UNIT-I

1.1 Consumer Behavior: Concept & Definition

1.2 Scope and Importance and Interdisciplinary
1.3 Consumer Environment
1.4 Consumer Analysis Framework
1.5 Consumer Behavior and Consumer Research
1.6 Models of Consumer Behavior:
1.6.1 Input-Process-Output Model
1.6.2 Nicosia Model
1.6.3 Howard Sheth Model
1.6.4 Engel-Kollat-Blackwell Model
1.7 Application of Consumer Behavior and Knowledge in Marketing
1.8 Profile of the Indian Consumer and Understanding their Needs.

1.1.1Consumer Behavior: Concept

Before understanding consumer behaviour let us first go through few more terminologies:
Who is a Consumer ?
Any individual who purchases goods and services from the market for his/her end-use is called a
consumer.
In simpler words a consumer is one who consumes goods and services available in the market.
Example - Tom might purchase a tricycle for his son or Mike might buy a shirt for himself. In the
above examples, both Tom and Mike are consumers.
What is consumer Interest ?
Every customer shows inclination towards particular products and services. Consumer interest is
nothing but willingness of consumers to purchase products and services as per their taste, need and
of course pocket.
Let us go through the following example:
Both Maria and Sandra went to the nearby shopping mall to buy dresses for themselves. The store
manager showed them the best dresses available with him. Maria immediately purchased two
dresses but Sandra returned home empty handed. The dresses were little too expensive for Sandra
and she preferred simple and subtle designs as compared to designer wears available at the store.
In the above example Sandra and Maria had similar requirements but there was a huge difference in
their taste, mind set and ability to spend.
What is Consumer Behaviour ?
Consumer Behaviour is a branch which deals with the various stages a consumer goes through
before purchasing products or services for his end use.
Why do you think an individual buys a product ?
 Need
 Social Status
 Gifting Purpose
Why do you think an individual does not buy a product ?
 No requirement
 Income/Budget/Financial constraints
 Taste
When do you think consumers purchase products ?
 Festive season
 Birthday
 Anniversary
 Marriage or other special occasions
There are infact several factors which influence buying decision of a consumer ranging from
psychological, social, economic and so on.
The study of consumer behaviour explains as to:
 Why and why not a consumer buys a product ?
 When a consumer buys a product ?
 How a consumer buys a product ?
During Christmas, the buying tendencies of consumers increase as compared to other months. In the
same way during Valentines week, individuals are often seen purchasing gifts for their partners.
Fluctuations in the financial markets and recession decrease the buying capacity of individuals.
In a layman’s language consumer behaviour deals with the buying behaviour of individuals.
The main catalyst which triggers the buying decision of an individual is need for a particular
product/service. Consumers purchase products and services as and when need arises.
According to Belch and Belch, whenever need arises; a consumer searches for several information
which would help him in his purchase.
Following are the sources of information:
 Personal Sources
 Commercial Sources
 Public Sources
 Personal Experience
Perception also plays an important role in influencing the buying decision of consumers.
Buying decisions of consumers also depend on the following factors:
 Messages, advertisements, promotional materials, a consumer goes through also
called selective exposure.
 Not all promotional materials and advertisements excite a consumer. A consumer does not
pay attention to everything he sees. He is interested in only what he wants to see. Such
behaviour is called selective attention.
 Consumer interpretation refers to how an individual perceives a particular message.
 A consumer would certainly buy something which appeals him the most. He would
remember the most relevant and meaningful message also called as selective retention. He
would obviously not remember something which has nothing to do with his need.

1.1.2Consumer Behavior: Definition

Consumer behavior is the process whereby individuals decide what, when, where, how and from
whom to purchase goods and services.
Walters and Paul

Consumer behaviour as “The dynamic interaction of cognition, behaviour and environmental events
by which human beings conduct the exchange aspect of their lives.
American Marketing Association (AMA)

Consumer behaviour refers to the actions and decision processes of people who purchase goods and
services for personal consumption.
Peter D. Bennett, ed. Dictionary of Marketing Terms, 2nd ed. 1995

Consumer behaviour refers to “the mental and emotional processes and the observable behaviour
of consumers during searching for, purchasing and post consumption of a product or service.
James F. Engel, Roger D. Blackwell and Paul W. Miniard, “Consumer Behaviour” (1990)

1.2 Scope and Importance and Interdisciplinary

1.2.1 Scope of Consumer Behaviour
Demand Forecasting
Consumer behaviour helps in the forecasting of demands for the business. Business can identify the
needs and wants of the customers by understanding their behaviour. They can easily find out their
unfulfilled needs and demands. If they get a clear idea of what customer needs, a business can
design their products accordingly. It will help them in the forecasting of demands for products by
understanding their behaviour. The business will be able to identify the market opportunities
available to them. 
Marketing Management
Marketing has an important role in the successful functioning of every business. Better
understanding of customer needs, problems and expectations will help the business in framing
sound marketing strategies. If a company is able to do marketing effectively it can attract more and
more customers. Understanding customer behaviour will help companies to have better knowledge
about their customers. This will ultimately help business in conducting their marketing in a better
way.
Selecting The Target Market
Consumer behaviour helps in identifying target customers from the market. Study of customer
behaviour identifies all customers segments with unique and distinct needs. It helps in segmentation
of the overall market into different groups. Grouping of customers and identification of their needs
will help business in serving them better. The business will be able to design their products in a
better way as per the needs and wants of their customer. It makes clear to businesses who are their
target customers and what they want.
Market Mix
Designing an accurate mix of important elements like product, price, place and promotion are
important for every business. It helps in finding out the dislikes and unfulfilled wants of customers.
This helps marketers in designing the optimum marketing mix for improving the effectiveness of
marketing strategies. The proper marketing mix will help marketers to attract more and more
customers thereby increasing the profit.
Educating Customer
Consumer behaviour helps marketers to identify how customers spend on their buying decision. By
understanding their behaviour marketers can easily guide their customers about how they can
improve their buying decisions. They can suggest ways to save their money and guides them with
better options available in the market. Customers get aware of different opportunities available to
them as per their behaviour.
Assists In Designing Product Portfolio
Designing the right product portfolio is a challenging task for every business. Every business should
design such a portfolio consisting of all class of products. Consumer behaviour helps in identifying
the class and requirements of peoples. This helps in designing products as per people’s needs and
include in the product portfolio of the company. This way business is able to design the optimum
product portfolio and able to serve its customers in a better way.

1.2.2 Importance of Consumer Behaviour

It is important for marketers to study consumer behaviour. This helps marketers to investigate and
understand the way in which consumers behave.
Below are some of the importance of consumer behaviour is given below:
1. Manufacturing policies
2. Price policies
3. Decision regarding channels of distribution
4. Decision regarding sales promotion
5. Exploiting marketing opportunities
6. Highly diversified consumer preferences
 7. New Technological product
Manufacturing policies
The study of consumer behaviour affects the manufacturing policies of the organisation. Consumer
behaviour helps an organisation to plan and develop its products according to consumer need and
preference.
Price policies
Consumer behaviour helps the marketer to set the price in the market. Consumer prefers optimal
solution combine with production policies.
Decision regarding channels of distribution
Consumer prefers difference channel of purchase which is influenced by many factors.
Decision regarding sales promotion
consumer behaviour enables the marketer to know what motive prompt consumer to make a
purchase and the same are used in overall marketing strategy.
Exploiting marketing opportunities
Consumer behaviour guide the marketers to understand the consumer’s problem, needs, want and
expectations and according to exploiting marketing opportunities.
Highly diversified consumer preferences
Availability of more choice now has diversified consumer preference. Therefore study of consumer
behaviour is a crucial and challenging task for marketers.
New Technological product
Rapid introduction of a new product with technological advancement has made the job of studying
consumer behaviour more imperative.

1.2.3 Interdisciplinary of Consumer Behaviour

Five Interdisciplinary Dimensions of Consumer Behaviour

1. Economic
Demand, Supply, Income, Purchasing Power
2. Psychology
Needs, Motivation, Personality, Perception, Attitudes, Learning
3. Sociology
Society, Social Class, Power, Esteem, Status
4. Socio Psychology
Group Behaviour, Group Influences, Conformity to group norms, Role Leader.
5. Cultural Anthropology
Beliefs, Values, Attitude towards wealth, Joint Family System, Caste System
We can explain all above Inter-Disciplinary Dimensions of Consumer Behaviour with the help of
various points and examples.
Economics
This is traditional discipline mainly focus on economic activities to get maximum returns on
investment.
Man’s behaviour always involves choice and he will purchase from various alternatives available in
the market based on his purchasing power.
There are two important concepts in Economics which we can not neglect –
1. Demand i.e. Consumption and
2. Supply (Production)
Many times pricing of a product depends on the availability of the product in the market and their
supply.
If demand is more and supply is less, the price may be high and visa versa.
Marketers should identify groups of people with unsatisfied needs and wants and are ready to spend
money. These can be target customers for marketers to offers unique and innovative products.
Income
1. Disposable Income: Take home pay or income minus taxes
2. Discretionary Income: Purchasing power or income left after paying taxes and spending on basic
necessary items like food clothing, home etc.
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1.4 Consumer Analysis Framework

What is Consumer Analysis?
Consumer analysis is the process where information about the consumer is found out from market
research like the needs of the consumer, the target market and the relevant demographics so that
this information can be used in market segmentation for further steps of market research. It is very
useful in predicting consumer behavior.
Importance of Consumer Analysis
Consumer is the most important entity in the entire selling and marketing process and analyzing
consumer is a very important aspect of market research.
Objectives of consumer analysis are to find out information about:
Profile of the consumers
This includes demographic, economic, social, geographical characteristics of the consumer and any
other special interests of the consumer that are relevant. It also includes the buying process of the
consumer i.e. factors like the decision making unit, time and frequency of purchase, how the
consumer makes the purchase and the method of payment. The former is called demographic
analysis and the latter is called behavioral analysis.
Benefit gained by the consumers
These include functional benefits, psychological benefits, high and low involvement benefits
depending on the products, and user & purchaser benefit depending on whether it is a B2B or B2C
customer.
Market
A market is the group of customers who gain the same benefit from a product. Market can be
undifferentiated or differentiated. In case of differentiated markets, market segmentation can be
based on geographic, demographic or psychological segmentation. Whichever the market is, it has to
be homogeneous, consistent, executable and profitable.

Steps in consumer analysis

Step1: Overview of the industry
Step2: Identifying and describing demographics of the customers
Step3: Project future changes
Step4: Determine and describe consumer buying behavior
Step5: Competitive analysis
Step6: Use information about industry, customer and competitors determined above to identify gaps
in the market
Wheel of consumer analysis: It is a model describing the key factors in understanding consumer
behavior and hence developing a marketing strategy.
Example of Consumer Analysis
Nike shoes has a wide range of products designed for different segments of its consumers like shoes
for sports persons, basic sports shoes for gym, walking or running, tougher shoes for football
players, etc.

1.5 Consumer Behavior and Consumer Research

Consumer Research:
(A) Consumer researchers today use two different types of RM to study CB

(i) Quantitative Research: It is also known as positivism – researchers are known as

positivist. The research methods used in positivist research are borrowed primarily
from the natural sciences and consist of experiments, survey techniques and
observation. The findings are descriptive, empirical and, if collected randomly (using
a probability sample) can be generalized to larger population.

(ii) Qualitative Research: It is also known as interpretivism. Researchers are also known
as interpretivists. Among the RM they use are depth interviews, projective
techniques, and other methods borrowed from cultural anthropology. Broadly
speaking, the findings of qualitative research cannot be generalized to large
population.

(B)The consumer researchprocess:

Marketers have discovered that these two research paradigms are really complementary in nature.
The prediction made possible by positivist research together produce a richer and more robust
profile of consumer behaviour than either research approach used alone.

(i) Developing research objectives:

A carefully thought out statement of objectives helps to define the type and level of information
needed. Is it to find out consumer attitudes about online shopping? To determine what percentage
of households e-mail?

(ii) Collecting Secondary Data:

Internal sources: P&L statement, balance sheets, sales figure, and prior research report. External
sources: Govt publication, periodicals and books & commercial data.

(iii) Designing primary research:

Quantitative research designs: Three Basic RD used here are

• Observational Research:
OR is an important method of consumer research because marketers recognize that the best way to
gain an in-depth understanding of the relationship between people & product is by watching them in
the process of buying and using products. Many large corporations and advertising agencies used
trained researchers/observers to watch note & sometimes videotape consumers in stores, malls or
their own homes.
Mechanical observation like security cameras in ATM counter to observe problems customer may
have in using ATMs.

• Experimentation:
The best example is shopping mall; we can judge the consumers inside about how long respondents
spend in looking at the product, the time spent in examining each side of the package, the products
purchased, and the order of the purchases.

• Surveys:
If researchers wish to ask consumers about their purchase preferences and consumption
experiences they can do so in person, by mail, by telephone or online through questionnaire.

1.6 Models of Consumer Behavior:

1.6.1 Input-Process-Output Model

Consumer Behaviour Models – Input, Process, Output Model

Input, Process, Output Model of Consumer behaviour is the one that pays attention on product that
is marketed, external forces and consumer’s family background.
Input and Output factor that are included in this model are: –
 Input: It comprises of forces like marketing efforts taken by company and
environmental forces that influence the process of decision making of consumer.
Marketing forces includes product, price, promotion and place. Whereas,
environmental forces comprise of family, culture, reference group, social class etc.
These are the important factors which consumer properly evaluates before making
any purchase decision.
 Process: Process includes various steps through which consumers goes through
before making a buying decision. These steps are need, recognition, awareness,
examination and finally the purchase.
 Output: Output mean the way in which a consumers react to the marketing efforts
of company. Some of the consumer response to marketing efforts are-
• Purchase Decision
• Selection of Product
• Selection of Brand
• Selection of store or dealer
• Amount and timing of purchase
• Behaviour post purchase
1.6.2 Nicosia Model

Consumer Behaviour Models – Nicosia Model

Nicosia model of Consumer behaviour takes into account the exposure level that a consumer gets in
relation to his decision of purchase. There are 4 fields which forms the basis of this model in such a
way that one field is an input for next field and so on.

 First field: There are 2 sub-fields in first field of Nicosia model namely. Firm
attributes and product attributes are components offirst sub-field. Second sub-field
includes consumer existing attitude towards the product and attributes revealed by
organization whose products to be purchased.

 Second field: Refers to evaluation and research done by consumer.

 Third field: Relates to consumer purchase decision.

 Fourth field: Relates to behaviour after using the product, its uses, storage and
consumption. It is concerned with the satisfaction or dissatisfaction level of
customer after purchasing the product.

 Feedback from fourth field is an input for first field which forces organization for
changing the attributes of its product, thereby acts as an input for field 2.
1.6.3 Howard Sheth Model

The Howard Sheth Model:

This model is slightly complicated and shows that consumer behaviour is a complex process and
concepts of leaning; perception and attitudes influence consumer behaviour. This model of decision-
making is applicable to individuals. It has four sets of variables, which are:

(i) Input
(ii) Perceptual and Learning constructs
(iii) Outputs
(iv) Exogenous or external variables

Input:
Some inputs are necessary for the customer for making decisions.

(a) Significance stimuli: These are physical tangible characteristics of the product. These are
price, quality, distinctiveness, services rendered and availability of the product. These are essential
for making decisions.

(b) Symbolic stimuli: These are the same as significative characteristics, but they include the
perception of the individual, i.e. price is high or low. Quality is up to the mark or below average. How
is it different from the other products, what services can the product render and, what is the
position of after sales service and how quickly or easily is the product available and, from where.

© Social stimuli: This is the stimulus provided by family, friends, social groups, and social class. This is
important, as one lives in society and for the approval and appreciation of the society, buying habits
have to be governed.

Perceptual and Learning Constructs

These constructs are psychological variables, e.g. motives, attitudes, perception which influence the
consumer decision process.
The consumer receives the stimuli and interprets it. Two factors that influence his interpretation are
stiulus-ambiguity and perpetual bias.
Stimulus ambiguity occurs when the consumer cannot interpret or fully understand the meaning of
the stimuli he has received, and does not know how to respond. Perceptual bias occurs when an
individual distorts the information according to his need and experiences.

These two factors influence the individual for the comprehension and rating of the brand. If the
brand is rated high, he develops confidence in it and finally purchases it.

Output

By output we mean the purchase decision. After purchase there is satisfaction or dissatisfaction.
Satisfaction leads to positive attitude and increases brand comprehension. With dissatisfaction, a
negative attitude is developed. The feedback shown by the dotted line and the solid lines shows the
flow of information.

Exogenous or external variables

These are not shown in the model, and do not directly influence the decision process. They influence
the consumer indirectly and vary from one consumer to another. These are the individual’s own
personality traits, social class, importance of purchase and financial status.

All the four factors discussed above are dependent on each other and influence the decision-making
process. The model though complicated, deals with the purchase behaviour in an exhaustive
manner.

1.6.4 Engel-Kollat-Blackwell Model

The Engel-Kollat-Blackwell Model:

It consists of four components:

(i) Information processing

(ii) Central control unit
(iii) Decision process
(iv) Environmental influences

Information processing:

It consists of exposure, attention, comprehension and retention of the marketing and non-marketing
stimuli. For successful sales the consumer must be properly and repeatedly exposed to the message.
His attention should be drawn, such that he understands what is to be conveyed and retains it in his
mind.
Central control Unit:
The stimuli processes and interprets the information received by an individual. This is done by the
help of four psychological factors.

(a) Stores information and past experience about the product, which serves as a standard for
comparing other products and brands.
(b) Evaluative criteria, which could be different for different individuals.

(c) Attitudes or the state of mind, which changes from time to time, and helps in choosing the
product.

(d) The personality of the consumer, which guides him to make a choice suiting his personality.

Decision Process

It consists basically of problem recognition, internal and external search, evaluation and the
purchase. The decision outcome or the satisfaction and dissatisfaction is also an important factor
which influences further decisions.

The decision process may involve extensive problem solving, limited problem solving or routinised
response behaviour. This depends on the type and value of the product to be purchased.

Environmental influences

The environmental influences are also shown in a separate box and consist of income , social class,
family influences, social class and physical influences and other considerations. All these factors may
favour or disfavour the purchase decisions.
1.7 Application of Consumer behaviour knowledge in Marketing

Marketing is the entire process of researching customer needs and preferences, developing product
and service solutions to match, and promoting the benefits to targeted customers. Understanding
basic buyer behavior and the steps consumers follow in making purchase decisions helps
significantly in developing effective marketing plans.

There are four main applications of consumer behavior:

The most obvious is for marketing strategy i.e., for making better marketing campaigns. For example,
by understanding that consumers are more receptive to food advertising when they are hungry, we
learn to schedule snack advertisements late in the afternoon. By understanding that new products
are usually initially adopted by a few consumers and only spread later, and then only gradually, to
the rest of the population, we learn that:-

1. Companies that introduce new products must be well financed so that they can stay afloat
until their products become a commercial success and

2. It is important to please initial customers, since they will in turn influence many subsequent
customers brand choices.

3. A second application is public policy. In the 1980s, Accutane, a near miracle cure for acne,
was introduced. Unfortunately, Accutane resulted in severe birth defects if taken by
pregnant women. Although physicians were instructed to warn their female patients of this,
a number still became pregnant while taking the drug. To get consumers’ attention, the
Federal Drug Administration (FDA) took the step of requiring that very graphic pictures of
deformed babies be shown on the medicine containers.

4. Social marketing involves getting ideas across to consumers rather than selling something.
Marty Fishbein, a marketing professor, went on sabbatical to work for the Centers for
Disease Control trying to reduce the incidence of transmission of diseases through illegal
drug use. The best solution, obviously, would be if we could get illegal drug users to stop.
This, however, was deemed to be infeasible. It was also determined that the practice of
sharing needles was too ingrained in the drug culture to be stopped. As a result, using
knowledge of consumer attitudes, Dr. Fishbein created a campaign that encouraged the
cleaning of needles in bleach before sharing them, a goal that was believed to be more
realistic.

As a final benefit, studying consumer behavior should make us better consumers. Common sense
suggests, for example, that if you buy a 64 liquid ounce bottle of laundry detergent, you should pay
less per ounce than if you bought two 32 ounce bottles. In practice, however, you often pay a size
premium by buying the larger quantity. In other words, in this case, knowing this fact will sensitize
you to the need to check the unit cost labels to determine if you are really getting a bargain.

A simplified framework for studying consumer behavior gives in detail the shaping of consumer
behavior, which leads a consumer to react in certain ways and he makes a decision, keeping the
situations in mind. The process of decision-making varies with the value of the product, the
involvement of the buyer and the risk that is involved in deciding the product/service.
The figures shows the consumer life style in the centre of the circle. The consumer and his life style is
influenced by a number of factors shown all around the consumer. These are culture, subculture,
values, demographic factors, social status, reference groups, household and also the internal
makeup of the consumer, which are a consumers’ emotions, personality motives of buying,
perception and learning. Consumer is also influenced by the marketing activities and efforts of the
marketer.

All these factors lead to the formation of attitudes and needs of the consumer.