Chapter One:

Basics of Consumer Behavior

1. Introduction:
Though similar, consumers are unique in themselves; they have needs and want which
are varied and diverse from one another; and they have different consumption patterns
and consumption behavior. The marketer helps satisfy these needs and wants through
product and service offerings. For a firm to survive, compete and grow, it is essential
that the marketer identifies these needs and wants, and provides product offerings
more effectively and efficiently than other competitors. A comprehensive yet
meticulous knowledge of consumers and their consumption behavior is essential for a
firm to succeed. Herein, lays the essence of Consumer Behavior, an interdisciplinary
subject, which emerged as a separate field of study in the 1960s.
1.1 Consumer Behavior Defined
The American Marketing Association has defined consumer behavior as, “The
dynamic interaction of affect and cognition, behavior, and the environment by which
human beings conduct the exchange aspects of their lives.”
Consumer behavior refers to “the mental and emotional processes and the observable
behavior of consumers during searching for, purchasing and post consumption of a
product or service.”
How consumers make decisions to spend their available resourcessuch as money, time
and effort on consumption and use-related items is thesubject of consumer behavior
study.
Consumer behavior has two aspects:the final purchase activity which is visible to us
and the decision processwhich may involve the interplay of a number of complex
variables not visibleto us. In fact, purchase behavior is the end result of a long process
ofconsumer decision-making. The study involves what consumer’s buy, whythey buy
it, how they buy it, when they buy it, where they buy it, howfrequently they buy it and
how they dispose of the product after use. Forexample, consider the product
computer, a relatively new but big business inour country.
A study of consumer behavior in this area would investigate
What kinds of consumers buy it or would buy for home and personal use?
What features do they look for?

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 What benefits do they seek including post purchase service?
How much are they willing to pay?
How many are likely to buy now?
Do they wait for prices to come down?
Do they look for some freebies?
The answers to these can be investigated through consumer research and provide
manufacturers with important data and insight for determining computer features and
promotional strategy etc.
Thus, the term consumer behavior is defined as the behavior displayed by consumers
in searching for, purchasing, using, evaluating, and disposing of products and services
that they expect will satisfy their needs.
Understanding of consumer behavior is a challenge for the marketers. It requires
them to probe and investigate a wide range of responses including affective responses
(feelings and emotions are experiences), cognitive responses (beliefs, opinions,
attitudes, and intentions related to products and services), and the behavioral
responses (actions involved while obtaining, using and disposing goods or services.)
Moreover, in the long run it is only those organizations that have been close to their
customers and understood their needs and wants that have been able to compete
effectively at the market place.

It is more necessary that marketers understand uniqueness and diversity of consumer

behavior and make product or service offerings accordingly. The success of
organizations will be reflected when consumers accept such offerings and continue to
patronize it for a long period of time.

1.2. Importance of study of consumer behavior

As stated earlier, consumer behavior plays an important role in modernmarketing
practices. {Most of marketing decisions are based on the study ofconsumer behavior.
It provides valuable information to design marketingmix and to modify it over time.
Marketing managers can actualize marketinggoals only by studying consumer
behavior and responding it by designingand designing marketing program objectively.
It is imperative to know howconsumers react to marketing program (4 P's) to serve
them effectively.
Role or importance of study of consumer behavior can be explained with reference to
the points stated as under.-

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 1. Modern Philosophy
It concerns with modern marketing philosophy – identifyconsumers' needs and satisfy
them more effectively than competitors.
 It makes marketing consumer-oriented.
 It is the key to success and achievement of goals,
 The key to the company's survival, profitability, and growth in a highly
competitive marketing environment is its ability to identify and satisfy
unfulfilled consumer needs better and sooner than the competitors.
 Thus, consumer behavior helps in achieving marketing goals.
2. Useful for Dealers and Salesmen
The study of consumer behavior is not useful for the companyalone. Knowledge of
consumer behavior is equally useful formiddlemen and salesmen to perform their
tasks effectively in meetingconsumers’ needs and wants successfully. Consumer
behavior, thus, improves performance of the I entire distribution system.
3. More Relevant Marketing Program
Marketing program consisting of product, price, promotion,and distribution decisions
can; be prepared more objectively. The program can be more relevant if it is based on
the study ofconsumer behavior. Meaningful marketing program is instrumentalin
realizing marketing goals.
4. Adjusting Marketing Program over Time
Consumer behavior studies consumer response pattern on acontinuous basis. So,
marketer can easily come to know the changestaking place in the market. Based on
current market trend, themarketer can make necessary changes in marketing program
toadjust with market.
5. Predicting Market Trend
Consumer behavior can also aid in projecting the future trends.
Marketer finds enough time to prepare for exploiting the emergingopportunities,
and/or facing challenges and threats.
6. Consumer Differentiation
Each segment needs different products. For every segment, aseparate marketing
program is needed. Knowledge of consumerdifferentiation is a key to fit marking

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offers with different groups ofbuyers. Consumer behavior study supplies detail about
consumerdifferentiations.
7. Creation and Retention of Consumers
Marketers who base their offering on a reorganization ofconsumer needs find a ready
market for their products. Company findsit easy to sell its products. In the same way,
the company, due tocontinuous study of consumer behavior and attempts to
meetchanging expectations of the buyers, can retain its consumers for longperiod.
8. Competition
Consumer behavior study assists in facing competition, too.
Based on consumers' expectations, more competitive advantages canbe offered. It is
useful in improving competitive strengths of thecompany.
9. Developing New Products
New product is developed in respect of needs and wants of thetarget market. In order
to develop the best-fit product, marketer mustknow adequately about the market.
Thus, the study of consumerbehavior is the base for developing a new product
successfully.
10. Dynamic Nature of Market
Consumer behavior focuses on dynamic nature of the market.
It helps the manager to be I dynamic, alert and, active in satisfyingconsumers better
and sooner than competitors. Consumer | behavioris indispensable to watch
movements of the markets.
11. Effective Use of Productive Resources,
The study of consumer behavior assists the manager to makethe organizational efforts
consumer-oriented. It ensures an exact use ofresources for achieving maximum
efficiency.
Consumer Behavior Applications in Marketing
Consumer behavior principles are applied in many areas of marketing as discussed
below:
Analyzing market opportunity: Consumer behavior study helps in identifying the
unfulfilled needs and wants of consumers. This requires examining the trends and
conditions operating in the marketplace, consumers’lifestyles, income levels and
emerging influences. This may reveal unsatisfied needs and wants. The trend towards
increasing number of dual income households and greater emphasis on convenience

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and leisure have led toemerging needs for household gadgets such as washing
machine, mixergrinder, vacuum cleaner and childcare centres etc. Mosquito repellents
havebeen marketed in response to a genuine and unfulfilled consumer need.
Selecting target market: A review of market opportunities often helpsin identifying
distinct consumer segments with very distinct and unique wantsand needs. Identifying
these groups, learning how they behave and how theymake purchase decisions
enables the marketer to design and marketproducts or services particularly suited to
their wants and needs. For example,consumer studies revealed that many existing and
potential shampoo usersdid not want to buy shampoo packs priced at Rs. 60 or more
and would ratherprefer a low-priced sachet containing enough quantity for one or two
washes.
This finding led companies to introduce the shampoo sachet, which became agood
seller.
In case of consumer durables market in India marketers are targetingthe higher
income class with special features in the equipments as well aslonger warranty period
and of course world class quality. In case of semiurban and rural areas consumers
who prefer the basic offerings or slightlymodern version of the product are targeted.
2.3 Consumer Behaviour Models
Consumer models are nothing but a framework based on particularstudy by particular
researcher provides guidelines for consumer buying behaviour understanding. The
consumer behaviour models provide better insight to the marketers for taking
important decisions regarding variousmarketing mixed elements.
A model is very often referred to as an abstract representation of a process or
relationship. We tend to hold various models in our minds, which allow us to make
sense of the world, and also help to predict the likely course of events. To put it
simply, models help us in the development of theories, understanding complex
relationships, and providing the framework for discussions and research work. In this
section we have made efforts to examine the various models having relevance to the
consumer decision process. The primary concern is to use the models to understand
consumer behavior. Consumer behaviorists as well as marketers are interested in
understanding how and why certain decisions are made.

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The objectives of modeling have mainly confined to the following:
i) Description of buying behaviour
ii) Describing the consumer processes
iii) Predictability and Control of Consumer behaviour.
Some Models of Consumer Behaviour are:
1. The psychoanalytical model
The psychoanalytical model draws from Freudian psychology. According to this
model, the individual consumer has a complex set of deep seated motives which drive
him towards certain buying decisions. The buyer has a private world with all his
hidden fears, suppressed desires and totally subjective longings. His buying action can
be influenced by appealing to those desires and longings. According to Mr. Freud,
human personality has three parts namely,
1. The “ID”, the source of all mental energy which drives one to an action.
2. The “Super Ego”, the internal representation of what is sociallyapproved—one’s
conscience.
3. The “Ego”, the conscious director of ‘ID’ impulses for finding satisfaction in
socially acceptable manner.
In other words, ‘ID’ represents one’s basic impulses, ‘instincts’ and cravings for
immediate and total satisfaction. These instincts might be even anti-social. The Super
Ego or conscience reflects one's idealized or mended behaviour pattern a via media
between the extremes that is the, conflict between “ID” and “Super Ego” is resolved
by Ego. The Ego is the intermediary which mediates and processes the dispute action
as a rational control centre between the conflicting extreme sides of ID and Super
Ego.
It is Ego that directs ones behaviour to satisfy both the “ID” and “Super Ego”. Thus a
person is interested in buying say SONY TV with characteristics of Hi-black Trinitron
Screen—super drum sound system, 100system memory, 1 tuner digital picture in
picture, A/V Stereo, LD compatibility costing say Birr.30,000 with remote control.
Here his ‘ID’ demands the use of consumer credit liberally to buy that costly T.V. set.
The Super Ego dissuades him from heavy borrowing as credit beyond certain limits is
not acceptable. Here the Ego acts like a mediator and comes with a fine compromise
of installment system without away strains and drain on his financial position.
Here self image of a consumer is a great motivating force inducing him to buy certain
products.
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This model can be presented as follows

2. Learning model
All theories of buyer behaviour have been basically based on a learning model
namely, Stimulation- Response or more popularly known as SR model. SR learning
theory is very useful to modern marketing and marketers. Learning is the centrifugal
point in the entire study to human behavior. Learning, as noted earlier, refers to a
change in the behavior which occurs as a result of practice. It is a change in the
behaviour that results from previous experience and behaviour in similar situations.
What is important, learning is a product of reasoning, thinking, information
processing and, of course, perception.
Therefore, behaviour is deeply affected by the learning experiences of the buyers.
Of all the psychologists, Pavlovian stimulus or learning of buyer behaviour is widely
accepted. He says that buyer behaviour is capable of being manipulated by human
drives, stimuli, and responses of the buyer. This model banks on man’s ability to
leave, forget and discriminate. Learning process involves three steps namely, Drive—
a strong internal stimulus which impels action. When it is directed towards a drive-
reducing object, it becomes a motive. A drive- need- thus motivates a person for
action to satisfy the need.
Here, the objectives are the stimuli which the drives Cues are weak stimuli. Cues
determine when the buyer will respond. Say, we have cues such as a product
advertisement relevant to the situation and existing in our environment.
Response is the final stage which is needed to fulfill the drive or as a need which was
acting as a strong stimulus. Thus, the thirst can be quenched by an ad. These
sequential components of learning link stimulus cue and response finally resulting in a
habit. In marketing, it is better known as a learning brand loyalty, brand images and

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store patronage. Repeated reinforcement leads to a habit formation and the decision
process for an individual becomes a matter of routine.
It is worth emphasizing here that we learn through trial and error and changes in our
behaviour are brought about by practice as experience.
The SR model of Pavlovian learning is made clear by given figure:

3. Economic Model
Under economics, it is assumed that man is a rational human being,who will evaluate
all the alternatives in terms of cost and value received andselect that product/service
which gives him/her maximum satisfaction (utility).Consumers are assumed to follow
the principle of maximum utility based onthe law of diminishing marginal utility. It is
assumed that with limitedpurchasing power, and a set of needs and tastes, a consumer
will allocatehis/her expenditure over different products at given prices so as to
maximizeutility.
The law of equi-marginal utility enables him to secure maximum utilityfrom limited
purchasing power.Economic model of consumer behavior is unidimensional. This
meansthat buying decisions of a person are governed by the concept of utility. Beinga
rational man he will make his purchase decisions with the intention ofmaximizing the
utility/benefits.
Economic model is based on certain predictions of buying behavior
1. Price effect- lesser the price of the product, more will be the
quantitypurchased,

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 2. Lesser the price of the substitute product, lesser will be the quantity ofthe
original product bought (substitution effect)
3. More the purchasing power, more will be the quantity purchased(income
effect).
The assumption about the rational behavior of human beings hasbeen challenged by
the behavioral scientists. They are of the opinion thatwhile the predictions are useful,
the model only explains how a consumerought to behave. It does not throw light on
how the consumer actually behaves.
Behavioral scientists argue that the economic model is incomplete.
Economics is assuming the market to be homogeneous, and that buyers willthink and
act alike. And that they will only concentrate on one aspect of theproduct, i.e.,
income. This model ignores all the other aspects such asperception, motivation,
learning, attitude and personality and socio culturalfactors. It has always been agreed
upon that man is a complex entity, apuzzle, a riddle. Hence, it is very important to
have a multi-disciplinaryapproach to understand consumer behavior. Further, in
today’s environment,apart from the various psychological, socio cultural determinants
of theconsumer, it has been observed that the consumer also gets influenced byother
marketing variables namely - products (ones which are technologicallyadvanced),
effective distribution network and marketing communication(media and promotion
techniques). Thus man cannot be assumed to be arational person and price is not the
only factor which influences his purchasedecision. Behavioral scientists have opined
that a broader perspective has tobe taken while trying to analyze buying behavior, not
only economics but therole played by needs, motives, personality and self-concept
and socio culturalfactors should be considered to understand what will be the
buyer’sresponses to various stimulus and in turn what will be the effect of this
onconsumer’s buying behavior

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4. Nicosia Model (Conflict Model)
Francesco Nicosia was one of the first to develop consumer behavior model in the
early 1960s and shift focus from the act of purchase itself to themore complex
decision process that consumers engage in about productsand services.
Nicosia presented his model in flow chart format, resembling the stepsin a computer
program. Also, all variables are viewed as interactive, withnone being inherently
independent or dependent Thus, the model describes acircular flow of influences
where each component provides input to the next.
The model is viewed as representing a situation where a firm isdesigning
communications (products, ads etc.) to be delivered to consumersand in turn
consumers’ responses influence subsequent actions of the firm.
The model contains four major fields or components: (FIELD-I) the firm’sattributes
and outputs or communications and the consumer’s psychologicalattributes, (FEELD-
II) the consumer’s search for and evaluation and of thefirm’s outputs and other
available alternatives, (FIELD-III) the consumer’smotivated act of purchase, and
(FIELD-IV) the consumer’s storage or use ofthe product. Nicosia assumes that the
consumer is seeking to fulfill specificgoals and that initially there is no history
between the consumer and the firm,so no positive or negative predispositions towards
the firm exist in theconsumer’s mind.
As shown in the figure, the firm produces some type of communication(product,
service, ad etc.) that the consumer is exposed. Attributes of themessage and the
consumer determine the nature of consumer’s exposure toit and its influence on the
individual. One consequence is that the messagewill influence the consumer’s attitude
towards the brand. This attitude is theinput to the FIELD-II.

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The consumer will probably become motivated to gain information atthis point, and
search activity is likely to occur. Some search activity willinvolve searching internal
memory for relevant information about thecommunication (product, service, company
etc.). External search may also occur, where the consumer visits stores or reads
reports etc. This is likely tolead to evaluation. If the consumer processes relevant
information and beginsto favor the firm’s brand, she/he will be motivated, leading to
FIELD-III, and ifnothing intervenes, this information is likely to precipitate shopping
activityand purchase of the brand. At this point, a number of outcomes can occur.
One outcome is that the firm receives feedback (FIELD-IV) and another is thatthe
consumer’s attitude towards the brand may change because she/he gainsexperience
with the product during storage and use. This experience isfeedback to the consumer’s
predispositions.
Limitations of Model:
The Nicosia model offers no detail explanation of the internal factors, which may
affect the personality of the consumer, and how the consumer develops his attitude
toward the product. For example, the consumer may findthe firm’s message very
interesting, but virtually he cannot buy the firm’sbrand because it contains something
prohibited according to his beliefs.
Apparently it is very essential to include such factors in the model, which give more
interpretation about the attributes affecting the decision process.

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5. Howard-Sheth Model
The Howard-Sheth Model represents a major revision of an earliersystematic effort to
develop a comprehensive theory of buyer decision making.
This model depicts and creates a distinction among three stages ofdecision-making.
1. Extensive Problem Solving: This occurs when a consumer has littleor no prior
knowledge, and any beliefs about the brand do not exist andshe/she has no specific
brand preference. The consumer seeksinformation actively about several alternative
brands in the category.
2. Limited Problem Solving: In this situation the consumer has somelimited
knowledge and beliefs about the available brands. Because oflimited knowledge,
she/he is not in a position to evaluate branddifferences to establish a preference. The
consumer seeks somecomparative brand information, although the decision criteria
are quitelikely to be fairly established.
3. Routinised Response Behaviour: This refers to a situation when theconsumer has
well-established knowledge and beliefs about the brandand other alternatives in the
category and is predisposed to purchase a
The model has four major sets of variables:
1. Inputs
2. Perceptual and Learning Constructs
3. Outputs
4. External Variables

Inputs
These variables include three distinct types of information sources(stimuli) present in
the consumer’s environment. Significativestimulirepresent the brand’s physical
attributes, the marketer provides the symbolicstimuli in the form of brand information
and could be visual or verbal, and thethird kind of information is furnished by
consumer’s social environment suchas family, reference groups, and social class. All
these three types of stimulifurnish information inputs to the potential consumer
concerning the productcategory or the brand.
Perceptual and Learning Constructs
The central element in the Howard-Sheth Model includes psychologicalvariables that
are assumed to operate when the consumer is involved indecision-making process.

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These psychological variables are treated as simplyideas, and are not defined
operationally or evaluated directly. Some of thesevariables are perceptual in nature
and focus on how the consumer receivesand processes information gained from input
and other parts of the model. Forinstance, stimulus ambiguity occurs when the
consumer is not sure aboutthe meaning of information gained from the environment
Perceptual biasoccurs in case the consumer distorts the received information so that it
suitsthe consumers’ established needs, wants, or experiences.
Learning constructs perform the function of consumer’s conceptformation and
include her/his goals, information about the brands in theevoked set, criteria for
evaluating alternatives, and intentions to buy. Theproposed interaction (shown with
arrows and solid and dotted lines) betweenvarious perceptual and learning variables
and the variables in other segmentsof the model give the Howard-Sheth Model a
distinct character.
Outputs
The model shows a series of outputs that are similar in name to someof the perceptual
and learning construct variables that include attention, brandcomprehension, attitudes,
intentions, and finally the act of purchase.
External Variables
These variables are not directly involved in the decision-makingprocess. The relevant
external variables include importance of the purchase,consumer’s personality traits,
time pressure, and availability of funds.

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6. The Engel – Kollat – Blackwell Mode
This model talks of consumer behaviour as a decision making processin the form of
five step (activities) which occur over a period of time. Apartfrom these basic core
steps, the model also includes a number of otherrelated variables grouped into five
categories. Information input Informationprocessing Product - brand evaluation
General motivating influencesinternationalized environmental influences
The five steps (activities) involved in the decision process stage arebriefly explained
hereunder:
(1) Problem Recognition: The consumer will recognize a differencebetween his or her
actual state and what the ideal state should be. Thismay occur on account of external
stimuli, for example a young girl hasseen an advertisement of an exhibition of
American Diamonds andmay feel the desire to possess the same or seeing a beautiful
dressdisplayed in the show-room may make a youngster to feel the need fora new
dress.
It may be noted that the consumer must perceive a sufficientlylarge discrepancy
between actual and ideal states in order to beactivated, recognize a problem and find a
way to solve it.
(2) Information Search: Initially the information available with the consumermay be
consistent to the beliefs and attitudes held by him or her. Whilebeing involved in an

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information seeking or search stage, the consumerwill try to gather more information
from various sources. These sourcescould be sales persons, personal or friends or
neighbors or masscommunication media. The information processing takes place
invarious stages. The individual gets exposure of the stimuli which maycatch his or
her attention, be received and stored or retained inmemory. This method of
information processing is selective in natureand the consumer will accept the
information which is conclusive towhat is perceived by them.
(3) Alternative Evaluation:Now the individual will evaluate the alternativebrands. The
methods used for evaluating the various products will bedependent on the consumers
underlying goals, motives andpersonality. The consumer also has certain
(predetermined) beliefsabout the various brands in terms of the characteristics
associated withthe different brands. Based on these beliefs the consumer will
respondeither positively or negatively towards a particular brand.
(4) Choice: The consumer’s choice will depend on his or her intention andattitude.
The choice will also depend upon normative compliance andanticipated
circumstances.
Normative compliance relates to the extent to which theconsumer is influenced by
other people like friends, family membersetc. Thus normative compliance and
anticipated circumstances willattempt to influence the individual. The person’s choice
of the productcan also be dependent on the sensitivity of the individual to
handleunanticipated circumstances like losing the job, funds diverted foranother
urgent cause etc.
At this stage, a purchase decision is likely to occur unless whenconfronted by un
anticipated circumstances. In case of the latteroccurring, it may act as a barrier to the
purchase decision.
(5) Outcome: The outcome may be either positive or negative. If the endresult is
positive, the outcome will also be positive. Conversely, if thereis dissonance, that is, a
feeling of doubt experienced by the consumer,about the choice made by him or her
the outcome will not be positive.
Now the consumer will search for more information to support his orher choice.
The above mentioned Engel-Kollat-Blackwell model has takeninto consideration a
large number of variables which influences theconsumer. The model has also
emphasized on the conscious decisionmaking process adopted by a consumer. The
model is easy tounderstand and is flexible, that is, it recognizes that a consumer
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maynot go through all the steps always. This is because in case of repeatpurchases the
consumer may bypass some of the steps.
One limitation of this model is the inclusion of environmentalvariables and general
motivating influences but not specifying theeffect of these on the buyer behaviour.

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