MKT-332 CONSUMER BEHAVIOR

LESSON 1
AN INTRODUCTION TO CONSUMER BEHAVIOR AND MARKETING CONCEPT

An Introduction to Consumer Behavior

Agenda:

1. What is consumer behavior?

2. Marketing concepts
3. Types of consumers
4. Implementation of marketing concepts
5. Current challenges for marketers
6. Consumer behavioral model

Introduction

Consumer behavior is the study of processes involved when individuals or groups select, purchase,
use, or dispose of products, services, ideas, or experiences to satisfy needs and desires. More
specifically, consumer behavior is considered to be a decision making process. It is the totality of
all activities and behaviors that consumer displays.

For example, shopkeeper in a village want to sell his products to a customer, he needs to understand
the needs of customer before he moves to the actual exchange.
Marketer has to persuade the customers to choose his products for which he needs to know two
important things:

- what influences customers

- how to make their product as choice number one

For example; in early 19th century, Ford developed Ford Motor Car with an ambition to provide
the cheapest car to every one who could buy. That was one aspect of the ‘marketing concept’. On
the other side of the picture, within 10 years of its launch, Alfred P. Sloan decided to launch a car
for “every body’s choice”, hence they launched General Motors. And this concept was later
emerged as marketing segmentation.

Marketing has gone through a number of phases: five most important steps are as follows:

The Production Concept

The Product Concept
The Selling Concept
The Marketing Concept
The Societal Marketing Concept

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The Production Concept It holds that consumers will prefer products that are widely available
and inexpensive. Managers focusing on this concept concentrate on achieving high production
efficiency, low costs, and mass distribution.

The Product Concept This orientation holds that consumers will favor those products that offer
the most quality, performance, or innovative features. Managers focusing on this concept
concentrate on making superior products and improving them over time.

The Selling Concept It holds that consumers and businesses, if left alone, will ordinarily not buy
enough of the selling company’s products. The organization must, therefore, undertake an
aggressive selling and promotion effort. Their aim is to sell what they make rather than make what
the market wants.

The Marketing Concept It holds that the key to achieving the organizational goals (goals of the
selling company) consists of the company being more effective than competitors in creating,
delivering, and communicating customer value to its selected target customers. The marketing
concept rests on four pillars: target market, customer needs, integrated marketing and profitability.

The Societal Marketing Concept It holds that this all must be done in a way that preserves or
enhances the consumer’s and the society’s well-being.

Retrieved from Kotler, Philip. (2000) Marketing Management. Upper Saddle River, New Jersey:
Prentice Hall.)

Two types of consumers

There are two types of consumers:

1) Household consumers.
2) Institutions/Organizations

Marketers need to understand their consumers and then devise strategies accordingly. The
strategies for household consumers will be different from organization consumers and vice versa.
But the focus of the marketers to gain competitive advantage in the eyes of consumers relative to
the competitors. In ordered to gain competitive advantage, three aspects are important: customer
satisfaction, customer value, and customer retention. For example, if one company is providing
more value to the customer relative to the competitors, then the same will gain more competitive
advantage. Customer value is defined in terms of price and cost. It is the difference between price
which a customer is supposed to pay and the cost which is incurred in the manufacturing of the
product.

Implementation of marketing concept

Following three steps are normally used for the implementation of marketing concept:

1. Segmentation

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2. Targeting
3. Positioning

Segmentation Segmentation is the process of grouping people or organizations within a market

according to similar needs, characteristics, or behaviors. It can also be defined as a process to
identify the consumers who are similar to one another in one or more ways, and then devise
marketing strategies that appeal to one or more groups.

Targeting Targeting is the actual selection of the segment the company wants to serve. Target
market is the group of people or organizations whose needs are similar and a product is specifically
designed to satisfy those needs.

Positioning Positioning is the use of marketing to enable people to form a mental image of your
product in their minds (relative to other products). Positioning requires marketing mix; product,
price, promotion, and place.

Current challenges for marketers

▪ Rapidly evolving technology

▪ Ethics
▪ Changing needs and wants
▪ Cultural assimilation
▪ Environmental issues
▪ Globalization

Marketers need to understand these challenges and devise marketing strategies accordingly.
Finally, consumer behavioral model is discussed as follows:

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LESSON 2
CUSTOMER VALUE

Consumer Research

Agenda:

1) Customer Value
2) Consumer Research
a. Qualitative Research
b. Quantitative Research
3) Data collection methods
a. Survey method
b. Experiments
c. Observations
4) Types of Data
a. Secondary
b. Primary
5) Validity and Reliability

1) Customer value

Customer value is the difference between what a customer gets from a product, and what he or she
has to give in order to get it or simply, it is the difference between cost and benefits.

2) Consumer research

Consumer research is the investigation into the driving forces behind customer behavior, consumer
psychology and purchase patterns. Consumer research is focused on obtaining objective
information through statistical sampling to help businesses craft products and advertising that
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increase sales and profitability. There are two broad areas of research known as qualitative research
and quantitative research.

a. Qualitative Research Qualitative research involves analysis of data such as words,

pictures or objects. Qualitative data is more 'rich', time consuming, and less able to be
generalized. The data in qualitative studies is normally conducted/collected through:
- Focus groups
- In depth interviews
- Ethnography
b. Quantitative Research Quantitative research involves analysis of numerical data.
Quantitative data is more efficient, able to test hypotheses, but may miss/overlook
contextual detail. This type of research is more close to cause and effect relationships.
There are many methods for the collection of data. Few of them are as follows:
a. Survey method
b. Experimental method
c. Observation method

a. Survey Method Data is usually collected through the use of questionnaires, although sometimes
researchers directly interview subjects. There are two basic types of surveys: cross-sectional
surveys and longitudinal surveys. Cross-sectional surveys are used to gather information on a
population at a single point in time. Longitudinal surveys gather data over a period of time. The
researcher may then analyze changes in the population and attempt to describe and/or explain
them. Normally survey is conducted through:

- Personal interviews
- Mail survey
- Telephonic survey
- Mall intercept

b. Experimental methods There are a number of ways to conduct a scientific experiment. For
example; laboratory experiments, field work, surveys, or longitudinal studies etc.
c. Observation method Observation method is a technique in which the behavior of research
subjects is watched and recorded without any direct contact. This method involves human or
mechanical observation of what people actually do or what events take place during a buying or
consumption situation.

4) Types of data

There are two types of data know as secondary data and primary data. Secondary data is the data
which pre-exist in the system. Secondary research gathers information which has already been
collected. Primary data is collected for a particular purpose and is new information. This is
conducted using some means of questioning usually via a survey or interviews.

5) Validity and reliability

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While conducting research, more emphasis should be given to the validity and reliability of the
instrument used for data collection. Validity means the instrument which you have used is really
relevant to the questions at hand. And this information is significant from the point of view of what
is the purpose of the research. Reliability is interpreted as the instrument you have used to collect
information for the first time, if the same instrument is used to the same sample again, you would
get the same responses. Then, it means that the instrument is reliable.

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LESSON 3
CONSUMER BEHAVIOUR RESEARCH

Consumer Behavior Research

This lecture first summarizes the previous lecture on consumer research with more depth
explanation. Initially qualitative and quantitative data is explained and important steps are
explained in detail. In quantitative research, most important is survey method and survey is
normally conducted through questionnaire. There are two types of questionnaire, (a). Disguised
(b). Undisguised.

(a). Disguised Questionnaire is one in which purpose of research is not explained to the
audience/respondents. This method normally give better and useful responses.

(b). Undisguised questionnaire is one in which the purpose of research is shared with the
respondents. Problem with this type of research is that the respondents are more inclined to answer
closer to what researcher is looking for. Hence, chances of biasness are high in undisguised
questionnaire.

There are two types of questionnaire: (a). Open ended (b). Close ended.

(a). Open ended are those in which a space is given to the respondents to write whatever they want
against the asked questions.
(b). Close ended questions are those in which numerical scales are given and respondents respond
according to their perceptions. Normally likert scale is used for the close ended questions.

Language of questions
Most critical issue in questions is the language. Whenever we write the questions, we need to avoid
from the following pitfalls:

- We should not ask Leading questions (question is suggested within the questions)
- We should not use the words that are specific to specific category. We need to use Simple words
so that every one can understand easily.
- We should also be very careful that respondents should be able to answer.
- We should ask the questions that respondents are willing to answer.
- Finally, we should avoid asking two points in one question.

Research design
Research design required three things:

1. Instrument
2. Sampling plan
3. Data collection method.
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Here, we need to understand the way instruments can be used. For this, we go through the concept
of measures – scales.

There are different types of scales; few of them are as follows:

1. Attitudinal scale
2. Satisfaction measures
3. Importance scale
4. Semantic differential scale
5. Behavioral intention scale

1. Attitudinal scale An attitudinal scale is a device consisting of symbols that have a value
assigned to them by the researcher. Attitudinal scales are very popular measureing instruments
with researchers. The best known type of a scale is Likert scale, which consists of items to which
a subject responds with varying degrees of intensity. For example, commonly used alternatives
are: strongly agree (SA), agree (A), undecided (U), disagree (D), strongly disagree (SD).

2. Satisfaction measures Satisfaction measure is the type in which we normally identify the scale
from very satisfied (1) to very satisfied (5).

3. Importance scale In importance scale, respondents are asked to show their perceptions on the
scale extremely important (1) to not at all important (5).

4. Semantic differential scale Semantic differential is a type of a rating scale designed to measure
the connotative meaning of objects, events, and concepts. The connotations are used to derive the
attitude towards the given object, event or concept. For example, reliability - no reliability; good -
bad; important – unimportant; useful – unuseful etc.

5. Behavioral intention scale The questions like ‘how likely are you to continue using A,B,C’.
Answers will be expected on definitely will continue (1) to definitely will not continue (5).

Sampling design

The method of selecting sample units to be included in a sample. There are two types of sampling:
(I). Probability Sampling, (II). Non-Probability Sampling. Each one is being explained below:

(I). Probability Sampling

A probability sampling method is any method of sampling that utilizes some form of random
selection. There are further four steps of probability sampling explained as below: (a). Simple
Random Sampling Every possible combination of sampling units has an equal and independent
chance of being selected. The selection of a particular unit to be sampled is not influenced by the

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other units that have been selected or will be selected. Samples are either chosen with replacement
or without replacement.

(b). Systematic Sampling The initial sampling unit is randomly selected or established on the
ground. All other sample units are spaced at uniform intervals throughout the area sampled. In this
type of technique, sampling units are easy to locate and appear to be representative of an area.

(c). Stratified Random Sampling In this type of sampling technique, population is subdivided
into subpopulations of known sizes. In order to obtain a more precise estimate of the population
mean, a simple random sample of at least two units is drawn from each subpopulation. If the
variation within a subpopulation is small in relation to the total population variance, the estimate
of the population mean will be considerably more precise than a simple random sample of the
same size.

(d). Cluster Sampling Cluster sampling is a sampling technique in which the entire population of
interest is divided into groups, or clusters, and a random sample of these clusters is selected. Each
cluster must be mutually exclusive and together the clusters must include the entire population.
After clusters are selected, then all units within the clusters are selected. No units from non-
selected clusters are included in the sample.

(II). Nonprobability Sampling

Nonprobability sampling does not involve random selection. There are different types of
nonprobability sampling.

(a). Convenience sampling Convenience sampling is a non-probability sampling technique where

subjects are selected because of their convenient accessibility and proximity to the researcher.

(b). Judgment Sampling In judgment sampling, the researcher or some other "expert" uses his/her
judgment in selecting the units from the population for study based on the population’s parameters.
This type of sampling technique might be the most appropriate if the population to be studied is
difficult to locate or if some members are thought to be better (more knowledgeable, more willing,
etc.) than others to interview.

(c). quota sampling A sampling method of gathering representative data from a group. Quota
sampling requires that representative individuals are chosen out of a specific subgroup. For
example, a researcher might ask for a sample of 100 females, or 100 individuals between the ages
of 20-30.

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Ethical issues
There are some ethical issues in research which needs to be considered.

(1). Assure the respondents that the information will not be used for any other purpose except the
purpose of research that has been explained to them.

(2). No misleading information should be provided to the respondents.

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LESSON 4
CUSTOMER SATISFACTION AND SEGMENTATION

Customer satisfaction and Segmentation

This lecture mainly focused on two broad areas of marketing. Customer satisfaction and
segmenting consumer markets (segmentation). First, we define customer satisfaction as follows:

Customer satisfaction
Customer satisfaction is a measure of how products and services supplied by a company meet or
surpass customer expectation. It has two main factors:

a. Customer expectation
b. Delivered value
If customer expectation is less than delivered value, customer is highly satisfied. If customer
expectation meets delivered value, then customer is satisfied. And if customer expectation exceeds
delivered value, then customer is dissatisfied. The task of marketer is to meet customer expectation
so that customer can be satisfied.

How to measure customer expectation?

Customer expectation can be measured through following methods:

a) Survey method (interviews, field studies etc)

b) Complaint center (put a small box and ask customer to put their comments in the box,
comment cards etc.)

How to measure Delivered value?

Delivered value can be measured through following methods:

a) Survey method (interviews, field studies etc)

b) Ghost shopping (one of the company member visit service center as a customer and observe
the level of service)

Segmentation
Customers are all different in the way they think, in the way they feel, in the way they live, in the
way they consume and in the way they choose. So, it means that there is diversity in the customers.
In fact, this diversity creates a great opportunity for the marketers because if all the people have
same needs and wants, then it will be difficult for the marketers to differentiate the products that
could be offered to the customers. It will would result in a single product/service with same price
for the whole market. Since this is not the case, every individual has different type of wants and
choices, therefore, marketers need to understand which customer have which type of need/want

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and what they can offer to satisfy that specific need/want. Before moving further, first, we should
define what the difference between need and want is:

Need: Need is something which exists in our systems. For example, hunger.

Want: In order to satisfy our need, we want something. In the above example of hunger, we can
eat savour pulao, burger, chapli kabab etc.

So here, we come to know that needs are similar which normally exist in the market, but wants are
different accordingly to the buying power of the individual customers. Since different consumers
want different things to satisfy their similar needs, therefore, marketers need to divide the
consumers into different segments in order to easily recognize the wants and then satisfy their
exact needs. Hence, we define segmentation as the process of dividing the total heterogeneous
market into groups which are similar in their wants.

For example, in a market 20% consumers want similar product, then marketers can discover the
want of 20 consumers to satisfy them and name it as a segment.

Basis of segmenting consumer market

1) Geographic segmentation
2) Demographic segmentation
3) Psychographic segmentation
4) Psychological segmentation
5) Socio-cultural segmentation
6) User-Related segments
7) Usage situations
8) Benefits segmentations
9) Hybrid

1. Geographic segmentation People with similar demographic characteristics normally live

nearby. For example; in urban areas, towns, states, regions and countries etc. People living within
the same geographical boundaries often have similar buying patterns. Therefore, marketers can
divide the market based on the geographical areas.

2. Demographic segmentation Demographic segmentation is based on various demographic

factors such as age, gender, marital status, family size, income, occupation, education, nationality
and social class etc. This type of segmentation helps the marketers to divide the market into several
groups and then target each of these groups to satisfy their needs and ultimately increasing
company’s performance.
3. Psychographic segmentation Psychographic segmentation is dividing the markets on the bases
of interests, activities, opinions, behavioral patterns, habits, lifestyle, and hobbies etc. This type of
segmentation plays on the psychology of the potential customers and helps the marketers to
determine how potential customers belonging to a particular segment can be approached.
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4. Socio-Cultural segmentation Three major aspects are:

1. Family Life cycle
2. Cultural base cycle
3. Social status

1. Family Life Cycle

a) Middle aged divorced without children: this group will have different choices because they
are divorced and have no children.
b) Middle aged married without children; this group will obviously have different choices as
compared to the previous one.
c) Young divorced without children; this group will have different choices because their life
style will be different due to young age.
d) Young single; they are not married having young age, so choices will be accordingly.
e) Young married with children; again choices will be different. And finally,
f) Older; this group will have totally different choices than the previous groups.

(2). Culture

Culture is long lasting value system which is adopted by a group of people. Various cultures
normally behave in similar manners. It is important for the marketers to understand different
cultures specifically when they intend to market their products globally. They should be well aware
about their norms, values, living standards, and choices. Hence, they will have to segment their
market accordingly.

(3). Social status

Every society normally has social classes. Social classes are defined by certain typical behaviors.
For example, BMW is targeted to a particular class, Mercedes is targeted to another class and
corolla, civic, vitz, swift, and mehran etc. are targeted to other groups. Hence, segmenting the
market will help the marketers to easily divide the individuals into groups and then devise
marketing strategies accordingly.

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