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Consumer Behavior

The behavior that consumers display in searching for,


purchasing, using, evaluating, and disposing of products
and services that they expect will satisfy their needs.

Need to study ?
You cannot take the consumer for granted any more
Therefore a sound understanding of consumer behavior
is essential for the long run success of any marketing
program

Why this important?


Out of 11000 products launched by 77 companies, only
56% are present five years later Kuczmaski & Associates
Only 8% of new product concepts offered by 112
leading companies reached the market. Out of this 83%
failed to reach marketing objectives Group EFO Ltd.,
Marketing News, Feb 1, 1993, Pg 2

Consumer Behavior Secrets to Grow


Your Sales
Are you interested in increasing sales and revenue?
Most people in your position are. Unfortunately, many
executives dont understand the secrets behind why
people decide to pick one brand over another. But if
you understand how people buy products or services,
you can improve the demand for your brand.

Secrets to Grow Your Sales


SECRET 1: People buy for emotional reasons, then rationalize the
purchase with logic.
SECRET 2: The way into a consumers mind is through the right
brain.
SECRET #3: People lie to researchers.
SECRET 4: As much as 95% of a consumers thinking occurs in his
or her subconscious mind.
SECRET #5: Consumers dont think in words.
SECRET #6: The better your employees can articulate your
companys position, the better your customers can, too.

Secrets to Grow Your Sales


SECRET #7: You must know what your customers are really
buying before you can sell it.
SECRET #8: If you want to increase sales tomorrow, youll need
to create a dialogue today.
SECRET #9: Most consumers would be willing to pay a 20-25%
price premium for their favorite brand before theyd switch to a
competitor.
SECRET #10: The longer a consumer engages with your brand,
the more likely they'll be to buy your product or service.

Consumer Behavior - Models Types


Industrial and Individual Consumer Behavior Models
Economic Man Model
Learning Model
The Psychoanalytic Model
Sociological

Industrial and Individual Consumer Behavior Models

Understanding buyer behaviors plays an important part in


marketing. Considerable research on buyer behavior both at
conceptual level and empirical level has been accumulated.
There are two types of buyers
Industrial (organizational) buyer
Individual consumer
Organizational buying behavior has many distinctive features
First, it occurs in a formal organization which is caused by budget
and cost.
Second, in some conditions, joint decision-making process may
occur, and this is not possible in individual buying behavior.

Industrial and Individual Consumer Behavior Models


In order to understand the organizational buying behavior, we
have to consider who will be involved in the buying process and
what are their expectations. At least, purchasing agents,
engineers, and final consumers will participate in the buying
process.
The second part of the model is regarding the industrial buying
processes Independent decision which means that the decision
is delegated to one department, joint decision processes.

Economic Man Model


In this model, consumers follow the principle of maximum utility
based on the law of diminishing marginal utility. Economic man
model is based on the following effects
Price Effect Lower the price of the product more will be the
quantity purchase.
Substitution Effect Lower the price of the substitute product,
lower will be the utility of the original product purchase.
Income Effect When more income is earned, or more money
is available, quantity purchased will be more.

Learning Model
This model suggests that human behavior is based on some core
concepts the drives, stimuli, cues, responses and
reinforcements which determine the human needs and wants and
needs satisfying behavior.
Drive A strong internal stimulus which compels action.
Stimuli These are inputs which are capable of arousing drives
or motives.
Cues It is a sign or signal which acts as a stimulus to a
particular drive.
Response The way or mode in which an individual reacts to
the stimuli.

Learning Model

The Psychoanalytic Model The model suggests that human needs


operate at various levels of consciousness. His motivation which is in
these different levels, are not clear to the casual observer. They can only
be analyzed by vital and specialized searching.
Sociological Model This is concerned with the society. A consumer is
an element of the society and he may be a member of many groups and
institutions in a society. His buying behavior is influenced by these
groups. Primary groups of family friends relatives and close associates
extract a lot of influence on his buying. A consumer may be a member of
a political party where his dress norms are different from different
member. As a member of an elite organization, his dress needs may be
different, thus he has to buy things that confirm to his lifestyle in
different groups.

Buying Decision
Consumer Buying Behavior-Consumer buying behavior is the study of an
individual or a household that purchases products for personal consumption.
The process of buying behavior is shown in the following figure

Stages of Purchasing Process


A consumer undergoes the following stages before making a
purchase decision
Stage 1 Needs / Requirements
It is the first stage of the buying process where the consumer
recognizes a problem or a requirement that needs to be fulfilled.
The requirements can be generated either by internal stimuli or
external stimuli. In this stage, the marketer should study and
understand the consumers to find out what kinds of needs arise,
what brought them about, and how they led the consumer
towards a particular product.

Stages of Purchasing Process


Stage 2 Information Search
In this stage, the consumer seeks more information. The
consumer may have keen attention or may go into active
information search. The consumer can obtain information from
any of the several sources. This include personal sources (family,
friends, neighbors), industrial sources (advertising, sales people,
dealers, packaging), public sources (mass media, consumerrating and organization), and experiential sources (handling,
examining, using the product).
Stage 3 Evaluation of Alternatives
In this stage, the consumer uses information to evaluate
alternative brands from different alternatives. How consumers go
about evaluating purchase alternatives depends on the individual

Stages of Purchasing Process


Stage 4 Purchase Decision
In this stage, the consumer actually buys the product. Generally, a consumer will
buy the most favorite brand, but there can be two factors, i.e., purchase intentions
and purchase decision. The first factor is the attitude of others and the second is
unforeseen situational factors. The consumer may form a purchase intention based
on factors such as usual income, usual price, and usual product benefits.
Stage 5 Post-Purchase Behavior
In this stage, the consumers take further steps after purchase based on their
satisfaction and dissatisfaction. The satisfaction and dissatisfaction depend on the
relationship between consumers expectations and the products performance. If a
product is short of expectations, the consumer is disappointed. On the other
hand, if it meets their expectations, the consumer issatisfied. And if it exceeds
their expectations, the consumer isdelighted.

Buying Situations
It is not only products differ. Even the buying situation differs. Each time the buyer
is to take a purchase decision, it may or may not be the same as the previous one.
The differentiation between the two buying situations may be caused by the
absence of any or all of the following factors.
1. Awareness about competing brands in a product group.
2. Customer has a decision criteria and
3. Customer is able to evaluate and decide on his choice.
Viewed against these parameters ,one may observe that it is not the product that
differentiates one buying situation from another; rather it is the time that the buyer
spends in learning and evaluating the alternatives or finally selecting one of
them .Howard and Sheth have described these buying situations as being:
1. Routinized response behavior
2. Limited problem solving and
3. Extensive problem solving.

Routinized Response Behavior or


Straight Re buy
This is a buying situation characterized by the presence of all the above three
criteria for differentiation .
In other words, here the customers is aware of his or her choices, knows what
he is looking for, as his or her decision is based on personal experience of
either self or others.
Generally, the customers spends little or no time choosing an alternative .Brand
loyalty is relatively higher here. Moreover, this is a buying situations where a
customer perceives a low risk in buying the product and/or the brand.
Consider the typical shopping behavior of a housewife .She goes to the grocer
or a supermarket and spends much less time in selecting her toiletries,
beverages like tea or coffee and other food products. For each time she goes to
buy her familys requirements, she generally ends up buying the same brand.

Limited Problem Solving or Modified Re


buy
This is a buying situation with a difference .This could be for example, introduction of
a new brand or product often requiring a change in the customers decision criteria.
Continuing the example of the housewife ,assume that in her next shopping cycle
,she sees a new liquid toilet soap which promises to keep her skin soft and
moisturized .the brand also promises to give vitamin E, which the manufacturer
claims is required in temperate conditions.
The liquid toilet soap brand is available in four fragrances .The pack can be refilled
every time the soap gets fully consumed .Now this introduction is likely to change her
decision and may be the choice criteria. If she spends some time in evaluating the
liquid toilet soap against the normal bar soap and then decides to try it, we conclude
that for her it was a limited problem solving situation.
As can be seen, this buying situation will often lead to a trial purchase. The customer
may even decide to continue with her current product selection.

Extended Problem Solving (EPS)


High degree of complexity
Often occurs with expensive items or can be fuelled by doubts
and fears
All 7 consumer decision making stages are often used (need
recognition, search for information, pre-purchase evaluation of
alternatives,
purchase,
consumption,
post-consumption
evaluation and divestment)
Dissatisfaction often leads to negative word of mouth
A longer time is taken to decide

Case Study on Rolex Marketing


Background of the Case
Branding of Rolex

Marketing Strategy
Market Segmentation
Product Classification & Features
Channel Distribution & Promotion

Background of watch
It is difficult to imagine a world without clocks. People in
the modern economy depends on the ability to measure
time.
Obelisk Shaped Sundials (Egypt)
Mechanical Clock (Italy & England Mid Fourteenth
Century)
Wrist Watch (Queen of Naples)

Switzerland & Watch


Watch making in Switzerland was introduced in the middle of the
sixteenth century by the Huguenots.
Around 1785 some 2000 persons worked in the watch making
industry of Geneva
The late seventeenth and the late eighteenth centuries, the
center of the world watch industry was Britain.
By 1901 Switzerland was again the most efficient producer of
% of Mechanical Watch Production
% of Watch Production Total
mechanical
watches.
Switzerland

Japan

Hong Kong

Others

Switzerland

Japan

Hong Kong

Others

19%

15%
9%

4%
55%

22%

77%

1993 World Production of Watch and Movement in Value (Millions Swiss Francs)

Hans Wilsdorf & Rolex


Hans Wilhelm Wilsdorf was born on March 22, 1881, in Kulmbach
near Nurnberg in Germany.
In London, Wilsdorf met Alfred James Davis, They started a watch
trading company, Wilsdorf and Davis Ltd in 1905. The Rolex
name was registered in 1908.
In 1912 Wilsdorf signed a deal for $500,000 to buy wristwatch
movement from Aegler.
In 1926 Wilsdorf started to use the word Rolex on the dials.
The name Rolex is recognized around the world. It has become
an icon of beauty, quality, accuracy, style, and taste.

Branding
Developing
a
brand
strategy can be one of the
most difficult steps in the
marketing plan process.

Rolex as a Brand

Rolex can Build a strong


Brand Image by :
Oyster Rolex (Greatest
Triumph in Watch Making)
Aquariums in retailers
window
Swiss Water Polo Team (1930)
Swiss Alpinist Team
Paul Newman (1960)

Marketing strategy
Marketing strategy is a process that can allow an
organization to concentrate its limited resources on
the greatest opportunities to increase sales and
achieve a sustainable competitive advantage.
A marketing strategy should be centered around the
key concept that customer satisfaction is the main
The following Marketing Strategy Rolex follow to
goal.
get a sustainable position in the market
Single Market Strategy (Rich, Athletes, Celebrities
Etc)
First in Strategy (Waterproof Patent)
Market Opportunist (Harwoods Company)

Rolex in Mind Space


Brand Ambassador
Swiss Made

Luxury Market

Luxury Adventure

Exclusive Customer

Fashion

Prestige Sports

Bond 007

Market Segment
WEALTHY CUSTOMER
CELEBRITY

SPORTSMAN/ ATHLETES

EXCLUSIVE CUSTOMER

ASTRONAUT

DEEP SEE DIVERS/ ALPINIST

Competitive Analysis
Value in mio CHF

Countries

2003

2002

2001

USA

Change in

2003/2002

2003/2001

(+)

(-)

(+)

(-)

3.50%

-8.30%

1534.
1507.6 1482 1.80%
1
896.7 997.4

978

10.10
%

556.7 610.4

667.4

-8.80%

538.7 519.7

468

3.70%

515.9 580.6

718.7

11.10
%

Japan
France
UK

Germany
China
UAE
Russia

179.6

80.4

212.2 221.3
127.1 101.7

16.60%
15.10%

123.30
451.10

%
%
176.4

-4.10% 20.30%
103 25.00%

23.40%
32.6

28.20%

Market positioning
6
5
4
3
2

Growth 2001-2003
Growth 2002-2003

1
0
-1

Graph of World Growth of using Swiss watch

Product Classification - Rolex


EXPLORER: With 24-hour red auxiliary needle,
To facilitate night adventure lovers to identify.

SUBMARINER :Water deeper than 300 meters.


With rotating outer ring to facilitate the calculation of
time
GMT MASTER : Not only to display two time zones
simultaneously the time clock can be independently moved to
another time zone, without moving the minute hand and second
hand.

COSMOGRAPH :As a multi-functional watches, can meet the


engineering, sports and business and other needs.

Product Classification
1. Pocket & Purse Watch (Jeweler y)
2. Wrist Watch (Premium & Sports)
With following Features :
Accuracy (Chronometer)
Quality (Swiss Made)
Design (1933, The Masterpiece of Watch
Championship)
All Proof (Greatest Triumph in Watch
Making)

Channel Distribution
Executing an effective channel sales strategy is a
critical component of a successful channel business
endeavor. Its formulation and design depends on
thorough and careful analysis and planning.
It follows certain steps that begin with understanding
your channels, down to the continuous management
of recruited partners.
Probably one of the most vital and challenging steps
in formulating channel sales strategy is selecting the
potential channel partners.
Channel development of Rolex by following examples:

1905 imported movement ,case & dials. After


assembled in Clerkenwell then retailers sales
using their name on the dial.
Creating foreign subsidiaries in 1920.
Via International Red Cross

Promotion
Promotion is one of the four elements of marketing
mix (product, price, promotion, distribution). It is the
communication link between sellers and buyers for
the purpose of influencing, informing, or persuading
a potential buyer's purchasing decision
Rolex use Brand
Ambassador to
promote its Product

Swiss Water Polo Team


(1930)
Swiss Alpinist Team

SWOT of Rolex
Strengths
Quality
Commitment to Excellence : The Rolex
name itself is well established
Reputation : Well known name.
Manage demand
Swiss-Made : It is considered a luxurious
item
Mechanical Movement
Advertising
Loyal customers
Market share leadership
Unique products
Strong financial position
High R&D
Innovation

Opportunities
Expansion of Luxury Brands
Lower Price Levels
Market Share Snapshot
Maintain Exclusivity of Brand

Weaknesses
Style limitations
High price limits market
Myopic Management

Threats
Desirability Diminished Relative to other
Luxury Brands
Change in trend : Cheaper technology ,
Economic slowdown
Product substitution
Expensive, flashy items are seen as
wasteful and frivolous