Paper: 14 Marketing Management

Module:14, Consumer Behaviour

Prof. S P Bansal
Principal Investigator Vice Chancellor
Maharaja Agrasen University, Baddi

Prof YoginderVerma
Co-Principal Investigator Pro–Vice Chancellor
Central University of Himachal Pradesh. Kangra. H.P.

Dr. Kulbhushan Chandel

Paper Coordinator Department of Commerce and Management
Himachal Pradesh University, Shimla

Dr. Rajwant Kaur

Content Writer Department of Commerce and Management
D.A. V.College, Jalandhar

BPSMV, KhanpurKalan, Sonipat

1
 Items Description of Module
Subject Name Management
Paper Name Marketing Management
Module Title Consumer Behaviour
Module Id Module 14
Pre- Requisites Basic knowledge of marketing
Objectives To study consumer behaviour and its determinants
Keywords Consumer, Consumer Behaviour, Purchase Decision, Stimulus

QUADRANT-I

Module 14: Consumer Behaviour

1. Learning Outcome
2. Meaning
3. Need for Studying Consumer Behaviour
4. Determinants of Consumer Behaviour
5. Consumer decision –making process
6. Summary

1. Learning Outcome:
After completing this module, the students will be able to:
 Understand the concept of consumer behaviour
 Explain the determinants of consumer behaviour
 Describe the consumer buying process

2. Meaning
Consumer behaviour is an orderly process whereby the consumer interacts with his or her
environment (social, psychological, economic) for making purchase decision. It is all social,
psychological and physical behaviour of individuals, who are end-users of products or services,
as they become aware of, evaluate, purchase, use and tell others about products or services.
Consumer behaviour is reflected in buying activities and includes communication, purchase and
consumption behaviour.
James, Roger and Paul defined consumer behaviour as actions and processes of people who
purchase goods and services for their personal consumption.

3. Need for Studying Consumer Behaviour

The study of consumer behaviour is an attempt to understand as well as predict human actions
in buying role. Knowledge of consumer behaviour and factors that influence consumer
behaviour are important for marketers to achieve the objective of consumer satisfaction. The
consumer research or consumer behaviour related research enables marketing executives to
predict reaction of consumers to promotional messages and to understand why they take the
purchase decisions the way they do. It helps in formulating effective marketing programmes
and serving target markets in a profitable way.

4. Determinants of Consumer Behaviour

Consumer behaviour is dynamic and complex. It is influenced by various factors. These factors
are broadly classified as economic, socio-cultural and psychological factors. An explanation of
these factors has been given below:

2
(A) Economic factors: As per economists, consumer is a rational person. He has perfect
knowledge about market. He tries to get maximum value for each unit of money and
efforts spent. However, his buying behaviour is affected by his personal income, family
income, income expectation, level of standard of living and consumer credit available.
Personal income is the reward for a person’s economic efforts. It gives him purchasing
power i.e. capacity to buy goods or services. In marketing sense, personal income in gross
terms is not relevant. Rather disposable and discretionary personal incomes are important
to study the consumer buying behaviour. ‘Disposable income’ means the personal income
available with the consumer after making necessary payments like taxes, interest charges,
debt repayment etc. This is the residual income which a consumer can use the way he
likes. Any change in disposable income affects consumer’s buying decisions. An increase
in disposable income leads to more consumer spending and even more demand for luxury
items whereas decrease in disposable income results in less consumer spending.
‘Discretionary income’ refers to the residual disposable income which is left with
consumer after meeting minimum subsistence needs (i.e. basic needs like food, clothes,
shelter etc.) of family. An increase in discretionary income leads to more consumer
spending usually on products that raise living standards like television, air-conditioner,
computer, refrigerator etc.
Family income is the sum total of individual income of all family members. In joint
family, consumer behaviour is influenced by family income available after meeting
family requirements.
Income expectations in future influence consumer behaviour. High or low income
expectations affect level of current spending of consumer on comforts of life or luxuries.
If there are expectations of less income generation in future, consumer will curtail his
present expenditure and will save more for future.
Liquid assets held by consumer affect his buying behaviour. Liquid assets are the assets
which are either in cash or can be converted into cash in a short period of time. Bank
balance, bank deposits, saving certificates, government bonds are the few examples of
liquid assets. These assets can be used to purchase consumer durables or meet future
contingencies. Thus, liquid assets enable a consumer to freely spend his current income.
Availability of consumer credit in the form of deferred payment, hire purchase agreement,
instalment buying etc. affects consumer buying behaviour. Consumer credit is a facility
provided to consumer by the marketer to purchase the product and make payment in
future. Thus, the credit facility enables consumer to buy consumer durables which he
would have postponed otherwise due to paucity of funds or resources. Moreover, current
income can be used by the consumer in a carefree manner.
The living standard enjoyed by the consumer also influences his buying behaviour. With
reduction in income, consumer spending does not reduce proportionately as it is difficult
for consumer to make compromises in consumption of such goods which are necessary to
maintain the living standard he is accustomed to. He tries to keep up the same standard of
living even if his income falls.
(B) Socio-Cultural factors : Sociologists are of the view that individual consumer’s
behaviour is affected by group of individuals known as reference groups, opinion leaders
and family. Consumer’s buying decisions are also influenced by social class and culture.
These factors have been explained in detail as under:

3
(i) Reference groups: Reference groups are the social, religious and professional
groups that exert direct or indirect influence on consumer’s behaviour. These are
the small groups to which an individual belongs and seeks their guidance and
advice to evaluate his opinions and beliefs. The information provided by these
groups on quality of a product, its performance, style etc. acts as a frame of
reference. Friends, local club members, neighbours, college living groups are the
primary reference groups that have a direct influence on individual’s buying
decisions. Religious or professional groups are secondary reference groups that
have an indirect influence on individual’s behaviour. Word-of-mouth
communication is used to pass messages within the group members. Group
members provide more relevant and additional information about new arrivals,
brands, style and products which cannot be provided by mass-media. There are also
aspirational groups that act as reference groups. Consumer does not belong to such
groups but his buying behaviour is affected by life style or opinions of such groups.
Sportsmen, successful businessmen, movie stars, models and political figures are
the members of such groups. In today’s digital environment, a new type of
reference group that has emerged is the virtual group which brings together people
who have different cultures but share a common ideology.
The reference groups have strong influence on individual’s attitude, life-style and
buying behaviour.
(ii) Opinion leaders: Many a times, persons seek guidance of a particular individual in
their group to form an opinion or take buying decisions. Such individual is called
opinion leader who usually acts as informal group leader. His attitude, actions and
beliefs influence the buying patterns of the group members. He sets the trend, tries
new products and suggests other members to use such products if he has good
experience. Opinion leaders can act as effective agencies of communication on
behalf of marketers if marketing efforts are directed at opinion leaders.
(iii) Family: Family exerts influence on consumer behaviour in two ways i.e. by
influencing consumer personality and his decision making process involved in the
purchases. Personal values, buying habits and attitude of an individual are being
shaped by family influences. Family members have considerable influence on
buying decisions. They play different roles in buying process as initiator,
influencer, decider and/or user. More than one role may be played by one family
member. Housewife usually influences the decisions regarding food and grocery
items. Husband and wife have joint influence on decisions regarding luxury items.
Children influence the buying decisions relating to toys, clothes and sports
equipments.
Due to different roles of family members, the marketers are interested in knowing
that (a) who influences buying, (b) who takes buying decision, (c) who actually
buys and (d) who uses the product. This will help in formulating appropriate
marketing mix. For example, if teenagers in the family are decision-makers, then
promotion policies will be formulated accordingly.
Family life cycle also influences consumption pattern. E.g. expenditure on food and
clothing generally increases when family expands due to birth of child. Similarly,
other stages like maturation of children, married children leaving home also have
impact on consumer expenditure patterns.
(iv) Social class: Consumer buying behaviour is influenced by social class. Social class
is a homogeneous division in society into which families or individuals sharing
similar values, life-style and behaviour can be categorized. In India, there exists
three social classes i.e. upper class, middle class and lower class. One can observe
differences in stores visited, products selected and magazines read by people

4
 belonging to different social classes. Thus, social classes can be a base for market
segmentation. It is usually seen that consumers in upper class group use products
and brands that are clear symbols of their social status. They can be attracted and
retained through product differentiation, premium quality and advertising.
Consumers in middle class group use rationality in their purchase decisions. They
make comparison of prices, quality etc. before buying any product. Such consumers
can be influenced through advertisements in newspapers or television. Lower class
consumers have limited sense of choice- making and they usually make impulse
buying. Such consumers can be attracted through point of purchase materials like
window banners, advertising on package, information folders etc.
(v) Culture: Culture adds another dimension to the study of consumer behaviour. It
includes a set of learned beliefs, customs, values, habits and attitudes that serve to
regulate behaviour of members of a society. These values, beliefs, customs are
adopted by society and passed from one generation to the next within that society.
Culture has significant influence on patterns of consumption and decision-making
and shape them right from infancy. Cultural changes take place due to social
position, technological advancements, travel and education. Marketers must
understand the values, rituals, customs and language of the culture of their target
markets and develop marketing strategies for each culture separately. Within a
culture, there exist sub cultures on the bases of caste, religion and region etc.
Cultural and sub cultural trends have important implications for market
segmentation and designing marketing-mix.
(C) Psychological factors : Psychologists have explained the reasons as to why consumer
behaves in a particular manner. According to them, motivation, perception, learning,
attitude and personality are the major psychological factors, internal to the individual, that
affect the behaviour of an individual as consumer.
Motivation is a driving force within individuals that impels them to some action.
Motivation, in consumer, is related with reasons that impel him to take certain buying
actions. It is an inner force governing consumer behaviour. An individual is motivated by
physiological, social and psychological needs till they are not satisfied. Individuals should
be regarded as need-satisfying mechanisms who try to fulfil a set of needs in a sequence
reflecting their buying motives. Buying motive is an urge prompting a person to purchase
decision. For the same behaviour, there can be different buying motives (stimulated or
aroused needs) like safety, pride, fashion, love and affection, comfort, social approval etc.
Thus, the study of motivation helps marketers in finding rationale behind buying
behaviour. It helps in market segmentation, product development, product positioning and
advertising creativity.
Perception influences consumer behaviour. Consumer acts or reacts on the basis of his/
her perceptions. Perception is a process whereby stimuli are received by an individual,
interpreted by him and translated into a response. In simple words, it is how an individual
sees the world around him. Different people, exposed to the same stimuli, will interpret
and respond in different ways based on their wants, needs, values and experiences.
Perception is a selective process as it relates to the interpretation of information to select a
response to stimulus. In marketing sense, every element of marketing mix is a stimulus
and purchase could be a response. Consumer perceptions influence marketing mix. Thus,
understanding consumer behaviour by marketers is essentially about understanding as
well as managing perceptions. Perceptions change with time. Marketers can influence or
change consumer perception through repetitive exposure.

5
 Learning significantly affects consumer behaviour. Learning is a process by which
consumer acquires purchase and consumption knowledge (usually through observation,
discussion or reading) and experience and applies them to future related behaviour. Most
consumer behaviour is learned. Learning process involves the interplay of drive, cues,
response and/ or reinforcement. Drive is a strong internal stimulus impelling action. Cues
are external stimuli coming from market or social environment of consumer e.g. product
or advertisement. Reaction to cue or drive constitutes response. Reinforcement increases
the possibility of similar response in future i.e. repeat purchases. Marketers are interested
in knowing that how consumers learn about products so that effective promotional
strategies can be formulated.
Through learning, an individual acquires attitude which influences his buying behaviour.
Attitude is a state of mind, a learned predisposition to respond in a favourable or
unfavourable way to an object. Attitudes develop gradually as a result of experience.
They are difficult to change but a change in attitude leads to change in buying behaviour.
An understanding of consumer attitudes is essential for the marketers to fit the product
into existing attitudes, change the attitudes in the favour of product, or even create new
attitudes through better marketing mix and effective promotion devices.
Personality refers to an individual’s inner psychological characteristics that determine
and reflect how an individual responds to his or her own environment. Personality is a set
of traits, attitude, habits, beliefs and outlook. Consumer’s personality has impact on his
buying decisions. According to Freudian psychoanalytic theory, consumer purchases are
largely a reflection of consumer’s own personality. Personality traits such as dependence,
impulsiveness, responsibility, creativity, aggressiveness, sociability etc. can determine
how people would behave. The study of personality traits helps marketers in knowing
consumer innovativeness, his preference for uniqueness and response to different
promotional messages. It guides marketing efforts regarding product positioning and
marketing communications.
Apart from the above mentioned factors, consumer behaviour is also affected by
occupation, life style and age of consumer.

5. Consumer decision –making process

Consumer decision-making process, also called as buying process, explains how consumer
takes purchase decisions. It represents a problem-solving approach followed by consumer and
consists of five steps i.e. (i) Recognition of need (ii) Search for information (iii) Evaluation of
alternatives (iv) Purchase decision and (v) Post-purchase evaluation. It is important to know
that ‘time lag’ i.e. time between need recognition and ultimate purchase is long for expensive
durable products or new products whereas it is short for non-durable and less costly products.
The various steps have been discussed in detail as below:
(i) Recognition of need: Buying process starts when a need is felt for a product due to
internal or external stimulus. Need is recognized when consumer faces some problem or
when desire for something triggers a latent or hidden need. Recognized needs become
wants. Consumer tries to fulfil the most pressing (urgent) wants first due to his limited
purchasing power. Advertising, packaging, product design, store locations, window
displays are external stimuli that trigger need recognition in consumer. Promotion-mix
not only triggers actual needs and desires of consumers but also offers selling points in
the buying process.

6
(ii) Search for information: Search for information begins when consumer feels that
aroused need should be satisfied by purchase and consumption of a product but he is
not sure about what type or brand of product can provide best satisfaction. He may have
no idea that from where and how it can be secured. Consumer tries to get information
about various models, brands, manufacturers, quality, price etc. He can collect
information from personal and/or impersonal sources. Personal sources of information
include neighbours, friends, relatives, opinion leaders, co-workers, salesmen and
dealers. Impersonal sources include internet, advertisements in television, radio or
newspaper, package label, consumer reports, brochures, press articles etc. ‘Shopping
around’ is another way of collecting external information and is usually preferred by
women. The duration for information search depends on differences between available
brands, perceived risk and/or consumer’s past experience with product category.
Marketers can assist consumers by providing relevant, reliable and up to date
information through websites, window display, package, advertisements, retail outlets,
dealers, salesmen and testimonials of past customers.
(iii) Evaluation of alternatives: The collected information is used to evaluate the alternative
products or services. Consumer assigns relative weights to different products and
judges the relative worth of alternatives. The evaluation behaviour varies with situation,
type of product and intensity of need. The consumer usually considers brand strength,
brand image, manufacturers’ reputation for quality, middlemen’s reputation, product
attributes, after sales services, availability of spare parts and most importantly utility
value while evaluating different brands. Price is also used as criteria for evaluating
brands but not an exact price figure rather a price range is used. Marketers can assist
consumer in evaluation process by communicating product attributes and by clearly
stating their brand’s point of differentiation.
(iv) Purchase decision: After careful evaluation of various alternative choices, the purchase
decision is taken. Purchase decision is a judgment made by consumer on the basis of his
attitude, lifestyle, level of motivation, perception and learning which reflects his
intention to buy some product. Purchase decisions are influenced by social factors such
as attitude of reference group or situational factors such as dealer or middlemen’s
terms, falling prices, availability, loss of job, a bad report about brand from customer at
point of purchase, launch of better product etc. Perceived risk may influence the
purchase decision. Purchase decision may be taken by the actual user or by the buyer.
Purchase implies consumer commitment for a product. Practically, it is the last stage as
it completes exchange activity. Purchase may be a trial or adoption purchase which
subsequently may result in repeat purchases if experience with product is good. Trial
purchase is made by consumer when he buys a product for the first time and in small
quantity to accumulate experience. Trial purchase is not possible in case of consumer
durables such as cars, scooters, air conditioners etc. The purchased product is adopted
and repeatedly used. In such cases, marketers can help consumer in his purchase
decision through product demonstrations or money back guarantees. In case of
automobiles, test drive can be offered.
(v) Post purchase evaluation: After using the product, the consumer evaluates its actual
performance in the light of his own expectations. When performance falls below
expectations, it leads to dissatisfaction. However, performance exceeding expectations
makes consumer delighted. It leads to positive word of mouth communication and/or
repeat purchases. In post purchase evaluation stage, the consumer usually tries to
reassure himself that his choice was right. He attempts to reduce his post purchase
anxiety or doubts (cognitive dissonance). Marketers can help in developing confidence
about purchased product by monitoring post purchase usage, emphasizing product
performance and quick redressal of complaints.

7
6. Summary
Consumer behaviour is all social, psychological and physical behaviour of individuals, who are
end-users of products or services, as they become aware of, evaluate, purchase, use and tell
others about products or services. Consumer behaviour is reflected in buying activities and
includes communication, purchase and consumption behaviour. Consumer behaviour is
influenced by various factors. These factors are broadly classified as economic, socio-cultural
and psychological factors. As per economists, consumer buying behaviour is affected by his
personal income, family income, income expectation, level of standard of living and consumer
credit available. Sociologists are of the view that individual consumer’s behaviour is affected by
group of individuals known as reference groups, opinion leaders and family. Consumer’s
buying decisions are also influenced by social class and culture. Psychologists have explained
the reasons as to why consumer behaves in a particular manner. According to them, motivation,
perception, learning, attitude and personality are the major psychological factors, internal to the
individual, that affect the behaviour of an individual as consumer. Consumer behaviour
essentially refers to decision processes. Consumer decision-making process, also called as
buying process, explains how consumer takes purchase decisions. It represents a problem-
solving approach followed by consumer and consists of five steps i.e. (i) Recognition of need
(ii) Search for information (iii) Evaluation of alternatives (iv) Purchase decision and (v) Post-
purchase evaluation.