Introduction to Consumer Behavior

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 Parle-G and the reason why this packet of biscuit still
costs Rs 5
• As the biscuit staple thrived for 25 years
without changing its price.
• "In the year 1994, the price of a small packet of Parle-G was Rs 4
and it remained that until 2021, when it was hiked by a rupee. As of
today, a small packet costs Rs 5. Ever wondered how is that even
possible?“
• "Along with many operational optimisations, Parle also applied an
incredible psychological hack to achieve this fete.“
• Instead of hiking the prices they slowly and steadily kept reducing
the size of portion over time, while maintaining the perception of
small packet.

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 Parle-G and the reason why this packet of biscuit still
costs Rs 5
• "It first started with a portion of 100 gm and a few years later they
made it 92.5 gm and then to 88 gm and as of today, the small
packet that costs Rs 5 weighs 55 grams, which is a good 45 per
cent reduction from what they had started with in 1994,“
• Describing the technique as graceful degradation, that companies
manufacturing potato chips, chocolate bars, and toothpaste, among
others also follow it. "This technique is called graceful degradation
where something not-so-desirable happens so steadily that the
consumers don’t feel the consequences of it,"
-------------------Saptarshi Prakash, Director of Design at Swiggy

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 Learning Outcomes

• To Understand 'consumer’ in Consumer behavior?

• To know the Evolution of the marketing concept
• To understand importance of Consumer research?
• To know Consumer behavior as interdisciplinary
• To uncover Consumer buying decision process

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 What is Consumer Behaviour?
The study of consumer behavior describes
•what products and brands consumers buy,
•why they buy them,
•when they buy them,
•where they buy them,
•how often they buy them,
•how often they use them,
•how they evaluate them after the purchase, and
•whether or not they buy them repeatedly.

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 Definition of Consumer Behavior

 CB is the study of consumers’ actions during

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

 Those activities directly involved in obtaining,

consuming, and disposing of products and services,
with special emphasis on the mental processes that
precede and follow these actions

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 What is ‘Consumer’ in CB?

• Marketing is about understanding the

consumer’s side:
– why they like/dislike something

• The essence of marketing consists of satisfying

consumers’ needs, creating value, and retaining
customers.
• How to understand Consumer?

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 How to Understand Consumer?

• Only 8% of new product concepts offered by 112

leading companies reached the market. Out of
this 83% failed to reach marketing objectives
• You cannot take the consumer for granted any
more
• A sound understanding of consumer behavior is
essential for the long run success of any
marketing program

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 Evolution of the marketing concept

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 Marketing Philosophies
• The Production Concept
• The Product Concept
• The Selling Concept
• The Marketing Concept
• The Societal Marketing Concept

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 The Production Concept
• Emphasis is on improving production
process
• Assumption: Consumers will buy products
that are widely available and inexpensive
• Strategy: Invest in improving production
time and lowering production costs.
• Faster delivery leads to more customers.
• Moore’s law: Density of transistors double
every 18 months
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 The Product Concept
• Emphasis on product
• Assumption: Consumers will buy the
highest quality product.
• Strategy: Invest in research, product
development, manufacturing and
engineering.
• Adopted by companies at the forefront of
technology
• Produce a better quality product.
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 The Selling Concept
Goal: Increase sales volume
• Assumes that customers would not purchase
products if left alone
• Strategy: Aggressively target customers through
advertisement and personal selling.
• Attract people through offers such as coupons,
sales, 0% finance charge.
• Persuade customer to buy rather than offer them
the products that best fit their needs and
interests. (Leads to success in the short-term.)

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 Marketing Myopia
Theodore Levitt
• Focus on product, production, or sales
could lead to myopia
• Could lead to ignoring specific consumer
needs
• Could lead to ignoring important markets

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 The Marketing
Concept
Goal: Address customers’ needs
and wants
• Assumes that companies can achieve
competitive advantage when the firm best gives
the needs of the consumer
• Strategy: Identify customers’ needs, wants and
preferences and market effectively to address
those needs, wants, and preferences.
• Develop long-term relationship with customers

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 The Societal Marketing
Concept
• Assumes that companies can achieve
competitive advantage when society’s
well-being is maximized
• Strategy: Identify customers’ needs, wants
and preferences and market effectively. In
the process, serve the needs of society
and be a good corporate citizen.
• Cause related marketing: Partnership with
a cause for mutual benefit

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 The Societal Marketing
Concept : Demarketing
• Reducing demand for a company’s own products, if that
is in the best interest of society
Example: Philip Morris USA (Altria Group), advertising
the negative effects of smoking. The company has a
youth smoking prevention department headed by a
Senior Vice President; his role is to prevent youth from
starting to smoke and to help those who smoke to give
up smoking.

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 MAHATMA GANDHI’S
DEFINITION OF CUSTOMER
• A customer is not an outsider to our business. He is a definite part
of it.
• A customer is not an interruption of our work. He is the purpose of it.
• A customer is doing us a favour by letting us serve him. We are not
doing him any favour.
• A customer is not a cold statistic; he is a flesh and blood human
being with feelings and emotions like our own.
• A customer is not someone to argue or match wits with. He
deserves courteous and attentive treatment.
• A customer is not dependent on us. We are dependent on him.
• A customer brings us his wants. It is our job to handle them properly
and profitably - both to him and us.
• A customer makes it possible to pay our salary, whether we are a
driver, plant or office employ

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 Customer’s Inertia
“A notable finding is the negative impact of customer
orientation on NP (New Product) novelty. It appears that
enhancing customer orientation is less likely to help a firm
create novel products, because current customers may not
approve novel product ideas because of their inertia toward
existing products in the market”
-----Im and Workman, 2004:P.126

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 APPLE/Steve Jobs
• iPod
• iPhone
• Innovators Dilemma (Christernson)
• PC/IBM
• Can Elephant Dance?

https://www.youtube.com/watch?v=oeqPrUmVz-o

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 Why Consumer Research?
•Consumer Research
•Market Segmentation, Targeting and Positioning
•The Marketing Mix (4 Ps)
– Product or service
– Price
– Place
– Promotion

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 Consumer Relationship
•Production-Product-Selling-Marketing Concepts valued
customers differently
•Consumer relationship at each stage are different
•The objective of providing value is to retain highly satisfied
customers
•Loyal customers are key
 They buy more products
 They are less price sensitive
 Servicing them is cheaper
 They spread positive word of mouth

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 Customer value, Satisfaction, and Retention

•The goal of all marketers is to build and maintain successful relationships with
their consumers
•Relationship occurs by offering a product which has benefits that the consumer
values
•If a product delivers value, the company is likely to have a high level of customer
satisfaction
•A company with strong customer relationships will be able to achieve a high level of
customer retention

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 Gillette Fusion
Functional Psychosocial Value
Brand Attributes Consequences Consequences

Close Feel well- Be

5 Blades Shave groomed attractive

Gillette
Fusion
Smooth, Be Be
Lubricating Soft comfort- relaxed,
Strip Shave
able not
stressed

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 Customer Loyalty Mix
• Customer groups based on loyalty include loyalists, apostles,
defectors, terrorists, hostages, and mercenaries
• Loyalists: Satisfied customers who continue to purchase
• Apostles: Who spread very positive word-of-mouth
• Defectors: When customers are disappointed, they can become
defectors and move to the competition
• Terrorists: Who spread negative word-of-mouth
• Hostages: Some dissatisfied customers become hostages and stay
with the company but are very unhappy
• Mercenaries: Who are satisfied but are not really considered loyal
and will move from company to company.

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 Consumer Behavior is Interdisciplinary

• Consumer behavior stems from four

disciplines.

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 Psychology
• Psychology is the study of the human
mind and the mental factors that affect
behavior (i.e., needs, personality traits,
perception, learned experiences, and
attitudes).

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 Sociology
• Sociology is the study of the development,
structure, functioning, and problems of
human society (the most prominent social
groups are family, peers, and social class).

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 Anthropology
• Anthropology compares human societies’
culture and development (e.g., cultural
values and subcultures).

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 Communication
• Communication is the process of imparting
or exchanging information (including
media and persuasive strategies).
• The advice to footwear salesmen should
be ‘Don’t sell shoes – sell lovely feet’

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• Think of a recent important purchase– briefly draw a
flowchart of the steps you recall moving through from the
awareness of need to post purchase

• What influenced you at each step?

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 Consumer Decision-Making Process

Need
NeedRecognition
Recognition

Information
InformationSearch
Search
Cultural,
Cultural,Social,
Social,
Individual
Individualand
and
Psychological Evaluation
Evaluation
Psychological of
Factors
Factors ofAlternatives
Alternatives
affect
affect
all
allsteps
steps
Purchase
Purchase

Postpurchase
Postpurchase
Behavior
Behavior
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 Consumer Buying Decision Process
•Inputs
– Firm marketing efforts
– Sociocultural influences
•Process
– Psychological factors
– Need Recognition, Decision Type, Prepurchase
Search, Evaluation of Alternatives
– Learning
•Outputs
– Purchase
– Post-purchase evaluation

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 Consumer Buying Decision Process

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 Complete Model of Consumer Behavior

Need
recognition
Internal
search Influences
Search
• culture
Exposure
• social class
• family
Stimuli Attention Alternative • situation
(marketer evaluation
dominated, Memory
Comprehension
other) Individual
differences
Acceptance Purchase
• resources
• motivation &
Retention involvement
Outcomes • knowledge
• attitudes
• personality,
values, lifestyle
External
search
Dissatisfaction Satisfaction
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