of an existing discrepancy. Some would say that ads showing healthy active people smoking cigarettes are an attempt to suppress problem recognition about health and smoking. 4. The firm has a very high percentage of the market. 3. and interprets information to create a meaningful picture of the world' The selective perception process .

Public sources. . such as friends and family. search • Often sufficient for frequently purchased • products. Personal sources.Stage Description . motives and experiences . 2. and select which sources of information are more effective for the brand CV. company websites.Selective retention consumers remember messages that are more meaningful or important to them The implications of this process help develop an effective promotional strategy. How can the marketing organization increase the likelihood that their brand is part of the consumer's evoked (consideration) set? Consumers evaluate alternatives in terms of the functional and psychological benefits that they offer. • Scanning one’s memory to recall previous Internal experiences with products or brands. Marketer-dominated sources. including various product-rating organizations such as Consumer Reports. such as advertising. 3. The marketing organization needs to understand what benefits consumers are . and salespeople ALTERNATIVE EVALUATION At this time the consumer compares the brands and products that are in their evoked set. attitudes.Selective comprehension consumer interpret messages in line with their beliefs. When past experience or knowledge is insufficient Two steps • The risk of making a wrong purchase decision is of information The primary sources of external information are: search External search 1.Selective attention consumers select which promotional messages they will pay attention to .Selective exposure consumers select which promotional messages they will expose themselves to.

or a sales promotion such as the opportunity to receive a premium or enter a competition may provide an incentive to buy now. (3) Developing consumer value perception. Purchase of the product can either be through the store. which for some consumers can be as just as rewarding as actually purchasing the product. (2) Yielding brand names that might meet the criteria. The process of going to the shop to buy the product. focus groups • Indirect methods: • projective techniques: allow a person to indicate what criteria someone else might use • perceptual mapping: consumers judge the similarity of alternative brands (often by ranking). the web.seeking and therefore which attributes are most important in terms of making a decision. The provision of credit or payment terms may encourage purchase. Purchase Decision: Buying Value . the consumer is ready to make a purchase decision. The relevant internal psychological process that is associated with purchase decision is integration.. which is processed by a computer to derive a spatial configuration Purchase decision: Once the alternatives have been evaluated. • These criteria establish a consumer's evoked set • the group of brands that a consumer would consider acceptable from among all the brands in the product class of which he or she is aware Measurement of Evaluative Criteria: • Direct methods: • ask consumers what information they use in a particular purchase • observe what consumers say about products and their attributes. • A consumer's evaluative criteria represent both • the objective attributes of a brand (such as locate speed on a portable CD player) • The subjective factors (such as prestige). e. The marketing organization must facilitate the consumer to act on their purchase intention. or over the phone.g. The information search clarifies the problem for the consumer by (1) Suggesting criteria to use for the purchase. Sometimes purchase intention does not result in an actual purchase.

but is likely to switch brands next time. This limits post purchase behavior. the consumer compares it with expectations and is either satisfied or dissatisfied. In these circumstances that customer will not repurchase immediately. This arises from a concept that is known as “cognitive dissonance”. it is the job of the marketing team to persuade the potential customer that the product will satisfy his or her needs.e. it is therefore just as important for manufacturers to advertise for the sake of their recent purchaser so consumers feel comfortable that they own a product from a strong and reputable organization. To manage the post-purchase stage. It involves using technology to organize. having bought a product. and synchronize business processes—principally sales related . • Satisfaction or dissatisfaction affects • consumer value perceptions • consumer communications • Repeat-purchase behavior. Customer Relationship Management Customer relationship management is a broadly recognized. you feel reassured that you own the latest advertised product. • Cognitive Dissonance. automate. • After buying a product. i. widely-implemented strategy for managing and nurturing a company’s interactions with customers and sales prospects. It is not affected by advertisement. Do not buy Post-purchase Behavior: Value in Consumption or Use Ever have doubts about the product after you purchased it? This simply is post purchase behavior and research shows that it is a common trait amongst purchasers of products. Then after having made a purchase. the customer should be encouraged that he or she has made the right decision. • Many firms work to produce positive post purchase communications among consumers and contribute to relationship building between sellers and buyers. may feel that an alternative would have been preferable. • which depends on such considerations From whom to • Terms of sale buy • Past experience buying from the seller • Return policy. It is common for customers to experience concerns after making a purchase decision. Three • which can be influenced by possibilities • store atmosphere When to buy • time pressure • a sale • Pleasantness of the shopping experience. The customer. Manufacturers of products clearly want recent consumers to feel proud of their purchase. The feelings of post purchase psychological tension or anxiety a consumer often experiences • Firms often use ads or follow-up calls from salespeople in this post purchase stage to try to convince buyers that they made the right decision.

also known as cloud computing and software as a service (SaaS). Vendors include: Salesforce. a sales force automation (SFA) system provides an array of capabilities to streamline all phases of the sales process. neither must they buy and maintain IT hardware to run it on. nurture and retain those the company already has. They are currently its fastest-growing segment. roadblocks to collaboration between departments. Many SFA applications also include features for opportunity management. Today. Software solutions then expanded to embrace deal tracking and the management of accounts. territory management. cloud-computing applications are sold by subscription. SAP AG. as described below. and still is. While some companies report great success. and—at the managerial level—the sales pipeline itself. For these and other minimizing the time that reps need to spend on manual data entry and administration. processes. [Citation needed] Tools and Trends Previously these tools were generally limited to contact management: monitoring and recording interactions and communications with customers. and product knowledge. and a lack of workforce buy-in and adoption. At the heart of SFA is a contact management system for tracking and recording every stage in the sales process for each prospective customer. In 2009. from initial contact to final disposition. In contrast with conventional on-premises software. and reduce operational costs. accessed via a secure Internet connection. and displayed on a Web browser. as enterprises seek to grow top-line revenues.0 e-commerce . Vendors include: Oracle Corporation. increase profitability. the SaaS option has proven very attractive. and boost the productivity of customer-facing staff Overview Once simply a label for a category of software tools. When an implementation is effective. and technology work in synergy to develop and strengthen relationships. but also those for marketing. and win new customers. initiatives have also been known to fail—mainly owing to poor planning. sales forecasting and pipeline. Newly-emerged priorities are modules for Web 2. Companies don’t incur the initial capital expense of purchasing software. SaaS represented approximately 20% of all customer relationship management spending. quote generation. opportunities. spending on customer relationship management is expected to top $11 billion annually by 2010. Next came the advent of tools for other customer-facing business functions. entice former customers back into the fold. a mismatch between software tools and company needs. Perhaps the most notable trend has been the growth of tools delivered via the Web. and continued its trajectory of outselling on-premises software by a ratio of 3-to-1. CRM technology has been. and SaaS applications have garnered a large share of the market. territories. and technical support. Challenges Tools and work flows can be complex to implement. Types/variations Sales Force Automation As its name implies. According to Forrester Research. CRM has matured and broadened as a concept over the years.activities. attract. work flow automation. improve the customer experience. offered as on-premises software that companies purchase and run on their own IT infrastructure. customer relationship management generally denotes a company- wide business strategy embracing all customer-facing departments and even beyond. people. Right Now and Sugar CRM. especially for large enterprises. customer service. and Amdocs. and reduce the costs of marketing and customer service. This allows them to successfully pursue more customers in a shorter amount of time than would otherwise be possible. The overall goals are to find.

a 2009 study revealed that only 39% of corporate executives believe their employees have the right tools and authority to solve customer problems. collateral. Customer service analytics are increasing in popularity as companies demand greater visibility into the performance of call centers and other support channels. Marketing applications generally come with predictive analytics to improve customer segmentation and targeting. marketing.” marketers can see which prospects are most likely to transact and also identify those who are bogged down in a sales process and need assistance. Another key trend is the increasing popularity of SaaS platforms for customer service.and pricing management. Analytics Relevant analytics capabilities are often interwoven into applications for sales. organizations are increasingly turning to technology platforms to help them improve their customers’ experience while increasing efficiency and keeping a lid on costs. As marketing departments are increasingly obliged to demonstrate revenue impact. and search marketing campaign Web analytics have evolved significantly from their starting point of merely tracking mouse clicks on Web sites. Marketing automation also encompasses capabilities for managing customer loyalty. Marketing and finance personnel also use analytics to assess the value of multi- faceted programs as a whole. and customer service. and dashboards that graphically display key performance indicators (KPIs). Sales analytics let companies monitor and understand customer actions and preferences. lists. and internal marketing resources. Metrics monitored include clicks. through sales forecasting. agent performance. purpose-built applications for analytics and business intelligence. responses. Web chat. off line. e-service capabilities—Web self-service. and revenue. and direct mail. collaborative browsing and virtual assistants—are gaining in importance. low initial cost. including email. leads. Even so. More recently. today’s systems typically include performance management features for measuring the ROI of campaigns. Support-focused applications typically include dashboards similar to those for sales. today’s profusion of customer service channels has prompted many companies to deploy integrated support applications that deliver knowledge-enabled solutions across all of them. social media. By evaluating customer “buy signals. and now-established efficacy for large and complex contact centers. Customer Service and Support: Recognizing that customer service is an important differentiator. data quality management. search. deals. and features for measuring the effectiveness of online. service quality. email response management. A key marketing capability is managing and measuring multichannel campaigns. Marketing Systems for marketing (also known as marketing automation) help the enterprise identify and target its best customers and generate qualified leads for the sales team. computer telephone integration (CTI). including such features as intelligent call routing. Integrated/Collaborative . owing to their rapid deployment. The core for customer service has been and still is comprehensive call center management.“. plus capabilities to measure and analyze response times. and the frequency of various customer issues. In fact. and escalation capabilities. knowledge management. in order to correct problems before they affect customer satisfaction levels. These features can be complemented and augmented with links to separate.

especially for mobile and telecommuting workers. As social media isn’t moderated or censored. faxes. many companies are still not fully leveraging these tools and services to align marketing. want to be able to pursue these opportunities without the time-wasting burden of re-entering records and contact data into a separate SFA system. an integrated solution that lets organizations and individuals efficiently track and record customer and supplier interactions. jobs. and are predicted to have profound and far-reaching effects on the ways companies manage their customer relationships. in their turn. Conversely. They also generally include opportunity management for tracking sales pipelines plus added functionality for marketing and customer service. companies are looking to gain access to these conversations and take part in the dialog. scheduling. This kind of solution is gaining traction with even very small businesses. thanks to the ease and time savings of handling customer contact through a centralized application rather than several different pieces of software. documents. Often. bona fide customer relationship management tools usually focus on accounts rather than individual contacts. feedback from a technical support center can enlighten marketers about specific services and product features customers are asking for. Systems that start disunited usually stay that way: Siloed thinking and decision processes frequently lead to separate and incompatible systems. an incomplete customer view. products. This finds expression in the concept of collaborative customer relationship management. campaign-engendered leads must be quickly and efficiently funneled to sales. Companies can . demand generation strategies need to marry marketing programs with structured sales processes —that is. This is because customers are using these social media sites to share opinions and experiences on companies. the development and adoption of the tools and services has fostered greater fluidity and cooperation among sales. several sources might contact the same customers for an identical purpose. customer service. Social Media Social media sites like Twitter and Face book are greatly amplifying the customer voice in the marketplace. In contrast with contact managers. More than a few systems are now integrating to social networking sites. many of the top-rated and most popular products come as integrated suites. sales. and services. which uses technology to build bridges between departments. Despite all this. including emails. and dysfunctional processes. Traditionally. individuals can say anything they want about a company or brand. lack of integration can have negative consequences: If a sales force automation or customer relationship management system isn’t adopted and integrated among all departments. Owing to these and related factors. For example. Increasingly. Social media promoters cite a number of business advantages. implementations are fragmented. and marketing. isolated initiatives by individual departments to address their own needs. As with larger enterprises. Similarly. and service to best serve the enterprise and its customers. whether pro or con. Reps. Departments within enterprises—especially large enterprises—tend to function in their own little worlds. small businesses are finding value in online management solutions. each with its own data collection system. and increase customer satisfaction and loyalty as a result. Small Business Basic customer management can be accomplished by a contact management system. and more. More recently. The objective is sharing and harnessing information from all quarters to improve the quality of customer service. such as using online communities as a source of high- quality leads and a vehicle for crowd sourcing solutions to customer-support problems. inter-departmental interaction and collaboration have been infrequent and rivalries not uncommon.

before choosing a technology platform. and two-way communication should be encouraged across hierarchical boundaries. Implementation Implementation Issues Many enterprises have derived great benefit from customer relationship management: dramatic increases in revenue. Under- performing deployments peaked in the early 2000’s. Depending upon the size of the company and the breadth of data. higher rates of customer satisfaction. For others. resources. Gartner reported that . context. the benefits have been limited and disappointing. Platform selection is best managed by a carefully chosen group of executives who understand the business processes to be automated as well as the various software issues. sales. Strategy Choosing and implementing a system is a major undertaking. risks assessed. and significant savings in operating costs. It can be seen as a more customer-centric way of doing business. planners need to determine the types of customer information that are most relevant. however. Senior executives need to be strong and visible advocates who can clearly state and support the case for change. an organization must convince its staff that change is good and that the new technology and work flows will benefit employees as well as customers. These observers recommend careful market research to determine if and where the phenomenon can provide measurable benefits for customer interactions. sales. teamwork. enterprises simply automate flawed customer-facing processes rather than redesign them according to best practices. and support. without an accompanying rationale. Collaboration.also leverage customers’ stated habits and preferences to personalize and even “hyper-target” their sales and marketing communications. when a number of companies spent large sums on CRM only to have it fail to deliver the hoped-for results. and market trends. Some analysts take the view that business-to-business marketers should proceed cautiously when weaving social media into their business processes. the ability to deliver the right data to the right employees. and cost quantified in three general areas: • Processes: Though customer relationship management has many technological components. especially with respect to process improvement. and sufficient ease of use that users won’t balk. In other instances. and how best to employ them. • People: For an initiative to be effective. business processes lie at its core. key factors include alignment with the company’s business process strategy and goals. and satisfying customers. Implementations almost invariably fall short when one or more facets of this prescription are ignored: • Poor planning: Initiatives can easily fail when efforts are limited to choosing and deploying software. managing. a complete and detailed plan is required to obtain the funding. Therefore.[8] • Poor adoption: In an early-2000’s survey of more than 600 enterprises. enabled by technology that consolidates and intelligently distributes pertinent information about customers. marketing effectiveness. choosing an application can take anywhere from a few weeks to a year or more. responsiveness. some will likely need re-engineering to better serve the overall goal of winning. a company needs to analyze its business work flows and processes. For enterprises of any appreciable size. Benefits must be defined. Proponents emphasize that technology should be implemented only in the context of careful strategic and operational planning. and company-wide support that can make the initiative successful. Moreover. and support for the work force. • Technology: In evaluating technology.

internally-focused. the landscape is littered with instances of low adoption rates. Prompt. Privacy and data security system One of the primary functions of CRM software is to collect information about customers. 43 percent of respondents said they use less than half the functionality of their existing system. 47% had difficulty with end-user adoption. and simplicity should be as important a decision factor as functionality. This often stems from a poor technology fit: A company compromises on capabilities or else tries to achieve too much in a single stroke. With expenditures expected to exceed $11 billion in 2010. According to a CSO Insights less than 40 percent of 1. In this view. 51 percent cited data synchronization as a major issue. If not. They offer a less than complete customer view and often lead to unsatisfactory user experiences. they will work around or ignore the system. Even with today’s more usable customer relationship management systems. • Choose the right capabilities: Employees need to know that time invested in learning and usage will yield personal advantages. Provide consistent support. 72 percent indicated they’d trade functionality for ease of use. leading to abandoned projects or unused software modules. four-fifths of senior executives reported that their biggest challenge is getting their staff to use the customer relationship management systems they’d installed. while perhaps less severe. a Gartner report estimated that more than $1 billion had been spent on software that wasn’t being used. sales. enterprises need to address and overcome persistent adoption challenges. Further. ending up with an overly complex and costly deployment that yields scant ROI. sales representatives need to know about current service issues and relevant marketing promotions before attempting to cross-sell to a specific customer. Marketing managers should be able to leverage customer information from sales and service to better target campaigns and offers.275 participating companies had end- user adoption rates above 90 percent. More recent research indicates that the problem.K. In 2003. always-accessible technical support goes a long way to facilitate use and confidence with a new system. expert. A contemporaneous AMR Research study found that of 80 large customers surveyed. • Provide training: Changing the way people work is no small task. and service. and 67 percent said that finding time to evaluate systems was a major problem. 42% of all purchased licenses had become “shelf-ware”—software paid for but never installed. [8] For example. Experts advise organizations to recognize the immense value of integrating their customer-facing operations. • Toward a solution: overcoming siloed thinking.. customer relationship management manifests in the form of piecemeal initiatives that address a glaring need: improving a particular customer- facing process or two (via simple contact management or sales planning). Some vendors offer more user-friendly applications than others. many staffers still need assistance with learning and adoption. Adoption Issues Historically. is a long way from being solved. In a 2007 survey from the U. department-centric views should be discarded in favor of reorienting processes toward information-sharing across marketing. And support agents require quick and complete access to a customer’s sales and service history. • Poor integration: For many companies. or automating a favored sales or customer support channel. a company must consider the desire for . Specialists offer these recommendations for boosting adoptions rates and coaxing users to blend these tools into their daily work flow: • Choose a system that’s easy to use: All customer relationship management solutions are not created equal. and help is usually a requirement. When gathering data as part of a CRM solution. Such “point solutions” offer little or no integration or alignment with a company’s overall strategy.

089.3 1. The marketer has to learn about the needs and changing of the consumer behavior and practice the Marketing Concept.475 16. 2. as well as the legislative and cultural norms. Alto.1 176. Boleno and other models.6 3. For successful marketing one should: 1.6 43.3 100 6.5 8.customer privacy and data security. Find consumer needs of various segments. Maruti Van.055 22.7 6.9 5. Maruti Udyog For example Maruti Udyog Ltd has come out with many models.8 15.1 2.8 25.573. . The offering given by the company must be enlarged to suit various segments. was selling jeans to a mass market and did not bother about segmenting the market till their sales went down. 965 10.9 Amdocs 451 4.6 Microsoft 581 6.3 451.147 100 8.1 4. They also targeted the women consumers for jeans and both men and women started wearing jeans in greater numbers. Case Study Levi Strauss & Co. they not only made up for the lost sales but Far exceeded the previous sales. Position Products (new & existing) to these segments.7 Total 9.5 SAP 2. They therefore came out with Khaki or Dockers to different segments and comfortable action stocks for the consumers in the 50 age group. Develop strategies for these segments. Versa Gypsy.6 Salesforce.7 Others 3. Market structures The following table lists the top CRM software vendors in 2006-2008 (figures in millions of US dollars) published in Gartner studies.9 421.681.6 2.8 100 The following table lists of the top software vendors for CRM projects completed in 2006 using external consultants and system integrators. Maruti 800.016.5 2. wagon R.050.0 5. Practice greater selectivity in Advertising and personal selling and creating more selective media and distribution outlets. Levi Strauss & Co. The study into consumer behavior showed their greatest market of the baby boomers had outgrown and their Needs had changed.4 332.7 26.3 1. 3. according to a 2007 Gartner study. Some customers prefer assurances that their data will not be shared with third parties without their prior consent and that safeguards are in place to prevent illegal access by third parties.1 1. Esteem.289.1 40.620 39. Thus by separating the market and targeting various groups and fulfilling their needs. Vendor 2008 Revenue 2008 Share 2007 Revenue 2007 Share 2006 Revenue 2006 Share (%) (%) (%) Oracle 1.881.2 365.8 16.6 676.

To conduct it. The interviews with the managers of L’Oreal Paris were conducted in order to collect data on their adaptation and standardization strategies on the studied markets. the culture and the consumer behavior in Asia. firms are becoming more and more global. Moreover. the thesis reveals an observable trend towards a correlation of the awareness of the acquisition and a negative shift in customer perception. press articles. The Role of Cultural Differences in the Product and Promotion Adaptation Strategy: A L'Oreal Paris Case Study Nowadays. The acquisition of Body Shop International by L’Oreal represents the practical case. It is an important part of marketing because it influences the consumers’ wants and needs and because it impacts on the interpretations of products’ communication. principles and associations that might affect a company’s appeal. their service attributes and their promotion. Different kinds of interviews have been done in order to know more about the company adaptation strategy. We also interviewed a specialist of cosmetics. Written sources as external documents from L’Oreal Paris. Japan and People’s Republic of China (PRC) for make-up products and its promotion considering the influence of culture on the consumer behavior. their packaging. However. The empirical data comes from various sources. This is studied referring to the European market. The purpose of this paper is to investigate adaptation strategy in South Korea. we chose to use qualitative interviews and document analysis. are consumers becoming global too? Therefore. The study of the consumer behavior conducts companies to adapt their products features. an expert interview with a Body Shop representative will be executed in order to add the company’s perspective. the challenges for the firms consists in determining if they should adapt their products or if they should consider the consumers as being global. All these interviews were conducted in order to answer our objectives. and keep their product standardized. which will be analyzed in reference to consumers’ reactions towards it. Quantitative consumer questionnaires will be conducted in order to collect representative data on consumers’ perceptions and associations of the brand Body Shop. . This demonstrates that the culture impacts consumer behavior.Consumer perceptions on the incorporation of established brands: the acquisition of Body Shop by L’Oreal This thesis aims at investigating consumers’ perceptions on the incorporation of an established brand and how the general attitude and buying behavior is altered in the course of an acquisition. websites. Therefore. The study clearly identifies that brand dilution is a possible threat for established brands and implies the risk of lost credibility and loyalty. We interviewed three managers from L’Oreal Paris and as well girls from the following nationalities: three Japanese girls. The buying behavior is however not found to be influenced by the combination of the two firms. one Chinese girl and two Korean girls. their symbolic attributes. The combination of two or more brands in a newly formed conglomerate implies a combination of values. underlying reasons for M&As will be elaborated upon as well as branding concepts based on brand image. loyalty and reputation in order to bridge the two theoretical areas with a case study. In conclusion. Culture is a system of meanings shared by members of a group. This study is a case study about L’Oreal Paris. L’Oreal Paris is used as an example to illustrate the study. scientific articles and literature have been used to complete the primary data. it can be stated that the need for pre-acquisition analysis regarding strategic fit and compatibility of values and associations is assured. The interviews with the Asian girls and with the specialist of cosmetics were conducted in order to collect data on the culture and on the consumer behavior. By analyzing the results of the questionnaire.

The culture diversity creates the consumer behavior diversity as it can be noticed in South Korea. In its adaptation strategy. L’Oreal Paris is trying to know more about these consumer behavior differences in order to answer the consumers’ demands and to adapt its products and promotion strategy. the firm considers some elements of the consumer behavior therefore of the culture. In order to reach our purpose we chose to perform a pilot study targeting students at the University of Linkoping. L’Oreal Paris is adapting some elements of its product range and its promotion. social influence.Cultural aspects impact directly or indirectly on the consumer behavior. However. . Therefore. Moreover. We were able to establish the existence of an attitude-behavior gap towards organic milk amongst students at the university. an actual corresponding behavior will not occur. to what extent the consumer feels an ethical obligation to buy organically and whether the consumer identifies herself with the issue. The three countries studied are very different culturally speaking. the adaptations on products and promotion made by L’Oreal Paris do not take fully into account these cultural and consumer behavior differences. In this case the factors strongly counteracting the attitude are consumer habits. Both qualitative and quantitative methods have been used in the collection of data. and that this gap in fact arises before an intention to buy organic milk is even formed. the purpose of this thesis is to explain the dissonance between attitude and behavior towards organic milk. Together. the cultural differences may influence the make-up products and promotion adaptation strategy. the L’Oreal Paris adaptation strategy in the Asian zone is a mix between standardization and adaptation. In this thesis focus is on one specific product . The attitude-behavior gap is explained by the fact that other factors than attitude influence the formation of the milk. Japan and PRC where the culture and the behaviours are very different than in Europe. It has been done using a survey and interviews. Thus. many promotion and products aspects are standardized. However. Since a behavioral intention is not formed. Practice what you preach!? : A study of the gap between attitude and behavior towards organic milk The trend of environmentally friendly consumption permeates our whole society and the general attitude towards the consumption of it is strongly positive. To conclude. the existence of an attitude- behavior gap became clear to us since the actual green consumption does not reflect the positive attitude. these factors are so strong that they succeed in neutralizing the positive attitude.