Bachelor of Science in Business Administration

ME 101- CONSUMER BEHAVIOR

CHAPTER 1: INTRODUCTION TO CONSUMER BEHAVIOR

Submitted by:
Ellen Bacay
Cathleya Billones
Micah Joy Boy
Kyla Mariz Dele

Submitted to:

Prof. Cynthia Agupitan

Course Facilitator
The Focus of Consumer Behavior
Consumer behavior reflects the totality of consumer’s decision process in the acquisition,
consumption, and disposition of product and services. It does not merely involve the way people
buy their daily need. It involves the use of services, ideas, and activities that consumer’s
experience in their daily life. Our behavior as a consumer reflects the choice of the TV programs
according to our preference and attends sports activity that is our individual life style.
The study of consumer behavior is an exciting field as it deals with the wonderful aspect of
how consumer buy the product. Students in marketing and those in the marketing professions
have to be updated in the dynamic changes taking place in the purchase decisions of the
consumer. The marketing process requires a careful understanding of the customer’s needs and
wants. The dynamic change in the marketing concepts that producers of goods and services must
stay focus on what the consumer’s wanted to buy to make the desired profit.

The changing landscape in consumer behavior needs careful analysis as most companies in the
whole business community is shifting to the development of quality products that is affordable to
most consumers. Marketers are trying to get the bigger share of the market pie by trying to
understand the changing consumer behavior. Marketing organizations are trying to serve better
the consumers and get ahead of the other players in the field of business.

The following major strategies are:

1. Provide customers with value added products.
This shifting in the consumer demands need to be addressed with the development of lean
organizational structure. The development of production strategies for quality products
requires new marketing strategies to satisfy the changing demand of the consuming
public.
2. Focus on the quality of consumer and marketing research
Consumer quality is determined by the advent of new technology and the information
linkages of the marketing organization. Today, computer technology and scanners and
other data sources can pinpoint who the customers are and what they wanted to buy.
3. The Internet as a new marketing tool to reach the greater number of quality
customers.
In the past, big marketing organizations have the resources to advertise their products
through the different media organizations. The competition has shifted to smaller
organizations that produce quality products with reduced overhead expenses. New
marketing strategies have evolved that changed consumer behavior and their buying
habits.

DYNAMICS IN UNDERSTANDING CONSUMER BEHAVIOR

The Nature of Consumer Behavior

Consumer behavior is dynamic as it involves the human process of thinking, feeling and
action. The dynamic nature of consumer behavior makes the development of marketing
strategy an exciting yet difficult task. These marketing strategic may work in a particular
market and fail in another set of consumers. The present product cycle becomes shorter
and consumers are looking for better and new products. These are the reasons why
companies must constantly innovate to create superior value for consumer satisfaction.

People constantly keep in touch with new information with the use of the internet.
These developed new consumer values. Marketers must keep a close look into this
development. They need to develop marketing innovation and research strategies as
customer satisfaction is the name of the game to maintain the level of profitability. This
involves the creation of new products, new brand strategies, and marketing approach to
reach the consumers.

The Interactive Process of Consumer Behavior

Consumer behavior involves interactive processes as the environment plays a vital role
on how people think, feel and act towards new and innovated products. Marketers in the
new environment need to understand what products appeal to new set of consumers. They
must understand the new shopping strategies of the consuming public. They need he
understand the environmental factors that influence the buying behavior. The greater the
knowledge base of the consuming society, the better they can satisfy the consumers' wants
and needs that will create value for them.

The changes in the income grouping in the marketing environment where there is a
growing number of more middle income groups in the Philippine population index have
effects on consumers' thoughts, feelings, and actions. The introduction of new electronic
gadgets in the market is the new needs of middle income groups. They would like to be in
the circle of the new generation environment in touch with the global community.

The Consumer Exchange Process

The exchange process is involved in the buying behavior. People will give up
something of value to others and receive something in return to satisfy their human wants.
People work hard and earn money to buy for the products they need for themselves and
their families. People give up this hard money to obtain products and services.

The role of the marketing organization is to help create exchange process by formulating
and implementing marketing strategies that will serve the customer needs and wants. This
is the exchange process where the consumer and the marketers meet to get their desired
objective. The consumer is satisfied in the exchange transaction and the seller gets the
profit objective.

The prerequisite for Exchange

1. Two or more parties must be present;

2. The parties must have something that is of value;

3. They must be capable of communication and delivery;

4. They are free to accept or reject the other offer;

5. The parties believe that the transaction is appropriate and desirable.

THE ROLE OF RESEARCH IN CONSUMER BEHAVIOR

1. Interpretive Approach
Consumer behavior is a complex phenomenon and an eclectic field. The interpretive
approach is new in the field of marketing and was quite influential in shaping the
attitude of consumers. It is based on theories and methods from cultural anthropology.
It seeks to develop a deep understanding of consumption and its relations to consumer
behavior.

Research studies used interview and focus groups to understand the consumer choice
on the products. The research uncovers the process of decision making that takes place
 in their preference for the product or service. Some related research studies are about
the influence of advertising and its effect on its successful strategy in the buying
behavior of the consumer. The interpretive approach is a vital component in the
development of new marketing strategy that will influence the consumer buying
behavior.

2. The Traditional Approach

The traditional approach is based on theories and methods from cognitive, social, and
behavioral psychology and sociology. This approach seeks to develop theories and
methods to explain how consumer makes behavioral decisions about the product or
service offered by marketing organization.

This study involves experiments and surveys is to uncover the buyers' decision making
process involving consumer information and how the social and peer group influence
on consumer buying behavior. The survey findings have a profound impact on
marketing thoughts and strategy in the development of theories on consumer behavior.

3. The Marketing Science Approach

This research study is based on theories and methods from economics and statistics. It
involves the use of testing hypothesis and mathematical models to predict the impact
of the different marketing strategies in the development of consumer buying behavior.

This approach is commonly used in consumer packaged goods because it uses

computerized data based set in an efficient manner to help solve marketing problems
of great magnitude. The process involves the services of statisticians and economic
practitioners.

The three research studies above has greatly helped in solving the behavioral concerns
of the marketing organizations. In the Philippine setting, only few companies have
undertaken research programs that will uncover the many buying behaviors of the
consumers.

In view of this, it may be noted that students and professionals in the field of
marketing be linked to marketing organizations to help undertake the research
activities in terms of financial assistance. It may benefit the industry in general. On the
other hand, it will help students and professionals enlarge their knowledge based on
the field of research and marketing, and uncover the many behavioral problems on the
buying decisions of the consumers.

THE AREAS OF CONSUMER BEHAVIORAL CONCEPTS

Behavioral concepts can be used to develop marketing strategy in five different areas:

1. MARKET RESEARCH

It is an applied research design to provide marketing professionals with

information that affects consumer's acquisition and disposition of goods and
services. The research issues must provide insights and information about the
customer's attention on advertisements, promotional perceptions, attitudes, and the
decision process in the buying of goods. Marketing organizations must know the
impact of the findings along the following areas:

a. Information Processing and Behavioral Learning

It refers to the customer's access exposure to various advertising media and the
attention and comprehension on its messages. It pertains further to the
consumer's level of product involvement and their sensory perception of taste,
smell and other product attributes. Behavioral learning has something to do
 with the factors that reinforce product acceptance or consumer's perception of
rejections. It identifies the characteristic of the product that elicit favorable or
unfavorable emotional reactions.

b. Personality and Motivation

Personality refers to the development of the measures of personal
characteristics for product segmentation and the message design that will
appeal to the particular type of consumer. Motivation shall be measured in
terms of reactions to advertisement and promotions and its appeal to satisfy
human needs and wants. Lifestyle of individual consumer affects the buying
behavior.
c. Decision Making and the Influence of Groups

This refers to the consumer's decision making process that will develop the
total marketing strategy to meet customer demand. The word of mouth among
groups of consumers affects decision dominance. It shall focus on the beliefs,
attitudes, and behavior of individuals and groups. It must pinpoint the segments
and identify positioning and marketing mix strategy.

d. The Level of Customer Satisfaction

This refers to the level of satisfaction in the use of product or service and its
attendant perceived value. It shall measure the behavioral responses and the
tendencies to engage in compulsive consumptions of the product. It must focus
on the physical distributions and other factors that develop the emotional and
behavioral responses.

2. ENVIRONMENTAL SCANNING AND ANALYSIS

It consists of the assessment of the external forces that act upon the marketing
organization and its target consumer. This refers to the threats and the
opportunities in the marketing of the product or service. This process is
performed by either the marketing research department or an independent
marketing organization.

a. The External Forces of the Environment

The research analysis should cover all the external forces of the environmental
aspects that interplay play in the development of consumer behavior. The
research goal should be able to predict the changes in these environments and
how it influences the consumer buying behavior. The research activities will
determine the opportunities and the liabilities of the marketing organization as
it relates to the demographic, group and situational environment.

b. The Economic Environment

The area of economics has particular relevance to consumer behavior. The

economic environment consists of the monetary, natural and human resources.
These factors influences the individual or groups in the buying patterns. The
money supply and economic conditions prevailing in the country and the
income index of the population is a great determinant of consumer buying
behavior.

c. Behavioral Economics
It is the study of the economic decisions made by individual consumers and its
behavioral determinants. While the law of supply and demand applies in the
behavioral patterns of consumers, the changing attitudes, motives, and
experiences can be drawn as predictable factors in consumer analysis. It will
 determine the consumer's influence in the total aggregate economy of the
country.

d. The Natural Environment

The features of the natural environment are important determinants of consumer
behavior. These factors are:

 Availability of raw materials - This refers to the supply of important inputs to

production like oil and other natural products like wood, cements and other
natural products.

 . Pollution index of the area this refers to the different pollutants in the air,
garbage disposal system and pollutants in rivers and water ways.

 refers to the destruction of crops caused by typhoons and the planting season
during the time of long summer season

 Health and social conditions this refers to the various diseases and the social
and economic conditions both in the urban and rural areas.

The above natural factors affect the buying behavior of the population of the country in general.

e. The Technological Environment

Technology is an important factor in the analysis of consumer behavior as it is the
contributory component in the introduction of new and innovative product in the
market. It can dramatically affect the lifestyle of the consumer. The consumer analysis
needs to anticipate the various changes in the process of product development and how
this will influence the lifestyle and the consumption patterns of the consumer.

3. MARKET SEGMENTATION
It is the division of the market into distinct subsets of customers having similar
needs and wants. This segment could be reached with the different marketing mix
strategies. The following market characteristics should be present to properly
identify the target market:

a. Measurability
It is the factor that has to deal with the demographic, psychographic and the
personality and attitudes of a particular set of population. The population index
for a particular product or service must be known in terms of its size and the
product that will serve their needs and wants.

b. Accessibility
It refers to the distance of distribution and how customers will be able to avail
of the product or service. The market that cannot be reached by advertisement
or promotional activities and would have difficulty in the distribution system is
not a viable market.

c. Sustainability
The market size must be substantial enough to make reasonable investments.
The income of the population that will be covered must be within the price of
the product. It must be affordable and within the economic reach of the target
consumer.

4. PRODUCT POSITIONING AND DIFFERENTATION

It refers to the organization's influence on how consumer perceived a brand
characteristic relative to those in the market that is offered for sale to the same
population segments. The goal of product positioning is to influence demand by
 creating a product with specific characteristics and the clear difference from its
competitors.

Product differentiation is the process of manipulating the marketing mix to

position a brand. The customer must be able to differentiate a particular brand to
the other in terms of packaging, uses and effectiveness or usability. The
manipulation process could be through promotion and market testing.

There are two types of positioning strategies:

a. Specific Positioning
It is the strategy where the marketing organization emphasis is on the product
attributes, qualities and benefits without comparing it with the competing brand. The
emphasis is to create in the mind of the target consumer a strong product image that
links with the purchasing decision and develop favorable consumer behavior.

b. Competitive Positioning
This positioning strategy is usually employed when the new brand of products
is competing with the leading brand in the market. The goal is to position the
product in terms of attributes and benefits that is perceived to be of better
quality. Competitive advertising and promotion is done to align the new brand
to that existing in the market. The goal is to attempt for the product to stand
above the competition and change the consumer buying behavior.

5. MARKETING MIX DEVELOPMENT

The theories and concepts of consumer behavior involved the initiation and
coordination of activities concerning the development of the products, its
promotion, its pricing and its distribution strategy.

a. Development of New Product

The principles of consumer behavior can be applied into four area of the new
product development.

 Idea Generation
This phase has the greatest impact on consumer behavior, as the
proponents think of attitudes, lifestyle changes, situational factors and
the cultural influences in conceptualizing the product idea. In the
concept testing, the product must appeal to the greater number of users
against the competing brand in terms of use and benefit.
 Product Development
This phase comes when the idea was found to be feasible and
profitable. This involved developing the product, testing, labelling and
packaging the proto-type. The researcher must pay attention to the
attitude formation process when testing the product and its packaging
appeals. It must be favorable in the changes of perceptual process in
consumer behavior.

 Market Testing
This process involved placing the product in the market in limited
distribution to identify the market potential and test the total marketing
mix. The consumer behavior is tested on their affective reactions and
determines their buying incentives. This could be done through post-
purchase surveys. The goal of the marketing organization is to
determine that the marketing strategy points to customer satisfaction
and the development of favorable consumer behavior.
  Advertising and Promotional Strategy
The behavior of the consumer is enhanced and developed with effective
advertising and promotional strategy. Advertising aims to instill certain
beliefs in the consumer about the product attributes and benefits. An
understanding of attitude formation on consumer behavior must
develop messages that will ensure effective development of favorable
responses. Sales incentives form part of favorable customer response.
b. Pricing and Distribution
One major application of consumer behavior principle is in the area of pricing.
Price has a great impact in the switching of product patronage as it plays a
perceptual on the economic advantage when the product is price lower than the
prevailing brand in the market.

The price-quality relationship must be analyzed in conformance with consumer

attitudes and perception about the product. Price and distributions are
interrelated on how consumer makes their purchase decisions. The customer
intensity search for the products has great impact on distribution strategy.