Understanding Consumer

Behaviour
 Factors which make

Intangibility
1. Intangibility is the main distinguishing feature, since
services are processes or experiences rather than
physical objects and therefore cannot be possessed.
2. Due to intangibility services are difficult for consumers
to grasp mentally.
3. In the pre-purchase stage services are difficult for
consumers to evaluate than goods
4. Services are high in experience qualities so its attributes
can only be assessed after purchase or during
consumption
Inseparability
1. The fact that services are processes or experiences
means that essentially they must be produced and
consumed simultaneously.
2. The inseparability of production and consumption
in services make production and marketing
interactive processes
Perishability
1. Services cannot be stored for some future time
period, hence the need for short distribution
channels so that they can be produced on demand
Heterogeneity
1. The quality of the service output very much
depends on the nature of the personal interactions
of these Suppliers and Consumers. This makes the
potential for variability in the service performance
high,
 How People Buy

Engel-Kollat-Blackwell model
Problem Recognition - > Information Search ->
Evaluation of alternatives -> Purchase decision ->
Post-purchase behaviour.
Another is Baker composite model – based on 4
motivation model and six other key concepts
important to understand consumer behaviour.
 4 motivation theories

Marshallian (pursuit of utility),

Pavlovian (a neutral stimulus gains the ability to
elicit a response as a result of being paired with
another stimulus that already causes that
response),
Freudian (unconscious psychological forces, such
as hidden desires and motives, shape an
individual's behavior)
Veblenian (pecuniary struggle to acquire and
exhibit wealth, in order to gain status, is the
driving force)
 Other Concepts in Baker model

Selective perception - Selective perception is the

tendency not to notice and more quickly forget
stimuli that cause emotional discomfort and
contradict our prior beliefs.
(https://www.youtube.com/watch?
v=ghMYzo0rgrw)
hierarchy of needs
hierarchy-of-effects
 Post Purchase Dissonance

Post purchase dissonance

is the feeling of regret
that a customer
experiences after buying
a product.
It results from cognitive
dissonance, which
psychologists define as a
period of mental
discomfort caused by
conflicting beliefs and
attitudes.
 Other two

buy tasks and buy phases

characteristics of goods
But does this general buying theories applies on
financial services market ?
Empirical Studies to decipher Financial Services Consumer
Some of the common choice criteria in bank
selection are dependability and size of the
institution, location, convenience and ease of
transactions, professionalism of bank personnel and
availability of loans.
personal consumer is more interested in the
functional quality dimension of financial services
(i.e. how the service is delivered) rather than the
technical quality dimension (i.e. what is actually
received as the outcome of the production process)
Given the difficulties consumers have in evaluating
services (Zeithaml, 1981): because of the intangibility,
inseparability and heterogeneity of services, there are
fewer tangible cues to base decisions on prior to
purchase
Therefore greater reliance is placed on experience
qualities after purchase or during consumption, and
even credence qualities since consumers may find it
extremely difficult to assess in hindsight whether they
entrusted the right organization with the management
of their financial resources.
 Let us now look at more recent and holistic model for
consumer buying behavior in financial services

Traditionally banks and insurance companies have used

a purely financial analysis to analyse their customers or
clients, particularly in the provision of loans, extension
of overdrafts, credit, insurances and so on.
Arguably this analysis presents only half the story, as
the results can only be accepted at face value. Behind
these financial analyses there are the behavioral
characteristics of the customer.
In order to understand the financial analysis fully we
need to look into customers' attitudes and behavioural
characteristics.
Early investigations have indicated that behavioral
characteristics are vital to understanding the
customer. These behavioral characteristics are
basically influenced by three sets of factors.
1.
 External factors

Arising from influential persons and reference

groups.
There are two types of reference group: membership
and non-membership.
membership groups are the various groups to which
the individual belongs. These include culture,
occupation, age, social class, geographic location,
and so on
Non-membership groups are reference groups that
the individual admires or aspires to belong to.
 Internal Factors

Arise from the internal attributes of an individual.

These have been identified as motives, attitudes,
learned behavior and perception.
 The Consumer Process

This is a series of stages through which a customer

goes when contemplating the purchase of a financial
service.
When customers are satisfied with their present
situation they are said to be in a cognitive balance or
homeostatic position.
When customers are satisfied with their present
situation they are said to be in a cognitive balance or
homeostatic position.
The Buying Process
SEGMENTATION
Segmentation involves identifying customer groups
that are fairly homogeneous in themselves but are
different from other customer types.
Its purpose is to determine differences between
customers that are of relevance to the marketing
decision maker.
SEGMENTATION IN FINANCIAL SERVICES
 DEMOGRAPHIC SEGMENTATION

Occurs when the marketer determines that

customers respond differently to marketing offerings
on the basis of their age, gender, size of immediate
family, income level, occupation, formal education,
religion, race or stage in the family life cycle.
Demographics are a popular basis for segmentation.
They often have a strong and significant relationship
to financial service sales, and are easier to recognize
and measure than most other variables
EXAMPLE

The segment with

least discretionary
time and most
discretionary income
The 34-45 year old.
This 'type' of
customer is likely to
have special financial
needs
Ex. financial portfolio
management.
 PSYCHOGRAPHIC SEGMENTATION

Psychographic segmentation has been used in

marketing research as a form of market segmentation
which divides consumers into sub-groups based on
shared psychological characteristics, including
subconscious or conscious beliefs, motivations, and
priorities to explain and predict consumer behavior.
Ex: Harringtons Insurance of London offers lower
motor premiums to non-smokers, married drivers and
property owners on the ground that these have a more
'cautious' approach to life.
 BEHAVIOURISTIC SEGMENTATION

Behavioral segmentation is the process of sorting

and grouping customers based on the
behaviors they exhibit.
Example: ego enhancement, location convenience,
pricing, integrity, expertise, philosophy and time
convenience. (Robertson and Bellenger)
Example
TARGETING
CASE SEGMENTATION FINANCIAL SERVICES INDIA

targeting Generation Y i.e people

between the age of 25 and 40,
especially those over the age of
30.
All of the current marketing
activities of Cred is curated
around seeking the attention of
Generation Y. That’s why there
is Rahul Dravid, Javagal Srinath
and Venkatesh Prasad in their
ads and not Virat Kohli or
Hardik Pandya
Likewise, it has Madhuri Dixit,
Anil Kapoor and Kumar Sanu
and not Alia Bhatt or Varun
Dhawan.
#FundYourOwnWorth Campaign ICICI

Company’s
exclusively designed
savings account for
women.
https://youtu.be/9J
0F2xX6H4w
FINTECH INDIA
FinTech characterizes the usage of digital
technologies such as the Internet, mobile computing,
and data analytics to enable, innovate, or disrupt
financial services.
FinTech start-ups are newly established
businesses that offer financial services based on
FinTech.
 EMERGENCE

Enabled by UPI, Indian fintechs have made rapid

gains in the payments space over the past few years.
Digital payments have soared, with UPI monthly
transactions reaching a value of approximately $135
billion (as of June’22), a remarkable nine times that
of credit cards (CCs), which have been around for
more than four decades in India.
 INVESTMENTS

 India has seen a significant rise in fintech

investment, with about $35 billion invested across
segments thus far, more than doubling India’s share
of global fintech funding since 2016
The years 2021 and 2022 saw more than $19 billion
of fintech funding and the addition of 18 fintech
unicorns.
A favourable shift towards more affluent and mass affluent
customers
MSME LACKS FORMAL CREDIT
Internet Penetration
Evolution of Fintechs
YEARWISE FUNDING
UNICORNS
Marketing Strategy FINTECHs