CONSUMER

BEHAVIOUR
MODULE - 1
 Module I: Introduction to Consumer Behaviour

Applications of Consumer Behavior, New Technologies on

Marketing Strategies, Customer Value, Satisfaction, Trust and
Retention, Consumer Analysis- Market Segmentation and
Strategic Targeting
• Dana-Nicoleta Lascu & George Zinkhan (1999) Consumer Conformity:
Review and Applications for Marketing Theory and Practice, Journal of
Marketing Theory and Practice, 7:3, 1-12, DOI:
10.1080/10696679.1999.11501836
• Hennig-Thurau, T., Malthouse, E. C., Friege, C., Gensler, S., Lobschat, L.,
Rangaswamy, A., & Skiera, B. (2010). The impact of new media on
customer relationships. Journal of service research, 13(3), 311-330.
• Shahana Sen, Balaji Padmanabhan, Alexander Tuzhilin, Norman H. White,
Roger Stein, (1998) "The identification and satisfaction of consumer
analysis‐driven information needs of marketers on the WWW",
European Journal of Marketing, Vol. 32 Issue: 7/8, pp.688-702, doi:
10.1108/03090569810224083
DEFINITION
“It is the study of process involved when individuals or
groups select, purchase, use or dispose of products,
services, ideas or experiences to satisfy needs and desires”
HEAD & SHOULDERS
Why do head & shoulders need these many variants in their

portfolio?

How many SKUs they have under each category?

Understanding the STP & Marketing mix will help us to

answer these questions (also remember the competition).

WHAT’S WRONG?
1. Why an individual buys a product?

2. Why he doesn’t buy a product?

3. What do people buy?

4. How an individual buys a product?

5. When an individual buys a product?

Why an individual Why he doesn’t
buys a product? buy a product?
• Need • No requirement

• Social Influence/Societal • No money

Status • Non availability of the
• Disposable Income product

• To give it to somebody else • Not meeting

preferences
What do people How an individual
buy? buys a product?
People expect value out of a The decision making process
purchase
When an individual
buys a product?
Season

Off season

Festival

Special occasions
TYPES OF
CONSUMERS

1. Need based consumers

2. Impulsive consumers

3. Discount consumers

4. Loyal consumers
HOW AN TURN INTO A
CONSUMER

Individual Shopper Buyer Customer Consumer

WHY CB IS
NECESSARY?
Every customer is Market positioning through
different. promotional activities
Shifting preference of Increases Product Life
consumers Cycle
Helps to understand the To open up global markets
Market Segmentation Protect consumer interests
To offer differentiated Understanding CB will
products provide valuable inputs to
To understand competition the Marketing Stategy
SIMPLE MODEL OF CONSUMER
DECISION MAKING
CB AND MARKETING

Societal
Customer marketing
satisfaction
Marketing
orientation
Sales
orientatio
Product &
n
Production
orientation
CONSUMPTION: THE PROCESS BY WHICH
GOODS, SERVICES OR IDEAS ARE USED AND
TRANSFORMED INTO VALUE
The role of marketing is to facilitate the exchange between
buyer and seller.

The activity includes production, pricing, promotion, and

distribution of goods, services, ideas or experiences that provide
value to the consumer.
Apart from functional needs, consumers have social as well as

psychological needs.

Marketers should be aware of these changing need and satisfy

the requirements of the consumers.

HORLICKS
ADVERTISEMENT
FIND THE PRODUCT
APPLICATIONS
Discussion on Research Paper:

Consumer Conformity: Review and Applications for Marketing

Theory and Practice

Author(s): Dana-Nicoleta Lascu & George Zinkhan

Journal: Journal of Marketing Theory and Practice Vol 7, Issue 3
Published on: 1999
DISCUSSION
Conformity theory offers suggestions for marketing managers, as we
apply the findings of academic studies to the functional areas of
marketing.

Conformity research findings are particularly useful in designing

communication and promotional mix strategies.

• Advertising

• Personal Selling

• Point of purchase displays

• Promoting ready to consume or luxury products

NEW TECHNOLOGIES ON
MARKETING STRATEGIES
Use of
1. Search bots
2. Shopping bots
3. Mobile technologies
4. Automated recommendation system
5. Peer to peer network and piracy

Hennig-Thurau, T., Malthouse, E. C., Friege, C., Gensler, S., Lobschat, L., Rangaswamy, A., &
Skiera, B. (2010). The impact of new media on customer relationships. Journal of service
research, 13(3), 311-330.
VALUE – SATISFACTION –
TRUST – RETENTION

trust
VALUE
Zeithaml (1988) considered value to be the customer’s overall
assessment of the utility of a product based on the perception of
what is received and what is given.
Dodds et al. (1991) argued that buyers’ perceptions of value
represent a trade-off between the quality or benefits they receive in
the product and the sacrifice they perceive in paying the price.
Butz and Goodstein (1996) defined it as the emotional bond
established between a customer and a producer after the customer
has used a salient product or service produced by that supplier.
Woodruff (1997) defined customer value as a customer-perceived
preference for, and evaluation of, product attributes, attribute
performances, and consequences in terms of the customer’s goals
and purposes.
TYPES OF VALUE
1. functional
2. social
3. emotional
4. epistemic and
5. conditional
FUNCTIONAL VALUE
The perceived utility acquired from an alternative’s capacity for
functional, utilitarian, or physical performance. An alternative
acquires functional value through the possession of salient
functional, utilitarian, or physical attributes. Functional value is
measured on a profile of choice attributes.
SOCIAL VALUE
The perceived utility acquired from an alternative’s association
with one or more specific social groups. An alternative acquires
social value through association with positively or negatively
stereotyped demographic, socioeconomic, and cultural-
ethnic groups. Social value is measured on a profile of choice
imagery.
EMOTIONAL VALUE
The perceived utility acquired from an alternative’s capacity to
arouse feelings or affective states. An alternative acquires
emotional value when associated with specific feelings or
when precipitating or perpetuating those feelings. Emotional
value is measured on a profile of feelings associated with the
alternative.
EPISTEMIC VALUE
The perceived utility acquired from an alternative’s capacity to
arouse curiosity, provide novelty, and/or satisfy a desire for
knowledge. An alternative acquires epistemic value by
questionnaire items referring to curiosity, novelty, and knowledge.
CONDITIONAL VALUE
The perceived utility acquired by an alternative as the result of the
specific situation or set of circumstances facing the choice
maker. An alternative acquires conditional value in the presence
of antecedent physical or social contingencies that enhance its
functional or social value. Conditional value is measured on a
profile of choice contingencies.
Customer value is a strategic weapon in attracting and
retaining customers and has become one of the most significant
factors in the success of both manufacturing businesses and
service providers (Gale, 1994; Zeithaml, 1988; Zeithaml et al.,
1996; Woodruff, 1997; Parasuraman, 1997).
According to the study of Mazumdar (1993), customers are
becoming more value-oriented and are not simply influenced by
high quality or lower price. Rather, they tend to make a
reasonable trade-off between the perceived benefits and
perceived sacrifices in the process of obtaining and consuming
products or services.

However, not all the customers value the same potential

benefits and care for the same sacrifices at any given time.
CUSTOMER
SATISFACTION
Performance = Expectation

Customer satisfaction has traditionally been regarded as a

fundamental determinant of long-term customer behaviour. The
more satisfied the customers are, the greater is their retention.
(Ranaweera & Prabhu, 2003)

there are at least two different conceptualisations of customer

satisfaction: transaction-specific; and cumulative (Boulding et
al., 1993).
TRANSACTION
SPECIFIC
From a transaction-specific perspective, customer satisfaction is
viewed as a post-choice evaluative judgment of a specific
purchase occasion (Oliver, 1981).
CUMULATIVE
Cumulative customer satisfaction is an overall evaluation based
on the total purchase and consumption experiences with a
product or service over time (Fornell et al., 1996; Johnson and
Fornell, 1991),

This is a more fundamental indicator of the firm’s past, present

and future performance.

Cumulative customer satisfaction motivates a firm’s investment

in customer satisfaction
VALUE VS.
SATISFACTION
Customer value contributes to an improvement in customer
satisfaction (Fornell et al., 1996; Bojanic, 1996) and customer
satisfaction is a consequence of customer-perceived value
(Fornell et al., 1996; Hallowell, 1996).

Customer satisfaction is usually perceived to be a key indicator

of a firm’s market share and profitability, and an important
indicator of a firm’s overall financial health.
A satisfied customer will show a strong tendency to be loyal
and repeat the purchase of the goods or services, and thus
increase a firm’s market share and profits, which signifies its
significance to successful competition in customer centered era.

Furthermore, it is likely that a satisfied customer will spread

positive word of mouth among his or her acquaintances. (Wang et
al, 2004).
TRUST
Moorman et al, (1993) defines trust as “A willingness to rely
on an exchange partner in whom one has confidence”. They
also infer that “trustworthiness results from the ability to
perform (expertise), reliability, and intentionality.

Morhgan & Hunt (1994) define trust as the perception of

“confidence in the exchange partner’s reliability and
integrity”
Gremler & Bitner (1998) found that trust (confidence with the
partner) is more important than special treatment or social
benefits in consumer relationship with the firm.

Whether the trust element is for the sales person, product,

service or the organization?
CUSTOMER
RELATIONSHIP
The role of the customer has changed from that of a mere
consumer to a multi-faceted role as consumer, cooperator, co-
producer, co-creator of value, and co-developer of knowledge and
competencies, which implies a much more important position of
the customer than ever.

As a result, there has been a substantial increase in interest in

the creation and delivery of value to customers and the
effective management of customer relationship.
In particular, firms are seeking to retain existing customers and
attract new customers by targeted value creation activities.

To do so, they need an in depth understanding of the underlying

dimensions of customer value, the practical implications of
different performance measures of CRM and knowledge of how to
improve each of them by focusing on one specific dimension of
customer value or their combinations.
The fundamental objective of CRM is to ensure steady streams
of revenue and maximisation of customer lifetime value or
customer equity, customer behaviours that might bring revenue
streams become strategically significant (Grant and Schlesinger,
1995; Bolton et al., 2002).
CONSUMER
RESEARCH

Though the title say consumer research most of the analysis are
being done in the area of buying. Hence the topic is discussed in
the customer’s point of view.
This slides suggest an approach to systematically analyzing the
customer
WHO BUYS AND
USES?
INDIVIDUAL INDUSTRIAL

Initiator Initiator
Gate keeper Gate keeper
Influencer Influencer
Decider Decider
Purchaser Purchaser
user user
WHAT CUSTOMERS
BUY?

Communicating the benefits in

advertisements or in a sales pitch will
appeal well to the customer
• We are not buying a pen, but Smooth Writing

• Shortest turn around time doesn’t mean anything to a customer

but the benefit is on time flight

• Men don’t buy fair and handsome they buy “handsomeness”

Communicating the benefits in advertisements or in a sales

pitch will appeal well to the customer
WHERE CUSTOMERS
BUY?
Why do customers buy brands from a specific shop?

The role of delivery channels is increasing with increasing

products and services

Amazon introduced “Try before you buy” option for prime

users.
WHEN CUSTOMERS
BUY?

The major issue the marketer’s has to address is the timing issue. The
timing encompasses time of year, month, week or even time of the day.

What marketer’s do to tackle or the timing issue?

HOW CUSTOMERS
CHOOSE?
How customers choose a product/service is based on the
information search (s)he makes. With the evolution of
technology in information and communication technology
the search has become very simple.

Customers can compare products, price and they can view

how other customers feel after purchasing this product.
WHY THEY PREFER A
PRODUCT/BRAND
The central point to this discussion is customer value: what
the product/brand is worth to the customer?

The customer value of a product/brand is composed of 3

elements

1. Importance of the usage situation

2. Effectiveness of the product category in that situation
3. Relative effectiveness of the brand in that situation
HOW THEY RESPOND TO
MARKETING PROGRAMS

Sensitivity to the marketing program varies on customer to

customer basis also varies on product to product basis.

The sensitivity can be assessed by

1. Expert opinion
2. Market survey
3. Experiments
4. Analysis of past data (scanner data using logit
regression)
WILL THEY BUY IT
AGAIN
It depends upon how satisfied the customer is.

Satisfaction vs. dissatisfaction

Dissatisfied? What if the company is a monopoly?

Customer delight

Even satisfied customers don’t buy products again. How to

tackle the issue?
SEGMENTATION AND
TARGETING
SEGMENTATION
Why Segmentation?

- Because, customization at customer level is not

possible.

Criteria for Segmentation

- Measurable, Substantial, Accessible, Differentiate,

Actionable
BASES FOR
SEGMENTATION
Price

Benefit (ex. Cosmetic vs. therapeutic)

VALS (psychographic)

Usage Intensity

Usage Occasions

Discuss how cars are segmented?

Hatchback-Sedan-MUV-SUV

Economy cars-luxury cars

Petrol-Diesel-CNG

Think how TATA-Indica is positioned in the market? Do

individuals prefer to buy? If yes who?
SEGMENTATION
BASES FOR B2B
Organization size

Product configuration

Service needs
TARGETING
To whom we are going to sell the product.

Identifying and profiling the group of buyers that differ on

needs/preferences then select one or multiple segments to
go after, develop marketing communication to communicate
and to deliver what their unique benefits are.

Brand identity and capabilities of the firm to be considered

DIFFUSION OF
INNOVATION
STAGES IN PRODUCT
ADOPTION
DISRUPTIVE
MARKETING
Disruptive innovation is a term in the field of business
administration which refers to an innovation that creates a
new market and value network and eventually disrupts an
existing market and value network, displacing established
market leading firms, products, and alliances.
Clayton M. Christensen
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