Analyzing Consumer

Markets

Dr. Abhilasha Jindal

Asst. Prof.
Chitkara Business School
 Learning Objectives
1. How do consumer characteristics influence buying
behavior?
2. What major psychological processes influence consumer
responses to the marketing program?
3. How do consumers make purchasing decisions?

4. In what ways do consumers stray from a deliberative,

rational decision process?
Why we need to
study CB?
The Kingfisher Airlines Saga
 Launched in 2006
 Whirlpool – tough stains in India
 Previous Success – Deccan
 Ice Tea
 Value for Money  Kellogg's
 First experience based airline  Deo Market
“good times’  Dye Market

 Comfort, service, personalized

entertainment
 First to offer concierge service in
India
 Enthusiastic, happy staff
 King club
 Mr. Malliya – thanking passengers
The Big Bazaar Story

 Kiryana stores, bargaining, informal relations

 First mover- large format retail mall
 Good quality at low prices
 Cutting middleman
 Monthly shopping
 Sabse saste 3 din
 Own manufacturing
What Influences Consumer Behavior?

 Consumer behavior

 The study of how

individuals, groups, and
organizations select, buy,
use, and dispose of
goods, services, ideas, or
experiences to satisfy
their needs and wants.

 Influenced by cultural,
social, and personal
factors
Consumer Decision Making Model
 Customer Lifecycle and its stages

Research in marketing shows that there is

a life cycle of any customer in a firm.
 Prospect
•Different characteristics
 First time buyer
•Value that customer seek is different in
 Repeat buyer each stage

•Helps in identifying marketing tasks

 Core buyer and performance

 Defector
Prospects
Potential customer in the target market
 Not yet bought the firm’s product/brand
 Being targeted for acquisition

Marketing Tasks
 Create awareness in the target market
 Induce purchase
First Time Buyers
Once the prospect has decided to buy, the customer
enters the trial stage. The customer is now evaluating
the firm, product and the entire purchase and
consumption experience.

Marketing Tasks
 Create an experience for the customer to repeat his
purchase – WOW
 Continuously reassure the customer that his decision
was correct
Repeat Buyers
 Satisfied with their first experience and find
value in the current offer of the company.
 Still vulnerable to competitor poaching

Marketing Task
Continuously strengthen the product value by
removing any dissatisfaction
Loyalty programs
Core Customers
 Fulcrum of any company as they account for its overall profitability.
 Core customers are also those, who despite competition, prefer to
remain with the company and the product/brand.
 They buy several other products from the company
 Also induce other customers to buy

Marketing Tasks
 Reward or Loyalty Scheme
 Prices need to remain competitive
 Inform these customers first of its new product launches or
promotions
 Sales and service personnel need to recognize such customers
Defectors
Most common causes of defection:
Poor service of the company;

Rude, discourteous and indifferent sales personnel;

Lack of personal touch as the company automates all its operations and
customer interfaces;

Delayed or no response to customer complaints;

Actual consumption experience is different from the promised one- i.e.

actual experience is less than the promised one;

Super or more efficient product offering form competitors at a competitive

price thus altering perceived value equation;

Competition offers lower prices; Better service from the competition

Consumer Decision Making Model
The Buying Decision Process

 The consumer typically

passes through five stages

 Problem recognition
 Information search
 Evaluation of alternatives
 Purchase decision
 Postpurchase behavior
The Buying Decision Process

 Problem recognition
 The buyer recognizes a problem/need triggered by
internal/external stimuli
The Buying Decision
Process
 Information search

 Personal sources
 Commercial sources
 Public sources
 Experiential sources
Sets Involved In Decision Making
The Buying Decision Process

 Evaluation of alternatives
 Expectancy-value model
Intervening factors
Types of perceived risk

Functional Physical
risk risk

Financial
Time risk risk

Psychological
Social risk
risk
The Buying Decision Process

 Postpurchase behavior

 Postpurchase satisfaction

 Postpurchase actions

 Postpurchase uses and disposal

Customer Product Use/Disposal
Moderating Effects on Consumer Decision Making

 Low-involvement Consumer Decision Making

 Variety-Seeking Buying Behavior
Levels of Consumer Decision Making

Extensive Problem
Solving

Limited Problem
Solving

Routine Response
Behaviour
What Influences Consumer
Behavior?

 Cultural factors

 Culture

 Subcultures

 Social classes
 Culture

The sum total of learned beliefs, values,

and customs that serve to regulate the
consumer behaviour of members of a
particular society.
 CULTURE and Brands

Used sweet tooth culture in India

Attempt to compete with traditional mithai
Something family could share
 Indian Core values
 Saving Orientation

 Festivities
Mc Donald don’t offer beef
products in India and in Saudi Arabia
Mc Donald outlets include separate
dining sections for both men& women.
 The division of
members of a society
into a hierarchy of
distinct status classes,
Social Class so that members of
each class have either
higher or lower status
than members of other
classes.
 Social Class and Marketing
Strategy
Clothing, Fashion, and Shopping
 Where one shops
 External point of identification
The pursuit of leisure
 Type of leisure activities differ
 Social Class and Marketing
Strategy
Saving, Spending, and Credit
 Level of immediate gratification sought varies
Responses to marketing communication
 Upper classes have a broader and more general view of
the world
 Regional variations in language rise as we move down
the social ladder
 Exposure to media varies by social class
What Influences Consumer Behavior?

 Social factors

Reference groups

Family

Roles and status

Reference Group

A person or group that serves as a point of

comparison (or reference) for an individual in the
formation of either general or specific values,
attitudes, or behavior.
Reference Groups

 Intimate groups

 Secondary group

 Opinion leader
FAMILY

Two or more persons related to blood,

marriage, or adoption residing together.
Buying Roles
What Influences Consumer
Behavior?

 Personal factors
 Age/stage in life cycle
 Occupation and
economic
circumstances
 Personality and self-
concept
 Lifestyle and values
Key Psychological Processes

Motivation

Memory Perception

Emotions Learning
Model Of Consumer Behavior
 Key Psychological Processes

 Motivation
 A need becomes a motive when it is aroused to a
sufficient level of intensity to drive us to act
Maslow’s Hierarchy Of Needs
Key Psychological Processes

 Perception

 The process by which

we select, organize,
and interpret
information inputs to
create a meaningful
picture of the world
perception

Selective attention

Selective distortion

Selective retention

Subliminal perception
What marketer thinks about the product
its not what actually so

What consumer thinks it is

Affects action and buying habits

Lifebuoy has always been at the
front of saving lives through
promise of germ kill over the
decades
 Attention getting perquisite to
Perception

 Eg- Times of India Banglore edition(17 Feb, 2013)

– Showing fire accident on first page and Eureka
Forbe’s FIREGUARD (gas based offering) ad on second
page (Involuntary attention to voluntary attention)
(fear appeal)
Attention getting perquisite to
Perception

“Voice in the head”

campaign by Heineken in
India
 Attention getting perquisite to
Perception
“Voice in the head” campaign by Heineken in India

Samar Singh Sheikhawat, Senior

Vice President Marketing, United
Breweries said, “Our activation idea
was built around the thought of
engaging with the consumer at the
point of sale right before he makes
the purchase; thus, reinforcing the
positioning of Heineken as a brand
that is innovative and cool.”
Brand Reinforcement and Perception

Reinforcing the
association of
INDIVIDUALITY
with the brand
Key Psychological Processes

 Learning
 Induceschanges in our behavior arising from
experience
 Drive and cues
 Generalization and discrimination
 Key Psychological Processes

 Memory
 Short-term vs. long-term memory
 Brand associations
 Memory encoding
 Memory retrieval
Analyzing
Business
Markets
 Learning Objectives

1. What is organizational buying?

2. What buying situations do business buyers face?
3. Who participates in the business-to-business buying process?
4. How do business buyers make their decisions?
5. In what ways can business-to-business companies develop effective marketing
programs?
6. How can companies build strong loyalty relationships with business customers?
7. How do institutional buyers and government agencies do their buying?
 How suppliers help cut Nano's cost

Tata Johnson controls, for instance, who developed the seats for the small
car. Tata Motors specified that the seats needed to be light, yet offer good
overall body support and meet all safety requirements.

Tata TACO worked on parts like interior injection mouldings, dashboard

aggregates and door handles.

Bosch was asked to develop the engine management system for the car

MRF became the exclusive partner in development of the tyres for the
first lot of cars.
 What is
Organizational Buying?
 Business market
 Consists of all the organizations that acquire goods and
services used in the production of other products or services
that are sold, rented, or supplied to others
Business markets

 Fewer, larger buyers • Multiple sales calls

 Close supplier– • Derived demand
customer relationships • Inelastic demand
 Professional • Fluctuating demand
purchasing • Geographically
 Multiple buying concentrated buyers
influences • Direct purchasing
Buying situations

Straight Rebuy

Modified Rebuy

New Task
The buying center

 Initiators
 Users
 Influencers
 Deciders
 Approvers
 Buyers
 Gatekeepers
 The buying center
1. Initiators—Users or others in the organization who request that something be
purchased.
2. Users—Those who will use the product or service. In many cases, the users initiate
the buying proposal and help define the product requirements.
3. Influencers—People who influence the buying decision, often by helping define
specifications and providing information for evaluating alternatives. Technical people
are particularly important influencers.
4. Deciders—People who decide on product requirements or on suppliers.
5. Approvers—People who authorize the proposed actions of deciders or buyers.
6. Buyers—People who have formal authority to select the supplier and arrange the
purchase terms. Buyers may help shape product specifications, but they play their
major role in selecting vendors and negotiating. In more complex purchases, buyers
might include high-level managers.
7. Gatekeepers—People who have the power to prevent sellers or information from
reaching members of the
buying center. For example, purchasing agents, receptionists, and telephone operators
may prevent salespersons from contacting users or deciders.
Targeting within the Business
Center
 Who are the major decision
participants?
 What decisions do they influence, and
how deeply?
 What evaluation criteria do they use?
 The Purchasing/
Procurement Process

 Business buyers seek the highest benefit package (economic, technical, service,
and social) in relationship to a market offering’s costs
Stages in the Buying Process
Stages in the Buying Process

 Problem recognition
 Someone in the company recognizes a problem or need that can be met by
acquiring a good or service
 General need description and product specification
 Next, the buyer determines the needed item’s general characteristics,
required quantity, and technical specifications
Stages in the Buying Process

 Supplier search

Catalog Vertical
sites markets

Buying “Pure Play”

alliances auction

Spot &
Private
barter
exchanges
markets
E-procurement

 Vertical hubs
 Functional hubs
 Direct extranet links to
major suppliers
 Buying alliances
 Company buying sites
Stages in the Buying Process

 Proposal solicitation
 The buyer next invites qualified suppliers to submit written
proposals
 Supplier selection
 Before selecting a supplier, the buying center will specify
and rank desired supplier attributes
A supplier-evaluation model
Supplier selection

 Overcoming price
pressures
 Solution selling
 Risk and gain sharing
 Number of suppliers
Stages in the Buying Process

 Order-routine specification
 After selecting suppliers, the buyer negotiates the final
order, listing the technical specifications, the quantity
needed, the expected time of delivery, return policies,
warranties, etc.
 Performance review
 The buyer periodically reviews the performance of the
chosen supplier(s)
Developing Effective b2b
Marketing Programs
 Communication and
branding activities
 Systems buying and selling
 Total problem solution from
one seller (turnkey
solution)
 Role of services
Buyer–supplier relationships

• Basic buying and • Customer supply

selling • Cooperative systems
• Bare bones • Collaborative
• Contractual • Mutually adaptive
transaction
• Customer is king
Managing b2b
Customer Relationships
 Risks and Opportunism in Business Relationships
Institutional and Government
Markets
 Institutional market
 Schools, hospitals, nursing homes, prisons, etc. that must
provide goods and services to people in their care
 Government organizations
 Are a major buyer of goods and services in most countries
Creating Long-
Term Loyalty
Relationships
Learning Objectives
1. What are customer value, satisfaction, and loyalty, and how
can companies deliver them?
2. What is the lifetime value of customers, and how can
marketers maximize it?
3. How can companies attract and retain the right customers
and cultivate strong customer relationships and
communities?
4. How do customers’ new capabilities affect the way
companies conduct their marketing?
Building Customer Value, Satisfaction,
and Loyalty

 Figure 5.1
Building Customer Value, Satisfaction,
and Loyalty

 Customer-perceived value (CPV)

 The difference between the prospective customer’s

evaluation of all the benefits and costs of an offering and
the perceived alternatives

 Total customer benefit vs. total customer cost

Figure 5.2
Determinants of CPV
customer value analysis

1. Identify the major attributes and benefits that customers

value
2. Assess the quantitative importance of the different
attributes and benefits
3. Assess the company’s and competitors’ performances
on the different customer values against their rated
importance
4. Examine how customers in a specific segment rate the
company’s performance against a specific major
competitor on an individual attribute or benefit basis
5. Monitor customer values over time
Building Customer Value, Satisfaction,
and Loyalty

 Customer-perceived value
(CPV)

 Choice processes

 Delivering high customer

value

 Loyalty
Building Customer Value, Satisfaction,
and Loyalty

 Total customer satisfaction

 A person’s feelings of pleasure or disappointment that
result from comparing a product or service’s perceived
performance (or outcome) to expectations
Building Customer Value, Satisfaction,
and Loyalty

 Monitoring satisfaction: many companies are

systematically measuring how well they treat
customers, identifying the factors shaping satisfaction,
and changing operations and marketing as a result
 Periodic surveys, customer loss rate, mystery shoppers,
J. D. Power’s satisfaction ratings
Building Customer Value, Satisfaction,
and Loyalty

 Product and service quality

 Quality is the totality of features and characteristics of a
product or service that bear on its ability to satisfy stated
or implied needs
 Conformance quality vs. performance quality
 Impact of quality
Maximizing Customer Lifetime
Value
 Customer profitabillity analysis
 Activity-based costing (ABC)
Figure 5.3
Customer-Product Profitability Analysis
Maximizing Customer Lifetime
Value
 Customer lifetime value (CLV)
 The net present value of the stream of future profits
expected over the customer’s lifetime purchases
Maximizing Customer Lifetime
Value
Maximizing Customer Lifetime
Value
Attracting and Retaining
Customers
 Reducing defection/customer churn

 Define and measure retention rate

 Distinguish/identify customer attrition causes
 Compare lost CLV to reducing defection rate
Attracting and Retaining
Customers
 Retention dynamics/marketing funnel
Attracting and Retaining
Customers
 Managing the customer base

Reduce
customer
defection
Focus on Increase
high-profit customer
customers longevity

Share of
Terminate
wallet &
low-profit
cross/upsellin
customers
g
Building loyalty

Interact closely with customers

Develop loyalty programs

Create institutional ties

Brand communities

 A specialized community of consumers and employees

whose identification and activities focus around the
brand
Table 5.5
Value Creation Practices
 Social networking • Community
– Welcoming, engagement
empathizing, governing
– Staking,
 Impression management
milestoning,
– Evangelizing, justifying badging,
documenting
• Brand use
– Grooming,
customizing,
commoditizing
Cultivating Customer
Relationships
 Customer relationship management (CRM)
 The process of carefully managing detailed information
about individual customers and all customer “touch points”
to maximize loyalty
 Customer value management (CVM)
CRM

 Personalizing/permission
marketing
 Customer empowerment
 Customer reviews/
recommendations
 Customer complaints