Madurai Kamaraj University

(University with Potential for Excellence)

Distance Education
[Link]

IV SEMESTER

MBA

Consumer Behavior

Paper code- MBAAT4A

MADURAI KAMARAJ UNIVERSITY

MADURAI

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Syllabus
UNIT – I
Concepts – Significance – Dimensions of Consumer Behaviour – Application
of knowledge of Consumer Behaviour in marketing decisions.

UNIT – II
Industrial and individual consumer behaviour models - Howared- Sheth, Engel
– Kollat, Webstar and wind Consumer Behaviour Models – Implications of the
models on marketing decisions.

UNIT – III
Psychological Influences on consumer behaviour – motivation – perception –
personality - Learning and Attitude- Self Image and Life styles – Consumer
expectation and satisfaction.

UNIT – IV
Socio-Cultural Influence, Cross Culture - Family group – Reference group –
Communication – Influences on Consumer behaviour

UNIT – V
High and low involvement - Pre-purchase and post-purchase behavior – Online
purchase decision process – Diffusion of Innovation – Managing Dissonance -
Emerging Issues – case studies.

REFERENCES
1. Assel, Consumer Behavior - A Strategic Approach, Biztranza, 2008.
2. David L. Louden and Albert J Della Bitta, Consumer Behavior, McGraw
Hill, New Delhi 2002.
3. Frank R. Kardes, Consumer Behaviour and Managerial Decision Making,
2nd Edition.

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 UNIT – I
1.1 INTRODUCTION

CUSTOMER

A customer is also known as a client, buyer, or purchaser. He is the recipient of

a good, service, product, or idea, obtained from seller, vendor, or supplier for a
monetary or other valuable consideration. One who regularly or repeatedly
makes purchases of a trader? A person, company, or
other entity which buys goods and services produced by another person,
company, or other entity.

CONSUMER

Any person who uses a product or service or deals with it can be called a
consumer.

An individual who buys products or services for personal use and not for
manufacture or resale. A consumer is someone who can make the decision
whether or not to purchase an item at the store, and someone who can be
influenced by marketing and advertisements. Any time someone goes to a store
and purchases toy, shirt, beverage, or anything else, they are making that
decision as a consumer.

Classification of consumers

[Link] consumer

[Link] consumer

Personal consumer - buys goods and services for his or her own use, for the
use of the household, or as a gift for a friend. In each of these contexts, the
products are bought for final use by individuals, who are referred to as end users
or ultimate consumers.

Organizational consumer –includes profit and not-for-profit businesses,

government agencies (local, state, and Federal), and institutions (such as
schools, hospital, and prisons), all of which must buy products, equipment, and
service in order to run their organizations.

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CONSUMER BEHAVIOR

Consumer behavior is defined as the decision-making process and physical

activity involved in acquiring, evaluating, using and disposing of goods and
services.

CONSUMER BEHAVIOR ROLES

The main buying roles are as follow

1. The Initiator – the person who decides to start the buying process.

2. The Gate keeper – the person who seeks information before the final
purchase.

3. The Influencer – the person who tries to convince others they need the
product.

4. The Decider – the person who makes the final decision to purchase.

5. The Buyer – the person who is going to buy the product.

6. The User – the person who ends up using your product, whether he had a
say in the buying process or not.

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DEVELOPMENT OF THE MARKETING CONCEPT AND THE
DISCIPLINE OF CONSUMER BEHAVIOR

The field of consumer behavior is rooted in the marketing concept, a business

orientation that evolved in the 1950s through several alternative approaches
toward doing business referred to, respectively, as the production concept, the
product concept, and the selling concept.

1. Production concept

This concept is used by Henry Ford in the early [Link] production concept
reveals that consumers are mostly interested in product availability at low
prices. Its implicit marketing objectives are cheap, efficient production and
intensive distribution. This concept makes sense when consumers are more
interested in obtaining the product than they are in specific features.

2. Product concept

This concept reveals that consumers will buy the product that offers them the
highest quality, the best performance, and the most features. A product
orientation leads the company to strive constantly to improve the quality of its
product and to add new features that are technically feasible without finding out
first whether or not consumers really want these features. This concept leads to
“marketing myopia,” that is, a focus on the product rather than on the consumer
needs.

Example: Railroads are often used as an example of marketing myopia.

3. Selling concept

It is a natural extension of the production and product concepts. In this concept,

marketing’s primary focus is selling the product(s) that it has unilaterally
decided to produce. A hard sell approach is often used to influence consumers
to buy something (even if they do not really want it). This approach is typically
used by the marketers of unwanted goods (such as life insurance).

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DEVELOPMENT OF MARKETINGCONCEPT

The field of consumer behavior is rooted in a marketing strategy that evolved in

the late 1950s. Consumer needs and wants became the firm’s primary focus.
This consumer-oriented concept came to be known as the marketing concept.

The key assumption:

➢ To be successful, a company must determine the needs and wants of specific

target markets and deliver the desired satisfactions better than the
competition.

➢ The marketing concept is based on the premise that a marketer should make
what it can sell, instead of trying to sell what it has made.

a) The older selling concept focused on the needs of the seller.

b) The marketing concept focuses on the needs of the buyer.

Segmentation, Targeting and Positioning

The focus of the marketing concept is consumer needs. The marketer must adapt
the image of its product so that each market segment perceives the product as
better fulfilling its specific needs than competitive products. The three elements
of this strategic framework are: market segmentation, targeting, and positioning.

i) Market segmentation is the process of dividing a market into subsets of

consumers with common needs or characteristics.

ii) Market targeting is the selection of one or more of the segments identified
for the company to pursue.

iii) Positioning refers to the development of a distinct image for the product or
service in the mind of the consumer, an image that will differentiate the offering
from competing ones and squarely communicate to the target audience that the
particular product or service will fulfill their needs better than competing
brands.

MARKETING MIX

The marketing mix consists of a company’s service and product offerings to

consumers and the methods and tools it selects to accomplish the exchange.
Four basic elements (known as the four Ps) include:

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a) The product—features, designs, brands, packaging, etc.

b) The price—list price (including discounts, allowances, and payment

methods).

c) The place—distribution of the product or service.

d) Promotion—advertising, sales promotion, public relations, and sales efforts

designed to build awareness of and demand for the product or service.

DISCIPLINES CONTRIBUTING TO CONSUMER BEHAVIOR

Marketing theorists borrowed heavily from concepts developed in other

scientific disciplines are,

1)Psychology — study of the behavior and mental processes of individual.

2) Sociology — study of the collective behavior of people in groups.

3) Social psychology — study of how individuals influence in groups and are

influenced by groups.

4 )Anthropology — study of people in relation to their culture or society.

5) Economics — study of people’s production, exchange and consumption of

goods and services. Many early theories concerning consumer behavior were
based on economic theory, the idea that individuals act rationally to maximize
their benefits (satisfactions) in the purchase of goods and services. Later
research discovered that consumers are just as likely to purchase impulsively,
and to be influenced not only by family, friends, advertisers and role models,
but by mood, situation, and emotion.

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SEGMENTATION

Definition: Segmentation refers to a process of bifurcating or dividing a large

unit into various small units which have more or less similar or related
characteristics.

➢ Market segmentation is a marketing concept which divides the complete

market set up into smaller subsets comprising of consumers with a similar
taste, demand and preference.
➢ A market segment is a small unit within a large market comprising of
likeminded individuals.
➢ One market segment is totally distinct from the other segment.
➢ A market segment comprises of individuals who think on the same lines and
have similar interests.
➢ The individuals from the same segment respond in a similar way to the
fluctuations in the market.

Advantages of Market Segmentation

1. Helps to distinguish one customer group from another within a given

market.

2. Facilitates proper choice of target market

3. Facilitates effective tapping of the market.

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 4. Helps crystallize the needs of the target buyers and elicit more
predictable responses from them; develop marketing programs on a
more Predictable base develop marketing offers that are most suited to
each group.

5. Helps achieve the specialization required in product distribution,

promotion and pricing for matching the customer group and develop
marketing offers and appeals that match the needs of such group.

6. Makes the marketing effort more efficient and economic.

7. Concentrate efforts on the most productive and profitable segments,

instead of frittering them over irrelevant, or unproductive, or
unprofitable segments.

8. Helps spot the less satisfied segments and succeed by satisfying such
segments.

9. Brings benefits not only to the marketer but to the customer as well.

Bases of Market Segmentation

Geographic segmentation

Segmentation of consumers based on geographic factors like climatic zone,

region, state district and urban/rural area, constitute geographic segmentation.

Demographic segmentation

➢ Demographic segmentation consists of dividing the market into groups

based on variables such as age, gender, family size, income, occupation,
education, religion, race and nationality.
➢ It helps to locate a target market, where as psychological and socio
cultural characteristics help to how its members think and how they feel.
➢ It is the most accessible and cost effective way to identify a target
market.

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 Psychological segmentation

➢ Psychological characteristics refer to the inner or intrinsic qualities of

the individual consumer like motivation, personality, perception,
learning and attitudes.
➢ Consumer segmentation strategies are often based on specific
psychological variables.
➢ Consumers may be segmented in terms of their motivations,
personality, perceptions, learning and attitudes.

Psychographic segmentation

➢ Psychographic segmentation is closely aligned with psychological

research, especially personality and attitude measurement.
➢ It is the science of using psychology and demographics to better
understand consumers. Here consumer is divided according to their
lifestyle, personality, values etc.

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 ➢ The psychographic profile of a consumer segment can be thought of as a
composite of consumers’ measured activities, interests and opinions
(AIOs).
➢ AIOs are designed to identify relevant aspects of a consumer’s
personality, buying motives, interests, attitudes, beliefs and values.

Socio cultural segmentation

➢ Here the market is subdivided into segments on the basis of stage in the
family life cycle, social class, core cultural values, sub cultural
memberships and cross cultural affiliation.

Family life cycle - Many families pass through similar phases in their formation,
growth and final dissolution. At each stage the family unit needs different
products and services. It is explicitly based upon marital and family status and
implicitly reflects relative age, income and employment status.

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Stages in the Family Lifecycle

➢ Stages in the Family Lifecycle include:

➢ Bachelorhood (what do they buy...)
➢ Newly Married Couples (what do they buy...)
➢ Parenthood and (what do they buy...)
➢ Post parenthood (what do they buy...)
➢ Dissolution

Social Class - Social Class is a hierarchy in which the individuals in the same
class generally have the same degree or status whereas the members of other
classes have higher or lower status core cultural values. This approach
consisting of their beliefs, values, artifacts, ways of behaving, ways of
communicating that is passed on from one generation to the next. Included in
the culture will be all that members of a culture have produced and developed,
their language, modes of thinking, art, laws and religion.

Sub cultural memberships - Within the larger culture distinct sub-groups

(subcultures) often are united by certain experiences, values or beliefs that make
a significant market segment. These groupings may be based upon specific
demographic characteristics (race, religion, ethnicity, or age) or lifestyle
characteristics (teachers, joggers)

Cross cultural affiliation - The world has grown smaller and smaller a true
global marketplace has developed, which calls for the need of Cross-cultural
and Global Market Segmentation.

Example: Wearing a watch that came from Japan

Use-related segmentation - Categorizing consumers in terms of product,

service, or brand usage characteristics is included into Use Related
Segmentation. The variables usually include:

Levels of usage

Level of awareness

Brand loyalty

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Usage situation segmentation

Some situational factors may influence a purchase or consumption choice.

Sometimes it is based on time, objective, location and person.

Benefit segmentation

The process of grouping consumers into market segments on the basis of the
desirable consequences sought from the product. For example, the toothpaste
market may include one segment seeking cosmetic benefits such as white teeth
and another seeking health benefits such as decay prevention.

Hybrid segmentation approaches

Hybrid segmentation is the kind of segmentation where instead of sticking to

one particular segmentation style, marketers combine one or two segmentation
variables and arrive at segmentation. This style is referred as Hybrid
segmentation

SIGNIFICANCE OR IMPORTANCE OF CONSUMER BEHAVIOR

Consumers are responsible for the sales of any product or services, so when a
new product is launched in the market, understanding consumers buying
behavior becomes very essential.

Marketers have to study and understand the various factors which influence the
customer thoughts while buying the product or services.

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Basically there are two reasons for buying any product or service,

1. Necessity driven buying behavior Every human being has certain basic
needs and to fulfill those basic needs one has to
2. Impulsive buying behavior

APPLICATIONS OF CONSUMER BEHAVIOR IN MARKETING

DECISIONS

The study of individuals, groups, or organizations and the processes they use to
select, secure, use and dispose of products, services, experiences, or ideas to
satisfy needs and the impacts that these processes have on the consumer and
society is called as consumer behavior.

The study of consumer help firms and organizations to improve their marketing
strategies by understanding issues such as,

➢ The psychology of how consumers think, feel, react and select product
among different alternatives.
➢ The psychology of how the consumer is influenced by his or her
environment (culture, family, signs, media).
➢ The behavior of consumers while shopping or making other marketing
decisions.

Marketing Strategy

All marketing strategies and tactics are based on explicit or implicit beliefs
about consumer behavior. Decisions based on explicit assumptions and sound
theory and research are more likely to be successful than are decisions based
solely on implicit intuition. Thus knowledge of consumer behavior can be an
important competitive advantage. It can greatly reduce the odds of bad
decisions.

Social Marketing

Is the application of marketing strategies and tactics to alter or create behaviors

that have a positive effect on the targeted individuals or society as a whole?
Social marketing has been used in attempts to reduce smoking, to increase the
percentage of children receiving their vaccinations in a timely manner, to
encourage environmentally sound behaviors such as recycling; to reduce
behaviors potentially leading to AIDS; to enhance support of charities; to reduce
drug use; and to support many other important causes. Just as commercial
marketing strategy, successful social marketing strategy requires a sound
understanding of consumer behavior.

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Regulatory Policy

Marketing is a highly visible, important activity. It affects the life of individuals,

the success of nonprofit groups, and the profits of businesses. There are many
issues where the appropriate ethical action for marketers is not clear-cut.
However, society has declared that other marketing actions are clearly
inappropriate. It has done so by enacting laws and regulations that prohibit or
require specific marketing actions. Regulating marketing activities requires the
same level of understanding and the extensive knowledge of the consumer
behavior as does managing marketing programs. Our consideration of the
regulation of marketing practices will separate regulations designed to protect
children from those designed to protect adults.

Informed Individuals

Most economically developed societies are legitimately referred to as

consumption societies. Most individuals in these societies spend more time
engaged in consumption than in any other activity, including work or sleep
(both of which also involve consumption). Therefore, knowledge of consumer
behavior can enhance our understanding of our environment and ourselves.
Such an understanding is essential for sound citizenship, effective purchasing
behavior and reasoned business ethics.

Literally thousands of firms are spending millions of dollars to influence you,

your family and your friends. These influence attempts occur in ads, packages,
product features, sales pitches, and store environments. However, they also
occur in the content of many television shows in the products that are used in
movies, and in the materials presented to children in schools. Given the
magnitude of these direct and indirect influence attempts, it is important that
consumers accurately understand the strategies and tactics being used. It is
equally important that all of us, as citizens, understand the consumer behavior
basis of these strategies so that we can set appropriate limits on them when
required

MARKET ANALYSIS COMPONENTS

Market analysis requires a thorough understanding of the organization’s own

capabilities, the capabilities of current and future competitors, the consumption
process of potential customers, and the economic, physical, and technological
environment in which these elements will interact.

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The Consumers

It is not possible of anticipate and react to customers’ needs and desires without
a complete understanding of consumer behavior. Discovering customer’s
current needs is a complex process but it can often be accomplished by
marketing research.

The Company

A firm must fully understand its own ability to meet customer needs. This
involves evaluating all aspects of the firm, including its financial condition
general managerial skills, production capabilities, research and development
capabilities, technological sophistication, reputation, and marketing skills.
Marketing skills would include new product development capabilities, channel
strength, advertising abilities, service capabilities, marketing research abilities,
market and consumer knowledge and so forth.

Failure to adequately, understand one’s own strengths can cause serious

problems.

IBM’s first attempt to enter the home computer market with the PC Jr. was a
failure in part for this reason. Although IBM had an excellent reputation with
large business customer and a very strong direct sales force for serving them,
these strengths were not relevant to the household consumer market.

The Competitors

It is not possible to consistently do a better job of meeting customer needs than

the competition without a thorough understanding of the competition’s
capabilities and strategies. This requires the same level of knowledge of a firm’s
key competitors that is required of one’s own firm. In addition, for any
significant marketing action, the following questions must be answered:

1. If we are successful, which firms will be hurt (lose sales or sales

opportunities)?
2. Of those firms that are injured, which have the capability (financial
resources, marketing strengths) to respond?
3. How are they likely to respond? (Reduce prices, increase advertising,
and introduce a new product)?
4. Is our strategy (planned action) robust enough to withstand the likely
actions of our competitors or do we need additional contingency plans?

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The Conditions

The state of the economy, the physical environment, government regulations,

and technological developments affect consumer needs and expectations as well
as company and competitors capabilities. The deterioration of the physical
environment has produced not only consumer demand for environmentally
sound products but also government regulations affecting product design and
manufacturing.

International agreements such as NAFTA (North America Free Trade

Agreement) have greatly reduced international trade barriers and increased the
level of both competition and consumer expectations for many products. The
development of computers has changed the way many people work and has
created new industries.

Clearly a firm cannot develop a sound marketing strategy without anticipating

the conditions under which that strategy will be implemented. In India, each
region, each state, provides a different environment. Tastes and combinations of
food products would change significantly across states. Logistics and
infrastructure across the interiors of Maharashtra and M.P would require
radically different strategies.

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18
APPROACHES TO THE STUDY OF CONSUMER BEHAVIOR

Marketers may approach target markets in their aggregate and heterogeneous

form or as smaller, more homogeneous segments.

a) Market Aggregation

A market aggregation strategy means, in effect, that little if any subdivision of

market is applied. With this approach, a firm would produce a single product
and offer it to all consumers with a single marketing program. Although the
marketer recognizes that not everyone will buy the product, a number sufficient
for profitable operations are expected to be attracted. This approach has also
been described as mass marketing, undifferentiated marketing, and product
differentiation.

The reasoning behind market aggregation is that although consumers may

differ, they are sufficiently alike to approach as a homogeneous grouping for the
product under consideration. Market aggregation, therefore, presents a standard
product that differs little if any from competition, makes heavy use of mass
promotion, and attempts to distinguish the product as being superior. By so
doing it seeks to have demand conform to what manufacturers are willing to
supply.

b) Market Segmentation

Perhaps the most important marketing decision a firm makes is the selection of
one or more market segments on which to focus. A market segment is a portion
of a larger market whose needs differ somewhat from the larger market. Since a
market segment has unique needs, a firm that develops a total product focused
solely on the needs of that segment will be able to meet that segment’s desires
better than a firm whose product or service attempts to meet the needs of
multiple segments.

To be viable, a segment must be large enough to be served profitably. To some

extent, each individual or household has unique needs for most products (a
preferred color combination, for example). The smaller the segment, the closer
the total product can be to that segment’s desires. Historically, the smaller the
segment, the more it costs to serve the segment. Thus, a tailor-made suit costs
more than a mass-produced suit. However, flexible manufacturing and
customized media are making it increasingly cost effective to develop products
and communications for small segments or even individual consumers.

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Market segmentation involves four steps:

1. Identifying product-related need sets

2. Group customers with similar need sets

3. Describing each group

4. Selecting an attractive segment to serve

MARKETING STRATEGY AND CONSUMER BEHAVIOR

Since all four of the applications of consumer behavior described above focus
on the development, regulation, or effects of marketing strategy, we will now
examine marketing strategy in more depth.

To survive in a competitive environment, an organization must provide target

customers more value than is provided by its competitors. Customer value is the
difference between all the benefits derived from a total product and all the costs
and risks of acquiring those benefits. For example, owning a car can provide a
number of benefits, depending on the person and the type car, including flexible
transportation, image, status, pleasure, comfort, and even companionship.
However, securing these benefits requires paying for the car, gasoline,
insurance, maintenance, and parking fees, as well as risking injury from an
accident, adding to environmental pollution, and dealing with traffic jams and
other frustrations. It is the difference between the total benefits and the total
costs that constitutes customer value.

Providing superior customer value requires the organization to do a better job of

anticipating and reacting to customer needs than the competition does. Since
customer value is delivered by the marketing strategy, the firm must develop its
general marketing strategy as it evaluates potential target markets.

Marketing strategy is basically the answer to the question: How will we provide
superior customer value to our target market? The answer to this question
requires the formulation of a consistent marketing mix. The marketing mix is
the product, price, communications, distribution, and services provided to the
target market. It is the combination of these elements that meets customer needs
and provides customer value.

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The Product

A Product is anything a consumer acquires or might acquire to meet a perceived

need. Consumers are generally buying need satisfaction, not physical product
attributes. As the former head of Revlon said, “in the factory we make
cosmetics, in the store we sell hope.” Thus, consumers don’t purchase quarter-
inch drill bits but the ability to create quarter-inch holes. Federal Express lost
much of its overnight letter delivery business not to UPS or Airborne but to fax
machines and the Internet because they could meet the same consumer needs
faster, cheaper, or more conveniently. Consider one analyst’s description of
McDonald’s product.

The source of McDonald’s pre-eminence is neither hamburgers nor fast-food

service. It’s giving a wide range of people the experience of a reliable break
from fatigue, stress, grown-up responsibility. More variety, fewer calories, even
enhanced freshness are not the principal criteria for success if what those people
seek is “a break today.”

We use the term product to refer to physical products and primary or core
services. Thus, an automobile is a product, as is a transmission overhaul or a
ride in a taxi. Over 15,000 new products and new versions of existing products
are introduced to supermarkets alone each year. Obviously, many of these will
not succeed. To be successful, products must meet the needs of the target
market better than the competition does.

Consider the Chinese computer market. A few years ago, a state-owned

company- Legend-appeared headed for oblivion as China opened its market to
Western firms. Today, it dominates all competitors. How? According to its
general manager, “We have much more insight into the needs of Chinese
customer.” These insights have been translated into bundling software products
for first-time buyers (most of the market) into its computers. These include
tutorials on such topics as using the computer, using the Internet, and organizing
home finances.

Communications

Marketing communications include advertising, the sales force, public relations,

packaging, and any other signal that the firm provides about itself and its
products. An effective communications strategy requires answers to the
following questions:

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• With whom, exactly, do we want to communicate? While most messages are
aimed at the target-market members, others are focused on channel members
or those who influence the target-market members. For example pediatric
nurses are often asked for advice concerning diapers and other nonmedical
infant care items. A firm marketing such items would be wise to
communicate directly with these individuals. Often it is necessary to
determine who within the target market should receive the marketing
message. For a children’s breakfast cereal, should the communications be
aimed at the children or the parents or both? The answer depends on the
target market and varies by country.
• What affect do we want our communications to have on the target audience?
Often a manager will state that the purpose of advertising and other
marketing communications is to increase sales. While this may be the
ultimate objective, the behavioral objective for most marketing
communications is often much more immediate. That is, it may seek to have
the audience learn something about the product, seek more information
about the product, like the product, recommend the product to others, feel
good about having bought the product, or a host of other communications
effects.
• What message will achieve the desired effect on our audience? What words,
pictures, and symbols should we use to capture attention and produce the
desired effect? Marketing messages can range from purely factual
statements to pure symbolism. The best approach depends on the situation at
hand. Developing an effective message requires a thorough understanding of
the meanings the target audience attaches to words and symbols, as well as
knowledge of the perception process.
• What means and media should we use to reach the target audience? Should
we use personal sales to provide information? Can we rely on the package to
provide needed information? Should we advertise in mass media, use direct
mail, or rely on consumers to find us on the Internet? If we advertise in mass
media, which media (television, radio, magazines, newspapers, Internet) and
which specific vehicles (television programs, specific magazines, websites,
and so forth) should we use? Answering these questions requires an
understanding both of the media that the target audiences use and of the
effect that advertising in those media would have on the product’s image.
• When should we communicate with the target audience? Should we
concentrate our communications near the time that purchases tend to be
made or evenly throughout the week, month, or year? Do consumers seek
information shortly before purchasing our product? If so, where? Answering
these questions requires knowledge of the decision process used by the
target market for this product.
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Price

Price is the amount of money one must pay to obtain the right to use the
product. One can buy ownership of a product or, for many products, limited
usage rights (i.e., one can rent or lease the product such as a video). Economists
often assume that lower prices for the same product will result in more sales
than higher prices. However, price sometimes serves as a signal of quality. A
product priced “too low” might be perceived as having low quality. Owning
expensive items also provides information about the owner. If nothing else, it
indicates that the owner can afford the expensive item. This is a desirable
feature to some consumers. Therefore, setting a price requires a thorough
understanding of the symbolic role that price plays for the product and target
market in question.

It is important to note that the price of a product is not the same as the cost of
the product to the customer. Consumer cost is everything the consumer must
surrender in order to receive the benefits of owning/using the product. As
described earlier, the cost of owning/using an automobile includes insurance,
gasoline, maintenance, finance charges, license fees, time and discomfort while
shopping for the car, and perhaps even discomfort about increasing pollution, in
addition to the purchase price. One of the ways firms seek to provide customer
value is to reduce the nonprime costs of owning or operating a product. If
successful, the total cost to the customer decreases while the revenue to the
marketer stays the same or even increases. Part of this consideration is the risk
perceived by the consumer in investing in the product

Distribution

Distribution, having the product available where target customers can buy it, is
essential to success. Only in rare cases will customers go to much trouble to
secure a particular brand. Obviously, good channel decisions require a sound
knowledge of where target customers shop for the product in question, as the
following example shows:

Huffy corp., a $700 million bicycle manufacturer, did careful research before
launching a new bicycle called cross Sport. The new bike was a cross between a
mountain bike and the traditional thin-framed 10-speed bicycle. Focus groups
and product concept tests revealed strong consumer acceptance. Huffy quickly
launched the $159Cross Sport through its strong mass distribution channels
such as Kmart and Toys “R” Us. Unfortunately, the fairly serious adult rider
that these bikes targeted demands individual sales attention by knowledgeable
salespeople. Such salespeople are found at specially bike shops, not at mass
retailers. As Huffy’s president said: “It was a $5 million mistake.”
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Service

Earlier, we defined product to include primary or core services such as haircuts,

car repairs, and medical treatments. Here, service refers to auxiliary or
peripheral activities that ate performed to enhance the primary product or
service. Thus, we would consider car repair to be a product (primary service),
while free pickup and delivery of the car would be an auxiliary service.
Although many texts do not treat service as a separate component of the
marketing mix, we do because of the critical role it plays in determining market
share and relative price in competitive markets. A firm that does not explicitly
manage its auxiliary services is at a competitive disadvantage.

Auxiliary services cost money to provide. Therefore, it is essential that the firm
furnish only those services that provide value to the target customers. Providing
services that customers do not value can result in high costs and high prices
without a corresponding increase in customer value.

CONSUMER DECISIONS

The consumer decision process intervenes between the marketing strategy (as
implemented in the marketing mix) and the outcomes. That is, the outcomes of
the firm’s marketing strategy are with determined by its interaction with the
consumer decision process. The firm can succeed only if consumers see a need
that its product can solve, become aware of the product and its capabilities,
decide that it is the best available solution, proceed to it, and become satisfied
with the results of the purchase. A significant part of this entire text is devoted
an understanding of the consumer decision process.

Consumer Purchase Decision Process

The process may be viewed as starting when the consumer engages in problem
recognition. It occurs when the consumer is activated by awareness of a
sufficient difference between their actual state of affairs and their concept of the
ideal situation. If an internal search does not provide sufficient information
about products, or how to evaluate them, the consumer continues with a more
involved external search for information. This result in exposure to numerous
informational inputs called stimuli, which can arise from a variety of sources,
including advertisements, printed product reviews, and comments from friends.
24
Any informational stimuli are subject to information-processing activities which
the consumer uses to derive meaning from stimuli. This process involves
allocating attention to available stimuli, deriving meaning from these stimuli,
and holding this meaning in what is termed ‘short-term memory’, where it can
be retained briefly to allow further processing.

The alternative-evaluation phase, involves comparing the information gained in

the search process for alternative products and brands to the product judging
criteria or standards the consumer has developed. When such comparison leads
to favorable evaluations, the consumer is likely to develop a purchase intention
toward that alternative receiving the most favorable evaluation.

From the above figure, a purchasing process usually follows strong purchase
intentions

This process involves a series of selections, including the type of retail outlet as
well as the specific brand or service to use. The consumer’s purchase then leads
to various outcomes. One such outcome is satisfaction as a result of direct
experience in using the brand. Satisfaction will affect the consumer’s beliefs
about the brand. Other outcomes are dissatisfaction and post sale doubt. These
can generate a heightened desire for additional information and influence
subsequent problem recognition. In both cases, post purchase experiences result
in feedback to the problem-recognition stage.

OUTCOMES

Firm outcomes

Product position

The most basic outcome for a firm of a marketing strategy is its product
position-an image of the product or brand in the customer’s mind relative to
competing products and brands. This image consists of a set of beliefs, pictorial
representations, and feelings about the product or brand. It does not require
purchase or use for it to develop. It is determined by communications about the
brand from the firm and other sources, as well as by direct experience with it.
Most marketing firms specify the product position they want their brands to
have and measure these positions on an ongoing basis. This is because a brand
whose position matches the desired position of a target market is likely to be
purchased when a need for that product arises.

25
Sales
Sales are a critical outcome, as they produce the revenue necessary for the firm
to continue in business. Therefore, virtually all firms evaluate the success of
their marketing programs in terms of sales. As we have seen, sales are likely to
occur only if the initial consumer analysis was correct and if the marketing mix
matches the consumer decision process.
Customer Satisfaction
Marketers have discovered that it is generally more profitable to maintain
existing customers than to replace them with new customers. Retaining current
customers requires that they be satisfied with their purchase and use of the
product, Thus customer satisfaction is a major concern of marketers.
Convincing consumers that your brand offers superior value is necessary in
order to make the initial sale. Obviously, one must have a thorough
understanding of the potential consumers’ needs and of their information
acquisition process to succeed at this task. However, creating satisfied
customer, and thus future sales, requires that customers continue to believe that
your brand meets their needs and offers superior value after they have used it.
You must deliver as much or more value than your customers initially expected,
and it must be enough to satisfy their needs. This requires an even greater
understanding of consumer behavior Honda’s recent efforts in this are described
below:
Honda had the factory workers who actually assemble the cars as well as
marketing mangers conduct telephone interviews with over 47,000 Accord
owners. The interviews sought to determine customer satisfaction levels with all
aspects of the Accord as well as ideas for improvements. The interviews were
conducted by those who would have to make any necessary changes.
Individual Outcomes
Need Satisfaction
The most obvious outcome of the consumption process for an individual,
whether or not a purchase is made, is some level of satisfaction of the need that
initiated the consumption process. This can range from none (or even negative
if a purchase increases the need rather than reduces it) to complete. Two key
processes are involved-the actual need fulfillment and the perceived need
fulfillment. These two might take a food supplement because they believe it is
enhancing their health while in reality it could have no direct health effects or
even negative effects. One objective of government regulation and a frequent
goal of consumer groups is to ensure that consumers can adequately judge the
extent to which products are meeting their needs.
26
Injurious Consumption

While we tend to focus on the benefits of consumption, we must remain aware

that consumer behavior has a dark side. Injurious consumption occurs when
individuals or groups made consumption decisions that have negative
consequences for their long-run well-being.

For most consumers, fulfilling one need affects their ability to fulfill others due
to either financial or time constraints. For example, some estimates indicate that
most Americans are not saving at a level that will allow them to maintain a
lifestyle near their current one when they retire. The cumulative impact of many
small decisions to spend financial resources to meet needs now will limit their
ability to meet what may be critically after retirement.

For other consumers, readily available credit, unrelenting advertising, and

widespread, aggressive merchandising result in a level of expenditures that
cannot be sustained by their income. The result is often financial distress,
delayed or bypassed medical or dental care, family stress, and inadequate
resources for proper child care, bankruptcy, or even homelessness.

Cigarette consumption is encouraged by hundreds of millions of dollars in

marketing expenditures, as is the consumption of alcoholic beverages, snacks
with high sugar or fat content, and other potentially harmful products. These
expenditures cause some people to consume these products or to consume more
of them... Some of these people, and their families, in turn are then harmed by
this consumption.

Companies are not the only entities that promote potentially harmful products.
Most states in the United States now promote state-sponsored gambling, which
has caused devastating financial consequences for some. The following quote
indicates the magnitude of the problem:

Every year over 10 million American consumers suffer financial losses from
their addiction to gambling… There are currently 10 million alcoholics and 80
million cigarette smokers in the United States… Every year 25,000 people die
as a result of alcohol related traffic accidents… All of these disturbing and
disturbed between behaviors result from consumption gone wrong.

While these are issues we should be concerned with and we will address
throughout this text, we should also note that alcohol consumption seems to
have arisen simultaneously with civilization and evidence of gambling is nearly
as old. Consumers smoked and chewed tobacco long before mass media or
advertising as we know it existed, and illegal drug consumption continues to
grow worldwide despite the absence of large scale marketing, or at least
27
advertising. Thus, though marketing activities based on knowledge of consumer
behavior undoubtedly exacerbate some forms of injurious consumption, they are
not the sole cause and, as we will see shortly, may also be part of the cure.

Society Outcomes

Economic Outcomes

The cumulative impact of consumers’ purchase decisions, including the

decision to forgo consumption, is a major determinant of the state of a given
country’s economy. Their decisions on whether to buy or save affect economic
growth, the availability and cost of capital, employment levels, and so forth.
The types of products and brands purchased influence the balance of payments,
industry growth rates, and wage levels. Decisions made in one society,
particularly large wealthy societies like the United States, Western Europe, and
Japan have a major impact on the economic health of many other countries. A
recession in the United States or a strong shift toward purchasing only
American-made products would have profound negative consequences on the
economies of many other countries, both developed and developing.

Physical Environment outcomes

Consumers make decision that have a major impact on the physical

environments of both own and other societies. The cumulative effect of
American consumers decisions to rely on relatively large private cars rather than
mass transit in significant air pollution in American cities as well as the
consumption of nonrenewable resources from other countries. The decisions of
people in most developed and in many developing economies to consume meat
as a primary source of protein result in the clearing of rain forests for grazing
land, the pollution of many watersheds due to large-scale feedlots, and an
inefficient use of grain, water, and energy to produce protein. It also appears to
produce health problems for many consumers. The destruction of the rain
forests and other critical habitat areas receives substantial negative publicity.
However, these resources are being used because of consumer demand, and
consumer demand consists of the decisions you and I and our families and our
friends make!

28
Social Welfare

Consumer decisions affect the general social welfare of a society. Decisions

concerning how much to spend for private goods (personal purchases) rather
than public goods (support for public education, parks, health care, and so forth)
are generally made indirectly by consumers’ elected representatives. These
decisions have a major impact on the overall quality of life in n a society.

Injurious consumption, as described above, affects society as well as the

individuals involved. The social costs of smoking-induced illnesses, alcoholism,
and drug abuse are staggering. To the extent that marketing activities increase or
decrease injurious consumption, they have a major impact on the social welfare
of a society.

However, the same authors conclude: “Although these problems appear

daunting, they are all problems that are solvable through altruistic [social]
marketing.” Thus, marketing and consumer behavior can both aggravate and
reduce serious social problems.

Factors influencing Consumer behaviour

Consumer behavior refers to the selection, purchase and consumption of goods

and services for the satisfaction of their wants. There are different processes
involved in the consumer behavior. Initially the consumer tries to find what
commodities he would like to consume, then he selects only those commodities
that promise greater utility. After selecting the commodities, the consumer
makes an estimate of the available money which he can spend. Lastly, the
consumer analyzes the prevailing prices of commodities and takes the decision
about the commodities he should consume. Meanwhile, there are various other
factors influencing the purchases of consumer such as social, cultural, personal
and psychological. The explanation of these factors is given below.

29
 1. Cultural Factor

2. Social Factor

3. Personal Factor

4. Psychological Factor.

1. Cultural Factor :-

Cultural factor divided into three sub factors (i) Culture (ii) Sub Culture (iii)
Social Class

Culture:-

The set of basic values perceptions, wants, and behaviors learned by a member
of society from family and other important institutions. Culture is the most basic
cause of a person’s wants and behavior. Every group or society has a culture,
and cultural influences on buying behavior may vary greatly from country to
country.

Sub Culture:-

A group of people with shared value systems based on common life experiences
and situations. Each culture contains smaller sub cultures a group of people with
shared value system based on common life experiences and situations. Sub
culture includes nationalities, religions, racial group and geographic regions.
Many sub culture make up important market segments and marketers often
design products.

Social Class:-

Almost every society has some form of social structure, social classes are
society’s relatively permanent and ordered divisions whose members share
similar values, interests and behavior.

2. Social Factors:-

A consumer’s behavior also is influenced by social factors, such as the (i)

Groups (ii) Family (iii) Roles and status

Groups :-

Two or more people who interact to accomplish individual or mutual goals.

A person’s behaviors are influenced by many small groups. Groups that have a
direct influence and to which a person belongs are called membership groups.
30
Some are primary groups includes family, friends, neighbors and coworkers.
Some are secondary groups, which are more formal and have less regular
interaction. These include organizations like religious groups, professional
association and trade unions.

Family:-

Family members can strongly influence buyer behavior. The family is the most
important consumer buying organization society and it has been researched
extensively. Marketers are interested in the roles, and influence of the husband,
wife and children on the purchase of different products and services.

Roles and Status :-

A person belongs to many groups, family, clubs, and organizations. The

person’s position in each group can be defined in terms of both role and status.
For example. M & “X” plays the role of father, in his family he plays the role of
husband, in his company, he plays the role of manager, etc. A Role consists of
the activities people are expected to perform according to the persons around
them.

3. Personal Factors:-

It includes i) Age and life cycle stage (ii) Occupation (iii) Economic situation
(iv) Life Style (v) Personality and self concept.

Age and Life cycle Stage:- People change the goods and services they buy over
their lifetimes. Tastes in food, clothes, furniture, and recreation are often age
related. Buying is also shaped by the stage of the family life cycle.

Occupation :-

A person’s occupation affects the goods and services bought. Blue collar
workers tend to buy more rugged work clothes, whereas white-collar workers
buy more business suits. A Co. can even specialize in making products needed
by a given occupational group. Thus, computer software companies will design
different products for brand managers, accountants, engineers, lawyers, and
doctors.

Economic situation:-

A person’s economic situation will affect product choice

31
Life Style:-

Life Style is a person’s Pattern of living, understanding these forces involves

measuring consumer’s major AIO dimensions .i.e. activities (Work, hobbies,
shopping, support etc) interest (Food, fashion, family recreation) and opinions
(about themselves, Business, Products)

Personality and Self concept:-

Each person’s distinct personality influences his or her buying behavior.

Personality refers to the unique psychological characteristics that lead to
relatively consistent and lasting responses to one’s own environment.

4. Psychological Factors:-

It includes these Factors.

i) Motivation (ii) Perception (iii) Learning (iv) Beliefs and attitudes

Motivation:-

Motive (drive) a need that is sufficiently pressing to direct the person to seek
satisfaction of the need

Perception :-

The process by which people select, Organize, and interpret information to form
a meaningful picture of the world.

Learning:-

Changes in an individual’s behavior arising from experience.

Beliefs and attitudes:-

Belief is a descriptive thought that a person holds about something Attitude, a

Person’s consistently favorable or unfavorable evaluations, feelings, and
tendencies towards an object or idea

32
 UNIT II

CONSUMER BEHAVIOR MODELS

2.1 Introduction

The theories of consumer decision-making process assume that the consumer’s

purchase decision process consists of steps through which the buyer passes in
purchasing a product or service. However, this might not be the case. Not
every consumer passed through all these stages when making a decision to
purchase and in fact, some of the stages can be skipped depending on the type
of purchases.

The reasons for the study of consumer’s helps firms and organizations improve
their marketing strategies by understanding issues such as:

• The psychology of how consumers think, feel, reason, and select

between different alternatives (e.g., brands, products);
• The psychology of how the consumer is influenced by his or her
environment (e.g., culture, family, signs, media);
• The behavior of consumers while shopping or making other marketing
decisions;

• Limitations in consumer knowledge or information processing abilities

influence decisions and marketing outcome;

• How consumers’ motivation and decision strategies differ between

products, that differ in their level of importance or interest that they
entail for the consumer; and
• How marketers can adapt and improve their marketing campaigns and
marketing strategies to more effectively reach the consumer.
1.2 Consumer Behavior

The study of consumer behavior focuses on how individuals make decisions to

spend their available resources (time, money, effort) on consumption-related
items (Schiff man and Kanuk , 1997). The field of consumer behavior covers a
lot of ground. According to Solomon (1996), consumer behavior is a study of
the processes involved when individuals or groups select, purchase, use, or
dispose of products, services, ideas, or experiences to satisfy needs and desires.

The official definition of consumer behavior given by Belch (1998) is ‘the

process and activities people engage in when searching for, selecting,
purchasing, using, evaluating, and disposing of products and services so as to
satisfy their needs and desires’. Behavior occurs either for the individual, or in
33
the context of a group, or an organization. Consumer behavior involves the use
and disposal of products as well as the study of how they are purchased.
Product use is often of great interest to the marketer, because this may influence
how a product is best positioned or how we can encourage increased
consumption.

Anderson (1965) proposed one of the earliest models of consumer behavior.

This model is shown in the following figure. The model recognizes the
importance of information in the consumer decision-making process. It also
emphasizes the importance of consumer attitudes although it fails to consider
attitudes in relation to repeat purchase behavior.

34
35
A second model, which concentrates on the buying decision for a new product,
was proposed by Nicosia (1976). This model is shown in Figure 2.2. The model
concentrates on the firm's attempts to communicate with the consumer, and the
consumers' predisposition to act in a certain way. These two features are
referred to as Field One. The second stage involves the consumer in a search
evaluation process, which is influenced by attitudes. This stage is referred to as
Field Two. The actual purchase process is referred to as Field Three, and the
post-purchase feedback process is referred to as Field Four. This model was
criticized by commentators because it was not empirically tested ( Zelman ,
Pinson and Angel man , 1973), and because of the fact that many of the
variables were not defined ( Lunn , 1974).

Perhaps, the most frequently quoted of all consumer behavior models is the
Howard- Sheth model of buyer behavior, which was developed in 1969. This
model is shown in Figure 2.3. The model is important because it highlights the
importance of inputs to the consumer buying process and suggests ways in
which the consumer orders these inputs before making a final decision. The
Howard- Sheth model is not perfect as it does not explain all buyer behavior. It
is however, a comprehensive theory of buyer behavior that has been developed
as a result of empirical research (Horton, 1984).

Schiff man and Kanuk (1997) mentioned that many early theories concerning
consumer behavior were based on economic theory, on the notion that
individuals act rationally to maximize their benefits (satisfactions) in the
purchase of goods and services. A consumer is generally thought of as a person
who identifies a need or desire, makes a purchase, and then disposes of the
product during the three stages in the consumption process in Figure2.2
(Solomon, 1996)

2.2.1 NICOSIA MODEL

This model focuses on the relationship between the firm and its potential
consumers. The firm communicates with consumers through its marketing
messages (advertising), and the consumers react to these messages by
purchasing response. Looking to the model we will find that the firm and the
consumer are connected with each other, the firm tries to influence the
consumer and the consumer is influencing the firm by his decision.

36
Figure 2.2 Nicosia Model of Consumer Decision Process

Source: Nicosia, (1976).

The Nicosia model is divided into four major fields:

Field 1: The consumer attitude based on the firms’ messages.

The first field is divided into two subfields.

The first subfield deals with the firm’s marketing environment and
communication efforts that affect consumer attitudes, the competitive
environment, and characteristics of target market. Subfield two specifies the
consumer characteristics e.g., experience, personality, and how he perceives the
promotional idea toward the product in this stage the consumer forms his
attitude toward the firm’s product based on his interpretation of the message.

Field 2: search and evaluation

The consumer will start to search for other firm’s brand and evaluate the firm’s
brand in comparison with alternate brands. In this case the firm motivates the
consumer to purchase its brands.

Field 3: The act of the purchase

The result of motivation will arise by convincing the consumer to purchase the
firm products from a specific retailer.

37
Field 4: Feed back

This model analyses the feedback of both the firm and the consumer after
purchasing the product. The firm will benefit from its sales data as a feedback,
and the consumer will use his experience with the product affects the
individuals attitude and predisposition’s concerning future messages from the
firm.
The Nicosia model offers no detail explanation of the internal factors, which
may affect the personality of the consumer, and how the consumer develops his
attitude toward the product. For example, the consumer may find the firm’s
message very interesting, but virtually he cannot buy the firm’s brand because it
contains something prohibited according to his beliefs. Apparently it is very
essential to include such factors in the model, which give more interpretation
about the attributes affecting the decision process.
2.2.2 HOWARD-SHETH MODEL
This model suggests three levels of decision making:
1. The first level describes the extensive problem solving. At this level the
consumer does not have any basic information or knowledge about the
brand and he does not have any preferences for any product. In this
situation, the consumer will seek information about all the different
brands in the market before purchasing.
2. The second level is limited problem solving. This situation exists for
consumers who have little knowledge about the market, or partial
knowledge about what they want to purchase. In order to arrive at a
brand preference some comparative brand information is sought.
3. The third level is a habitual response behavior. In this level the
consumer knows very well about the different brands and he can
differentiate between the different characteristics of each product, and he
already decides to purchase a particular product. According to the
Howard-Sheth model there are four major sets of variables; namely:
Inputs.
These input variables consist of three distinct types of stimuli (information
sources) in the consumer’s environment. The marketer in the form of product or
brand information furnishes physical brand characteristics (significative stimuli)
and verbal or visual product characteristics (symbolic stimuli). The third type is
provided by the consumer’s social environment (family, reference group, and

38
social class). All three types of stimuli provide inputs concerning the product
class or specific brands to the specific consumer.

a) Perceptual and Learning Constructs.

The central part of the model deals with the psychological variables involved
when the consumer is contemplating a decision. Some of the variables are
perceptual in nature, and are concerned with how the consumer receives and
understands the information from the input stimuli and other parts of the model.
For example, stimulus ambiguity happened when the consumer does not
understand the message from the environment. Perceptual bias occurs if the
consumer distorts the information received so that it fits his or her established
needs or experience. Learning constructs category, consumers’ goals,
information about brands, criteria for evaluation alternatives, preferences and
buying intentions are all included. The proposed interaction In between the
different variables in the perceptual and learning constructs and other sets give
the model its distinctive advantage.

b) Outputs

The outputs are the results of the perceptual and learning variables and how the
consumers will response to these variables (attention, brand comprehension,
attitudes, and intention).
39
c) Exogenous(External) variables Exogenous variables are not directly part
of the decision-making process. However, some relevant exogenous variables
include the importance of the purchase, consumer personality traits, religion,
and time pressure.

The decision-making process, which Howard-Sheth Model tries to explain,

takes place at three Inputs stages: Significance, Symbolic and Social stimuli. In
both significative and symbolic stimuli, the model emphasizes on material
aspects such as price and quality. These stimuli are not applicable in every
society. While in social stimuli the model does not mention the basis of
decision-making in this stimulus, such as what influence the family decision?
This may differ from one society to another.

Finally, no direct relation was drawn on the role of religion in influencing the
consumer’s decision-making processes. Religion was considered as external
factor with no real influence on consumer, which give the model obvious
weakness in anticipation the consumer decision.

2.2.3 ENGEL-KOLLAT-BLACKWELL MODEL

This model was created to describe the increasing, fast-growing body of

knowledge concerning consumer behavior. This model, like in other models,
has gone through many revisions to improve its descriptive ability of the basic
relationships between components and sub-components, this model consists of
four stages.

First stage: decision-process stages

The central focus of the model is on five basic decision-process stages: Problem
recognition, search for alternatives, alternate evaluation (during which beliefs
may lead to the formation of attitudes, which in turn may result in a purchase
intention) purchase, and outcomes.

But it is not necessary for every consumer to go through all these stages; it
depends on whether it is an extended or a routine problem-solving behavior.

40
 Information Variables Influencing
Input Decision Process
Processing Problem Precision Process
Exposure Individual
Recognition
Internal Characteristic
Search
s:
search
Beliefs
Attention

Stimuli: Motives
M
Marketer- Alternative Values
Attitude

Dominated, E evaluation Social

Lifestyle
Comprehension
other Influences
Personality
Perception Intention :
M

Yielding/
O
Purchase Culture
Acceptance Situationa
Reference
l
R
Retention group
Influences
Y Outcomes
External

search Family

Dissatisfaction Satisfaction

Figure [Link] Engel-Kollat-Blackwell Model of Consumer Behavior.

Source: Engel , Blackwell, and Miniard,(1995) page No 95

Second stage: Information input

At this stage the consumer gets information from marketing and non-marketing
sources, which also influence the problem recognition stage of the decision-
making process. If the consumer still does not arrive to a specific decision, the
search for external information will be activated in order to arrive to a choice or
in some cases if the consumer experience dissonance because the selected
alternative is less satisfactory than expected.

41
Third stage: information processing

This stage consists of the consumer’s exposure, attention, perception,

acceptance, and retention of incoming information. The consumer must first be
exposed to the message, allocate space for this information, interpret the stimuli,
and retain the message by transferring the input to long-term memory.

Fourth stage: variables influencing the decision process

This stage consists of individual and environmental influences that affect all
five stages of the decision process. Individual characteristics include motives,
values, lifestyle, and personality; the social influences are culture, reference
groups, and family. Situational influences, such as a consumer’s financial
condition, also influence the decision process.

This model incorporates many items, which influence consumer decision-

making such as values, lifestyle, personality and culture. The model did not
show what factors shape these items, and why different types of personality can
produce different decision-making? How will we apply these values to cope
with different personalities? Religion can explain some behavioral
characteristics of the consumer, and this will lead to better understanding of the
model and will give more comprehensive view on decision-making.

2.2.4 Bettman’s Information Processing Model of Consumer Choice

Bettman (1979) in his model describes the consumer as possessing a limited

capacity for processing information. He implicate that the consumers rarely
analyze the complex alternatives in decision making and apply very simple
strategy.

In this model there are seven major stages.

Stage No. 1: Processing capacity

In this step he assumes that the consumer has limited capacity for processing
information, consumers are not interested in complex computations and
extensive information processing. To deal with this problem, consumers are
likely to select choice strategies that make product selection an easy process.

Stage No. 2: Motivation

Motivation is located in the center of Bettman model, which influence both the
direction and the intensity of consumer choice for more information in deciding

42
 Motivation

Goal

hierarchy Scanner interrupt

Attention Perceptual and interpretation

encoding interrupt and

Processing Memory Scanner
Information Interrupt
mechanisms response
interpretation
capacity acquisition search and
External
and
and search interrupt
response
evaluation Scanner
mechanisms Interrupt

Decision and interpretation

Processes Consumption Scanner

interrupt Interrupt
and

and and
mechanisms interpretation
response

learning Perceptual
Figure 2.5 Bettman Information-Processing Model interrupt
of Consumer Choice and

processes mechanisms response

Source: Bettman . (1979). Pp 402

Between the alternatives Motivation is provided with hierarchy of goals’

mechanism that provides a series of different sub-goals to simplify the choice
selection. This mechanism suggests that the consumers own experience in a
specific area of market and he doesn’t need to go through the same hierarchy
every time to arrive at a decision, which make this mechanism serves as an
organizer for consumer efforts in making a choice. No concern was given on
religious motives, and how religion may motivate the consumer in his decision.
Most of the general theories of motivation such as Maslow’s hierarchy of needs
(1970) emphasizes self-achievement, the need for power, and the need for
affiliation.

Stage No. 3: Attention and perceptual encoding.

The component of this step is quite related to the consumer's goal hierarchy.
There are two types of attention; the first type is voluntary attention, which is a
conscious allocation of processing capacity to current goals. The second is
involuntary attention, which is automatic response to disruptive events (e.g.,
newly acquired complex information). Both different types of attention

43
influence how individuals proceed in reaching goals and making choices. The
perceptual encoding accounts for the different steps that the consumer needs to
perceive the stimuli and whether he needs more information.

Stage No. 4: Information acquisition and evaluation

If the consumer feels that the present information is inadequate, he will start to
look for more information from external sources. Newly acquired information is
evaluated and its suitability or usefulness is assessed. The consumer continues
to acquire additional information until all relevant information has been secured,
or until he finds that acquiring additional information is more costly in terms of
time and money.

Stage No. 5: Memory

In this component the consumer keeps all the information he collects, and it will
be the first place to search when he need to make a choice. If this information is
not sufficient, no doubt he will start looking again for external sources.

Stage No. 6: Decision Process

This step in Bettman’s model indicates that different types of choices are
normally made associated with other factors, which may occur during the
decision process. Specifically, this component deals with the application of
heuristics or rules of thumb, which are applied in the selection and evaluation of
specific brand. These specific heuristics a consumer uses are influenced by both
individual factors (e.g., personality differences) and situational factors (e.g.,
urgency of the decision); thus it is unlikely that the same decision by the same
consumer will apply in different situation or other consumer in the same
situation.

Stage No. 7: Consumption and Learning Process

In this stage, the model discusses the future results after the purchase is done.
The consumer in this step will gain experience after evaluating the alternative.
This experience provides the consumer with information to be applied to future
choice situation. Bettman in his model emphasize on the information processing
and the capacity of the consumer to analyze this information for decision
making, but no explanation was given about the criteria by which the consumer
accepts or refuses to process some specific information.

44
 2.2.5 SHETH-NEWMAN GROSS MODEL OF CONSUMPTION
VALUES

According to this model, there are five consumption values influencing

consumer choice behavior. These are functional, social, conditional, emotional,
and epistemic values. Any or all of the five consumption values may influence
the decision. Various disciplines (including economics, sociology, several
branches of psychology, marketing and consumer behavior) have contributed
theories and research findings relevant to these values, ( Sheth et al. 1991).
Each consumption value in the theory is consistent with various components of
models advanced by Maslow (1970), Katona (1971), Katz (1960), and Hanna
(1980). Five consumption values form the core of this model

Functional Value Conditional Value Social

Value

Consumer Choice Behavior

Emotional Value Epistemic

Value

Figure 2-6: The five values influencing Consumer Choice Behavior

Source: Sheth, Newman, and Gross (1991) Pp159-170

45
The first value: Functional value

By Sheth et al. the functional value of an alternative is defined as:

"The perceived utility acquired from an alternative 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."

Traditionally, functional value is presumed to be the primary driver of consumer

choice. This assumption underlies economic utility theory advanced by
Marshall (1890) and Stigler (1950) and popularly expressed in terms of
"rational economic man." An alternative’s functional value may be derived from
its characteristics or attributes, (Ferber, 1973) such as reliability, durability, and
price. For example, the decision to purchase a particular automobile may be
based on fuel economy and maintenance record.

By identifying the dominant function of a product (i.e., what benefits it

provides), marketers can emphasize these benefits in their communication and
packaging. Advertisements relevant to the function prompt more favorable
thoughts about what is being marketed and can result in a heightened
preferences for both the ads and the product

Katz (1960) developed the functional theory of attitudes. He identifies four

attitudes based on the functional values.

1) Utilitarian function.
The utilitarian function is related to the basic principles of reward and
punishment. We develop some of our attitude toward products simply based on
whether these products provide pleasure or pain.
2) Value-expressive function.
Attitude that performs a value-expressive function expresses the consumers’
central values or self-concept. A person forms a product attitude not because of
its objective benefits, but because of what the product says about him or her as a
person.
3) Ego-defensive function.
Attitude formed to protect the person, either from external threats or internal
feelings, perform an ego-defensive function. Example of this function is
deodorant campaigns that stress the dire, embarrassing consequences of being
caught with underarm odor in public.
46
4) Knowledge function.

Some attitude is formed as a result of a need for order, structure, or meaning.

This need is often present when a person is in an ambiguous situation or is
confronted with a new product.

The second value: Social value

Sheth et al. defined social value of an alternative as:

"The perceived utility acquired from an alternative 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 choice imagery."

Social imagery refers to all relevant primary and secondary reference groups
likely to be supportive of the product consumption. Consumers acquire positive
or negative stereotypes based on their association with varied demographic (age,
sex, religion), socioeconomic (income, occupation), cultural/ethnic (race,
lifestyle), or political, ideological segments of society.

Choices involving highly visible products (e.g., clothing, jewelry) and good
service to be shared with others (e.g., gifts, products used in entertaining) are
often driven by social values. For example, a particular make of automobile is
being chosen more for the social image evoked than for its functional
performance. Even products generally thought to be functional or utilitarian, are
frequently selected based on their social values.

The third value: Emotional value

Sheth et al. defined emotional value of an alternative as:

"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 those feelings. Emotional values are
measured on a profile of feelings associated with the alternative."

Consumption emotion refers to the set of emotional responses elicited

specifically during product usage or consumption experience, as described
either by the distinctive categories of emotional experience and expression (e.g.,
joy, anger, and fear) or by the structural dimensions underlying emotional
categories such as pleasantness/ unpleasantness, relaxation/action, or
calmness/excitement. Goods and services are frequently associated with
emotional responses (e.g. the fear aroused while viewing horror movie).
47
Emotional value is often associated with aesthetic alternatives (e.g. religion,
causes). However, more tangible and seemingly utilitarian products also have
emotional values. For example, some foods arouse feeling of comfort through
their association with childhood experiences, and consumers are sometimes said
to have "love affairs" with their cars.

A number of different attempts have been made to identify the various emotions
that people experience. Izard (1977) develops the taxonomy of affective
experience approach that describes the basic emotion that people feel. He
measures emotions using ten fundamental categories: interest, joy, surprise,
sadness, anger, disgust, contempt, fear, shame, and guilt. This approach has
been used extensively by consumer researchers, for example, Westbrook and
Oliver (1991).

The fourth value: Epistemic value

Sheth et al. defined epistemic value as:

"The perceived utility acquired from an alternatives capacity to arouse curiosity,

provide novelty, and/or satisfy a desire for knowledge. An alternative acquires
epistemic value by items referring to curiosity, novelty, and knowledge."

Epistemic issues refer to reasons that would justify the perceived satisfaction of
curiosity, knowledge, and exploratory needs offered by the product as a change
of pace (something new, different). Entirely new experience certainly provides
epistemic value. However, an alternative that provides a simple change of pace
can also be imbued with epistemic value. The alternative may be chosen
because the consumer is bored or satiated with his or her current brand (as in
trying a new type of food), is curious (as in visiting a new shopping complex),
or has a desire to learn (as in experiencing another culture).

The concept of epistemic values has been influenced by theory and by several
important areas of research. Exploratory, novelty seeking, and variety seeking
motives have been suggested to active product search, trial, and switching
behavior, (Howard and Sheth 1969). One of the most significant contributors to
the study of the optimal stimulation and arousal has been Berlyne (1970), who
contends that individuals are driven to maintain an optimal or intermediate level
of stimulation. Finally, Hirschman (1980) has advanced innovativeness, or a
consumer’ propensity to adopt new products.

48
The Fifth value: Conditional value

Sheth et al. defined the conditional value as:

"The perceived utility acquired by an alternative is 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."

An alternative’s utility will often depend on the situation. For example, some
products only have seasonal value (e.g., greeting cards), some are associated
with once in a life events (e.g., wedding dress), and some are used only in
emergencies (e.g., hospital services). Several areas of inquiry have also
influenced conditional value. Based on the concept of stimulus dynamism
advanced by Hall (1963), Howard (1969) recognized the importance of learning
that takes place as a result of experience with a given situation. Howard and
Sheth (1969) then extended Howard’s earlier work by defining the construct
inhibitors as noninternalized forces that impede buyers’ preferences. The
concept of inhibitors was more formally developed by Sheth (1974) in his
model of attitude-behavior relationship as anticipated situations and unexpected
events. Recognizing that behavior cannot be accurately predicted based on
attitude or intention alone, a number of researchers during the 1970s
investigated the predictive ability of situational factors (e.g., Sheth 1974).

The five consumption values identified by the theory make differential

contributions in specific choice contexts. For example, a consumer may decide
to purchase coins as an inflation hedge (functional value), and also realize a
sense of security (emotional value) from the investment. Social, epistemic, and
conditional values have little influence. Of course, a choice may be influenced
positively by all five consumption values For example, to a first-time home
buyer, the purchase of a home might provide functional value (the home
contains more space than the present apartment), social values (friends are also
buying homes), emotional values (the consumer feels secure in owning a home),
epistemic value (the novelty of purchasing a home is enjoyable), and
conditional value (starting a family).

49
 2.2.6 SOLOMON MODEL OF COMPARISON PROCESS

CONSUMER'S PERSPECTIVE MARKETER'S PERSPECTIVE

How does a consumer How are consumer

PREPURCHASE decide that he/she needs a attitudes toward products
ISSUES product? What are the best formed and/or changed?
sources of information to
learn more about What cues do consumers
use to infer which products
Isalternative
acquiring achoices?
product a How do situational factors,
PURCHASE ISSUES are superior to others?
stressful or pleasant such as time pressure or
experience? What does the store displays, affect the
purchase say about the consumer’s purchase
consumer? decision?
Does the product provide What determines whether
POSTPURCHASE pleasure or perform its a consumer will be satisfied
ISSUES intended function? with a product and
whether he/she will buy it
How is the product again?
eventually disposedprocess
Figure 2.7 Model of comparison of, and
what are the Does this person tell others
Figure 2.7 explains some of the issues that are addressed
environmental duringexperiences
about his/her each stage of
the consumption process. The ‘exchange’,
consequences of this act? in whichwith
twotheorproduct
more organizations
and affect
their purchase decisions?
or people give and receive something of value, is an integral part of marketing.
He also suggested that consumer behavior involves many different actors. The
purchaser and user of a product might not be the same person. People may also
act as influences on the buying processes. Organizations can also be involved
in the buying process. Much of marketing activity, they suggest, concentrates on
adapting product offerings to particular circumstances of target segment needs
and wants. It is also common to stimulate an already existing want through
advertising and sales promotion, rather than creating wants. The definitions and
models, which have been presented so far, have been from general marketing
theory. Tourism is, by its very nature, a service rather than a product, which
may have a considerable effect on consumer behavior.

2.2.7 Stimulus-Response Model of Buyer Behavior

Middleton (1994) presented an adapted model of consumer behavior tourism,

which was termed the stimulus-response model of buyer behavior. The model is
shown in Figure 2.8. This model is based on the four interactive components
with the central component identified as 'buyer characteristics and decision
process'

50
 Communication Buyer characteristics and Purchase
Stimulus Input channels decision process outputs
(response
Communication
)
filters Motivation

Range of Learning Demographic

Advertising economic and
competitive
Sales promotion social position
produced and
Brochures
marketed by
Personal selling Psychographic Product
the tourist
PR characteristic Brand
industry
Perception Price
Needs Outlet
Wants
Friends Goals
Family
Reference Experience Attitudes
Group

Post-purchase and
Experience
post-consumption feelings

Figure 2.8 a Stimulus-Response Model of Buyer Behavior

The model separates out motivators and determinants in consumer buying

behavior and also emphasizes the important effects that an organization can
have on the consumer buying process by the use of communication channels.
Schmoll (1977) quoted in Cooper et al. (1993), developed a model which travel
stimuli, including guide books, reports from other travelers and advertising and
promotion

• personal and social determinants of travel behavior including motivators,

desires and expectations
• external variables, including destination images, confidence in travel
trade intermediaries and constraints such as cost and time
• Characteristics and features of the service destination such as the
perceived link between cost and value and the range of attractions and
amenities offered.

51
2.2.8 Model of Travel-Buying Behavior Mathieson and Wall

Mathieson and Wall (1982) suggested a linear five-stage model of travel

buying behaviour, which is shown in Figure 2.9.

Information Travel
Travel Travel
Felt need/ collection decision
preparation satisfaction
travel and (choice
and travel outcome
desire evaluation between
experiences and
image alternatives)
evaluation

e 2.9 Model of Travel-Buying Behavior

2.2.9 Model of

2.2.10 Consumer Decision-Making Framework

Gilbert (1991) suggested a model for consumer decision-making in which is

shown in Figure 2.10 This model suggests that there are two levels of factors
that have an effect on the consumer. The first level of influences is close to the
person and includes psychological influence such as perception and learning.
The second level of influences includes those, which have been developed
during the socialization process and include reference groups and family
influences. All these models that have been adapted for tourism offer some into
the consumer behavior process involved during the purchase post-purchase
decision stages.

Socioeconomic Cultural
influences influences
Motivation or Perception
energizers

Consumer or

Personality/ Decision-maker Learning

attitude
Reference group Family
influences influences

Figure 2.10 Consumer Decision-Making Framework

52
2.2.10 Integrated Model of Self-Congruity and Functional Congruity in
Explaining and Predicting Travel Behaviour

A more encompassing approach to the understanding of CS/D can be found in

Sirgy's evaluative congruity models of consumer behavior (Sirgy 1983; Sirgy
and Tyagi 1986). Sirgy explains the theoretical position associated with CS/D in
terms of discrepancies between perceived and normative outcome levels.
According to his theory, satisfaction is a function of evaluative congruity, which
is a cognitive matching process in which a perception is compared to evoke
referent cognition for the purpose of evaluating a stimulus object/action.

The result of the cognitive process is postulated to produce either a motivational

or an emotional state. CS/D is viewed as an emotional state because it prompts
the consumer to evaluate alternative courses of action to reduce an existing
dissatisfaction state and/or to obtain future satisfaction state (Sirgy 1983; 1984;
Sirgy and Tyagi 1986). Further, CS/D is viewed as a function of one or more
congruities between perceptual (perceived value) and evoked referent (evoked
value) states.

Problem recognition (dissatisfaction) is the function of a directional discrepancy

between the valence level of the perceived performance of a good/service and
the valence level of a referent (standard of comparison or performance
expectation). The "negative incongruity" condition (a state of negative
performance perception and positive referent state) is hypothesized to produce
the second highest dissatisfaction or problem recognition, followed by "negative
congruity" (a state of negative performance perception and negative
performance expectation), "positive congruity" (a state of positive performance
perception and positive expectation) and "positive incongruity" (a state of
positive performance perception and negative performance expectation),
respectively.

The theory of self concept was supported in empirical studies involving

consumer evaluation of the automobile, typewriter, a bachelor's degree, and a
house (Sirgy 1984; 1987). Sirgy (1982b) further argues that product images
should be classified as being "functional" and "symbolic." The functional
images of a product include the physical benefits associated with the product,
whereas the symbolic images refer to the stereotypic personality images
consumers have of a specific product often expressed in terms of the typical
user image.

53
Relatedly, Sirgy (1982b) argues that CS/D is not only an evaluative function of
the consumer's expectation and performance evaluation, but it is also an
evaluative function of the consumer's self-image and product image congruity.
That is, the consumer's self-concept should be understood in order to truly
understand the individual's satisfaction or dissatisfaction. Self-concept, defined
as "the totality of the individual's thoughts and feelings having reference to
himself as an object," has been construed from a multi-dimensional perspective
(Rosenberg 1979).

The satisfaction level would be the lowest because the purchase of the product
serves no function to the maintenance of either the self-esteem or self-
consistency motives. Based on the review of literature on CS/D as related to the
evaluative congruity models and self-concept, a logical interpolation can be
drawn with respect to CS/D in tourism as related to the role of the tourist's
perception of destination images.

That is, CS/D in tourism is a function of both (1) the evaluative congruity of a
tourist's expectation of destination and his/her perceived outcome of the
destination experience; and (2) the evaluative congruity of a tourist's self-image
and his/her perception of the destination's value-expressive image. Deference to
him as an object," has been construed from a multi-dimensional perspective
(Rosenberg 1979).

For instance, the term "actual self" refers to how a person perceives one's self,
and "ideal self" refers to how a person presents one's self to others (Rosenberg
1979). The self-image/product image congruity model in essence describes the
effect of the cognitive matching process between value-expressive attributes of
a given product and the consumer self-concept on consumer decisions such as
product preference, purchase intentions, purchase behavior, product
satisfaction/dissatisfaction, and product loyalty (Sirgy 1982b).

The theory explains the effect of self-image congruence on consumer attitude

through the mediating effects of two self-concept motives: self-esteem and self-
consistency. According to the self-image/product-image congruity model, a
consumer's specific value-laden self-image belief interacts with a corresponding
value-laden product-image perception in terms of the typical user image in a
product purchase.

The result of such an interaction occurs in the form of the following four
congruity conditions.

54
First, a "positive self-image congruity,” occurs when there exists a state of
positive self-congruity (a low discrepancy between one's actual self-image and
the product image) and a state of positive ideal self-congruity (a low
discrepancy between one's ideal self-image and the product image). That is, a
product image matches up with one's actual self-image as well as with his/her
ideal self-image. Such a situation would result in high consumer satisfaction
because, by purchasing or identifying himself/herself with this product, the
consumer would reach an emotional state that enhances his/her self-esteem
motive and reinforces his/her self-consistency motive.

Second, a "positive self-image incongruity" condition occurs when there exists a

state of negative self-congruity (a high discrepancy between one's actual self-
image and the product image), but a state of positive ideal self-congruity (low
discrepancy between one's ideal self-image and the product image). In this
situation the individual might be motivated to purchase the product but his/her
satisfaction level would be moderate. This occurs because, while the purchase
would enhance one's self-esteem motive, the self-esteem motive would conflict
with his/her self-consistency motive.

Third, a "negative self-image incongruity" condition is the opposite of the

"positive self-image incongruity" condition. That is, there is a state of positive
self-congruity (low discrepancy between one's actual self-image and the product
image,) but a state of negative ideal self-congruity (high discrepancy between
one's ideal self-image and the product image). The situation again would result
in a moderate satisfaction level because the individual's self-consistency motive
would conflict with his/her self-esteem motive.

Finally, "negative self-image congruity" occurs when there exists negative self-
congruity (high discrepancy between one’s actual self-image and the product
image,) as well as negative ideal congruity (high discrepancy between his/her
ideal self-image and the product image.) The satisfaction level would be the
lowest because the purchase of the product serves no function to the
maintenance of either the self-esteem or self-consistency motives.

Model of self-congruity and travel behavior is depicted in Figure2.11 the model

posits that various aspects of the destination and its atmosphere are related to
the destination visitor image. The destination visitor image is then evaluated in
light of specific dimensions of the tourist’s self-concept to determine the degree
of self-congruity which is systematically related to travel behavior.

55
 Destination
Visitor Image
Self-
Congruity
Tourist Self-
Destination Congruity
Environment Self-Concept
Functional-
Congruity

Tourist Tourist
Perceived
Utilitarian Ideal
Destination Utilitarian
Destination
Attributes
Attributes

Figure 2.11 an Integrated Model of Self-Congruity and Functional

Congruity in Explaining and Predicting Travel Behaviour

2.2 Desiccation

Different models of consumer behavior describe satisfaction as the final output

of the decision process or incorporate it in the feedback mechanism linking
completed experiences to future behavior. For example; Nicosia (1976)
attributes the state of CS/D to the dominant interest in the "final act" of
consumers that is the purchase of product. Further, the concept of CS/D is
given greater emphasis in the works of McNeal (1973), Engel and Blackwell
(1982), and Howard and Sheth (1967, 1969, and 1973). In their consumer
behavior models, satisfaction is shown as the final output in the framework of
purchase decisions.

These buyer behavior models postulate that if the actual outcome of a product is
judged to be better than or equal to the expected, the buyer will feel satisfied.
If, on the other hand, actual outcome is judged not to be better than expected,
the buyer will be dissatisfied. This disconfirmation paradigm of CS/D can be
also found in the works of Suprenant (1977); Hunt (1977); and Oliver (1977,
1980).

56
The theory of self-concept advances the notion that every self-image has a value
association, which determines the degree of positive, or negative effect felt
when that self-image is activated. This value component associated with a
particular self-image replaces the traditional constructs of ideal self-image, ideal
social-image, etc. Correspondingly, every product image has also a value
component reflective of the affective intensity associated with attribute.

A specific value-laden self-image interacts with a corresponding value-laden

product image and the result occurs in the form of positive self-congruity
(match between a positive product image and a positive self-image), positive
self-incongruity (match between a positive product image and negative self-
image), negative self-incongruity (match between a negative product image and
a positive self-image), or negative self-congruity (match between a negative
product image and negative self-image). Sirgy [Link] (2000) added on further by
stating that tourists’ perception of the destination (type and quality of resorts,
prices, hotel ambiance, atmosphere, etc) is likely to influence the formation and
change of the destination visitor image. Given that self-concept is
multidimensional in nature (actual, ideal, social, ideal social self), at issue is the
particular dimension of the self-concept evoked in the psychological process of
self-congruity – the matching of the tourist’s self-concept with the destination
visitor image.

In addition to evaluating a destination by focusing on the symbolic (person-like)

attributes of the destination, tourists may also evaluate destinations based on the
destination’s functional or utilitarian attributes. The match between the
destination’s level of a utilitarian attribute and the tourist’s expectation of the
attribute is referred to as functional congruity – may also affect destination
travel and may be related to self-congruity.

IMPLICATIONS OF CONSUMER BEHAVIOR MODELS ON

MARKETING DECISIONS

Consumer behaviors control the type of marketing strategy that organizations

such as small businesses employ, so they conduct studies to determine which
strategies are likely to prove most effective. Small businesses need to know the
members of their target audience, what they want, where they are located and
how they'll react to product promotions. They gather this information via
surveys and studying data regarding the past behavior of consumers. Data is
obtained from a variety of sources such as marketing databases, sales
history and the Internet.

57
✓ Sales Forecasts

Organizations study past consumer behaviors to determine future sales. Sales

forecasts estimate the expected sales for a particular market during a specified
time period. Sales forecasts cannot be higher than the market potential and
usually fall short of expectations. Different methods exist for forecasting sales,
most of which revolve around obtaining information directly from past buyers.
Some examples of forecasting methods are quantitative and qualitative.
Quantitative forecasts predict the sales of products based on past results and
qualitative forecasts predict sales based on expert opinions in the field.

✓ Research Surveys

Research surveys are conducted for the purpose of studying consumer

behaviors. They help companies learn what consumers want, as well as how
they respond to advertising. They also help pinpoint potential problems. Some
examples of research surveys are new-product concept tests, product use tests
and brand name recognition. Organizations conduct surveys in person, on the
phone, through the mail and online. These surveys target specific population
groups who share a similar set of characteristics.

✓ Internet Research

Companies, including small businesses, use the Internet to conduct much of

their research, monitoring the Web-based behavior of consumers. Based on their
findings, organizations determine the right prices, attributes and sales
promotions for their products. They also reveal the optimal places and market
conditions in which to sell. The Internet is a cost-effective tool marketing
research tool because it pinpoints target areas and is flexible enough to adapt to
the changing demands of consumers.

✓ Market Sensing

Market sensing processes can help small businesses develop a competitive

advantage by giving them a deeper understanding of customers. Organizations
use different resources to study consumer behavior, and the process of
compiling that data into a marketing and management information database is
called market sensing. The database provides the framework for integrating
information and presenting it to management for decision-making purposes

58
 Unit –III

PSYCHOLOGICAL INFLUENCES ON CONSUMER BEHAVIOUR

As firms and markets have grown in size, many marketing decision makers have
lost direct contact with their consumers. Most marketers have had to turn to
consumer research. They are spending more money than ever to study
consumers, trying to learn more about consumer behavior. The company that
really understands how consumers will respond to different product features,
pries, and advertising appeals has a great advantage over its competitors.
Therefore, companies and academics have heavily researched the relationship
between marketing stimuli and consumer’s response.

PERSONAL CHARACTERISTICS AFFECTING CONSUMER

BEHAVIOR

Roles and status:

A person belongs to many groups- family, clubs, and organizations. The

person’s position in each group can be defined in terms of both role and status.
A role consists of the activities people are expected to perform according to the
persons around them. Each role carries a status reflecting the general esteem
given to it by society.

Personal factors:

A buyer’s decisions are also influenced by personal characteristics such as the

buyer’s age and life- cycle stage, occupation, economic situation, life style, and
personality and self- concept

Age and life –cycle state – people change the goods and services they buy over
their lifetimes. Buying is also shaped by the stage of the family life cycle- the
stages through which families might pass as they mature over time. Marketers
often define their target markets in terms of life- cycle stage and develop
appropriate products and marketing plans.

Occupation:

A person’s occupation affects the goods and services bought. Marketers try to
identify the occupational groups that have an above- average interest in their
products and services. A company can even specialize in making products
needed by a given occupational group.

59
Economic situation:

A person’s economic situation will greatly affect product choice. Marketers of

income- sensitive goods closely watch trends in personal income, savings, and
interest rates. If the economic indicators point to a recession, marketers can take
steps to redesign, reposition, and reprise their products.

Life style:

People coming from the same subculture, social class, and even occupation may
have quite different life styles. Life style is a person’s pattern of living as
expressed in his or her activities, interests, and opinions. Life style captures
something more than the person’s social class or personality. The life style
concept, when used carefully, can help the marketer gain an understanding of
changing consumer values and how they affect buying behavior.

Personality and self- concept:

Each person’s distinct personality will influence his or her buying behavior.
Personality refers to the unique psychological characteristics that lead to
relatively consistent and lasting responses to one’s own environment. Many
marketers use a concept related to personality – a person’s self –concept.

Psychological factors:

A person’s buying choices are also influenced by four major psychological

factors – motivation, perception, learning, and beliefs and attitudes.

Motivation:

A person has many needs at any given time. Some needs biological, arising
from states of tension such hunger, thirst, or discomfort. Other needs will not be
strong from the need for recognition, esteem, or belonging. Most of these needs
will not be strong enough to motivate the person to act at a given point in time.
A need becomes a motive when it aroused to a sufficient level of intensity. A
motive is a need that is sufficiently pressing to direct the person to seek
satisfaction. Motivation researchers collect in- depth information from small
samples of consumers to uncover deeper motives for their product choices.

60
Perception:

A motivated person is ready to act. How the person acts is influenced by his or
her perception of the situation. Two people with the same motivation and in the
same situation may act quite differently because they perceive the situation
differently. Perception is the process by which people select, organize, and
interpret information to form a meaningful picture of the world. People can
form different perceptions of the same stimulus because of three perceptual
processes: selective exposure, selective distortion, and selective retention.

Learning:

When people act, they learn. Learning describes changes in an individual’s

behavior arising from experience. The practical significance of learning theory
of marketers is that they can build demand for a product by associating it with
strong drives, using motivating cues, and to the same drives as competitors and
providing similar cues because buyers are more likely to transfer loyalty to
similar brands then to dissimilar ones. Or it may design its brand to appeal to a
set of drives and offer strong cue inducement to switch (discrimination).

Belief and attitudes:

Through acting and learning, people acquire their beliefs and attitudes. These in
turn influence their buying behavior. A belief is a descriptive thought that a
person has about something. Marketers are interested in the beliefs that people
formulate about specific products and services. If some of the beliefs are wrong
and prevent purchase, the marketer will want to launch a campaign to correct
them. People have attitudes regarding religion, politics, clothes, music, food,
and almost everything else. An attitude describes a person’s relatively consistent
evaluations, feelings, and tendencies toward an object or idea. Attitudes put
people into a frame of mind of liking or disliking to them.

MOTIVATION

Motivation is said to be the driving force within individuals produced by a state

of tension caused by unfulfilled needs and wants. Individuals strive to reduce
this tension through appropriate behavior which they expect will satisfy their
needs.

Motivation arises due to two reasons

1) Needs

2) Goals
61
1) Needs

Every person has needs: some of these needs are basic for sustaining life
and are born with individuals. There are two types of needs

i) physiological need or biogenic needs.

ii) Acquired needs

i) Physiological needs or biogenic needs

Some of these needs are basic for sustaining life and are born with individuals.
These basic needs are also called physiological needs or biogenic needs and
include the needs of air, water, shelter, clothing and sex. Physiological needs are
also called primary needs because they are essential for survival.

ii) Acquired needs

Acquired needs are learnt needs that we acquires as a result of being brought up
in a culture and society. Acquired needs are also called as secondary needs.

For eg: Needs for self- esteem, prestige, affection, power and achievement are
all considered as learned needs.

2) Goals

Results of motivated behavior are called as goals. Human behavior is goal

oriented without needs there is no goal. Something what we want to achieve or
something which is to be achieved is called as goals.

There are two types of goals i) Generic goals ii) Product – specific goals

i) Generic goals

Goals are sought –after results of motivated behavior. The general classes or
categories of goals that consumer see as a means to fulfill their needs is called
as generic goals. For eg : if a student tells his parents that he wants to become a
medical doctor, he has stated generic goals.

ii) product- specific goals

Marketers are particularly concerned with product specific goals, that is

specially branded products or services that consumers select for goal attainment.
For eg: if a student says he wants to get an M.S degree from Oxford university,
he has expressed product specific goals.

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CLASSIFYING MOTIVES

Motives can be divided into four types

i) Physiological Vs Psychogenic motives

ii) Conscious Vs Unconscious motives

iii) Rational Vs Emotional motives

Positive Vs Negative motive

i) Physiological Vs Psychogenic motives:

Physiological motive: Motive that satisfies the basic needs of the individual is
called as physiological needs. Eg: Hunger, thirst and anger.

Psychogenic motives: Motives that satisfies the physiological needs is called as

psychogenic motives. Psychological motives are that they are learned from the
society. There acquired or secondary motives exert very powerful influence on
people. Eg: affection status, achievement.

ii)Conscious Vs Unconscious motives

Conscious motives: Conscious motives are those of which people are quite
aware. Consumers will know about the particular product or services whether it
is good or bad. Eg: Hunger, thirst.

Unconscious motives: unconscious motives are those of which are often not
aware. Consumers do not know which is bad or good. Eg: consumers buy
expensive clothes for their goods fit and may not aware that they are satisfying
the need for status.

iii)Rational Vs Emotional motives

Rational motive: For choosing a particular product the consumers will have a lot
of alternative from that alternative product the consumers will choose the best
product that is called as rational motives. Eg: soap, powder, detergents etc.

Emotional motives: By watching the advertisements the consumers emotionally

buy the products. The advertisement which makes the consumers to buy the
particular products on the first sight is called as emotional motives. Eg: TVs,
refrigerators.

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iv)Positive Vs Negative motives

Positive motives: positive motives are nothing but which induce the consumers
to achieve the particular goal, what he have to. Positive motives attract
consumers towards desired goals.

Negative goals: which divert you not to achieve particular goals? Negative
motives divert them to avoid unpleasant consequences. Eg: fear can influence
consumers into buying water purifiers.

NEEDS AND GOALS ARE DYNAMIC

The nature of needs and goals is not static; they keep on returning, changing and
growing as results of an individual’s changing physical condition, environment,
experience, learning and social interventions. Some important reasons why
motivated behavior never comes to an end include the following 4 reasons.

i) Needs are never completely satisfied or permanently

At nearly regular intervals we become hungry and need food to satisfy the
recurring need. Similarly most people experience the social need and regularly
seek company of others, their affection and approval. Even in case of more
complex and abstract psychological needs such as need for power, no one ever
seems to be completely and permanently satisfied with whatever one has and
keeps on motivated for more.

ii) New needs emerge

At any time a need may be mainly active but as soon as it is satisfied another
needs emerges. According to Maslow, a hierarchy of needs exists. As lower-
order needs are fulfilled, a new higher order needs becomes active.

iii) Success and failure influence goals

Research has showed that individuals who are successful in achieving their
goals usually seek to achieve higher goals. This is probably happens because
success gives them more confidence in their ability. On the other hand, those
who meet with failure, sometimes lower their level of goal.

iv) Substitute goals are formed

When someone is unable to achieve specific goals to satisfy certain needs, it

may however not be as satisfactory as the original goal but would be sufficient
to just satisfy and relieve tension.

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FRUSTRATION AND DEFENCE MECHANISM

Failure to achieve a goal often gives rise to feelings of frustration probably there
is nobody who has not experienced frustration that comes from the inability to
achieve some goal. Individual react differently to frustration. Some more
common forms of individual reaction to frustration can be of the following type.
There are eight common frustrations. They are as follows.

1. Aggression: As a result experiencing frustration, some individuals show

violent behavior in an attempt to keep their self esteem whole. Frustrated
consumers write letters to editors or take the help of consumer’s
discussion.
2. Rationalization: A person who rationalizes is not really telling lies
because the individual is not consciously aware of the cognitive
distortion as a result of experiencing frustration. The individual
convinces himself or herself that the goal is not really worth the effort.
3. Regression: In reaction to frustration people sometimes exhibit
immature or childlike behavior by throwing the merchandise or fighting
with shopkeeper rather than setting the matter kindly.
4. Withdrawal: People often resolve their frustration by withdrawing from
the situation. For eg: A person who feels difficulty in driving a car may
shop doing so and may decide that it is cheaper and convenient to use a
three wheeler auto or a taxi.
5. Projection: Sometimes an individual redefines frustration situation by
blaming other persons or objects as the reason for her/ his failures. For
eg: it is common to see auto drivers blaming the other person after an
accident. After failing in an examination, students often blame the
prevailing conditions in the institution.
6. Autism: The thinking, which is almost completely dominated by needs
and emotions( Day dreaming) without relating to reality is called autism.
This is a way to achieve imaginary fulfillment of one’s needs.
7. Identification: Sometimes subconsciously people identity with other
persons or situation to resolve their feelings of frustration. From the
marketers point of view this is an important defense mechanism that
consumers use. If the consumer identifies with frustrating situation, it is
likely that she/ he would adopt the suggested solution and purchase the
advertised product or service. For eg; A number of commercials are seen
every day for anti dandruff shampoos, skincare products, deodorants,
mosquito repellants, and detergents and so on.
8. Repression: Some people resolve frustration by forcing the need out of
their conscious mind. The suppressed needs sometimes emerge in a
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 direct manner. For eg : A couple not having children may have many
pets to fulfill their need. Socially acceptable form of repressed behavior
is termed as sublimination.

There are countless ways that people use to face frustration in an attempt to
protect themselves against tension resulting from failure. Much depends on
individuals early experiences in life that help them in handling frustrating
situations.

MASLOW’S HIERARCHY OF NEEDS

The hierarchy of needs proposed by Abraham H. Maslow is perhaps the best

known. Maslow classified need into five grouping, ranking in order of
importance from low – level (Biogenic) needs to higher level (Psychogenic)
needs and suggested the degree to which each would influence human behavior.

According to this scheme, individuals strive to fulfill lower- level needs first
before higher level needs become active. The lowest level unfulfilled need of an
individual servers to motivate her/ his behavior. When this need is satisfied a
new higher- order need become active and motives the individual. If a lower-
order need again becomes active due to renewed deprivation, it may temporarily
become more active again.

i) Physiological needs

According to Maslow, the first and most basic level of needs is physiological.
These needs are essential to sustain biological life and include air, water, food,
food, shelter and clothing and sex all the primary or biogenic needs.
Physiological needs are very potent when they are chronically unfulfilled. In his
book “A theory of human motivation” Maslow says, “for the man who is
extremely and dangerously hungry, no other interest exists+ but food. He
dreams food, he remembers food he thinks food, he emotes only about food he
perceives only food and he wants only food.

ii) Safety needs

After physiological needs, safety and security needs acquire the driving force
and influence an individual’s behavior. These needs are concerned with much
more than only the physical safety and include routine, familiarity, security,
certainty and stability etc. For eg: the labor unions in India provide members
the security of employment.

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iii) Social needs

The third level social needs include love, affection, belonging and friendship
etc. People need warm and satisfying human relationship with others. People
have strong attachment with their families and are motivated by love and
affection. Advertisement of personal care products often emphasize appeals
based on social acceptance.

iv) Ego needs

The fourth level is concerned with ego needs. These needs include reputation,
prestige, status, self esteem, success and independence etc. many advertisements
of ego intensive products emphasize ego appeals such as expensive watches,
jewelers and designer.

v) Self Actualization

Self actualization refers to a person’s desire to achieve or become what one is

capable. People express this need in different ways. The only common thing is
that they all seem to be striving for excellence in whatever they are doing.

PERSONALITY

According to Gordon W. Allport “personality is the dynamic organization

within the individual of those psychological systems that determine his unique
adjustment to environment”.

THEORIES OF PERSONALITY

Marketers have mainly focused on three theories of personality which greatly

vary in their approach to measuring personality. They are as follows

1. psychoanalytic theory

2. Social/ cultural theory ( Neo- Freudian theory)

3. Trait theory

1. Psychoanalytic theory

Freud’s psychoanalytic theory proposes that every individual’s personality is the

result of childhood conflicts. These conflicts are derived from three fundamental
components of personality.

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i) Id (or) Libido

ii) Ego

iii) Super ego

i) Id or libido

The Id is the source of an individual’s strong basic drives and

urges such as hunger, aggression and self preservation. The Id

operates on what is called the ‘Pleasure principle’ that is to seek

immediate pleasure and avoid plan. The Id is entirely unconscious and not

fully capable of dealing with objective reality. Many of its impulses are

not acceptance to the values of organized society.

For eg: a new born baby’s behavior is totally by the Id

ii)Ego

The ego is the individual’s conscious control. Ego operates on what is called the
‘Reality principle. It is capable of postponing the gratification until that time
when it will be suitably and effectively directed attaining the goals of Id in a
society acceptable manner.

iii) Super ego

The super ego constitutes the moral part of an individual’s personality. It

represents the ideal rather than the real. It defines what is real/ right/ good and it
influences the individuals to strive for perception. It operates in the unconscious
and often represses certain behavior that would otherwise occurs based on the
Id, which would disrupt the social system.

2. Social /cultural theory (Neo- Freudian theory)

Freud’s understanding of personality focused mainly on observations of

emotionally disturbed people. Carl Jung and Alfred Adler disagreed from his
view of personality. They believed that social and cultural variables, rather than
biological drives are more important in the development of an individual’s
personality. They believed that insights into personality development should
also be based on normal person’s functioning in their environment and not by
focusing on observation of emotionally disturbed people alone.

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Jung identified a number of personality types, such as i) sensing- thinking ii)
sensing feeling iii) intuiting thinking and iv) intuiting feelings etc.

i) Sensing- thinking personality

Individuals with this personality types make rational decisions. They are logical
and experimental in their approach are inclined to be highly involved extensive
problem solving orientation. Evaluate economic considerations, price sensitive
and avoid any risks. They identify themselves with material objects or things
have short term perspective in making decisions.

ii) Sensing feeling personality

They are moved by personal values rather than logic and believe in personal
experience. They follow a subjective orientation in making decisions are
inclined to consider others when making decisions and share risks. They are
status conscious and have short term perspective in decision making.

iii) Intuiting thinking personality

Their view of personal situations or world is broad. They use imagination in

considering a wide range of options in making decisions are quite likely to
consider other’s view and show least sensitivity toward prices.

According to Joel B. Cohen, Karen identified ten major needs which individuals
acquire as a result of striving to find solutions to their problems in developing
personality and dealing with others in society. Based on these ten needs she
classified three major approaches adopted by individuals for coping with
anxiety i) compliant ii) aggressive iii) detached.

i) Complaint

Individuals are those who move towards people and stress the need for love,
affection, approval and modesty such individual’s exhibit empathy, humility
and is unselfish.

ii) Aggressive

Individuals are those who move against people and emphasize the need for
power, admiration, strength and the ability to manipulate others.

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iii) Detached

Individuals are those who move away from others and desire independent
freedom from obligations and self reliance.

3. Trait theory

J.P Guilford describes a trait as any distinguishing and relatively enduring way
in which one individual differ from another. The concept is that traits are
general and stable, characteristics of personality that influence behavioral
tendencies. The concept can be summed up in three assumptions

i) Behavioral tendencies in individuals are relatively stable

ii) A limited number of traits are common to meet most individuals. They differ
only in the degree to which they have these tendencies.

iii) These traits and their relative degree when indentified and measured are
useful in characterizing individual personalities.

Effect of Personality traits on Consumer Behaviour

Harold and H Kasser and Mary Jane Sheffet reviewed more than 300 studies on
personality and have concluded that the results are “Equivocal”. Few studies
seem to show a definite relationship between consumer’s personality and
behavior, other indicates of no relationship. Majority of studies indicate that if
at all there is any relationship between personality and behavior. Certain types
of personality traits may be more related to consumer behavior than others, such
as i) optimal stimulation level (OSL), ii) need for cognition (NFC) iii)
dogmatism iv) susceptibility to influence and v) self monitoring behavior.

i) Optimal stimulation level

Some activities have more potential to provide individuals with sort of

physiological encouragement. There are two levels of optimum stimulation. The
high optimum stimulation levels are associated with more willingness to take
risks, to be innovative, try new products and actively seek purchase related
information. The low optimum stimulation level falls short of the desired level,
such a person is bored. Consumers with high stimulation needs tend to be the
first to buy new products, actively seek information about them and engage in
variety seeking buying behavior.

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ii) Need for cognition

Some researchers have focused on need for cognition. Need for cognition refers
to the degree of an individual’s desire to think and enjoy getting busy in
information processing. There are two levels of need of cognition. The
consumers high in need for cognition were more influenced by the quality of
arguments in the advertisements. The low level need for cognition was
influenced more by spokesperson’s attractiveness than those who were high in
need for cognition.

iii) Dogmatism

Consumers are also likely to vary in terms of how open-minded or closed

minded. Dogmatism is a personality trait that indicates the degree of an
individual’s rigidity towards anything, this is opposing of her/ his own
established beliefs. One would expect highly dogmatic consumers to be
relatively unwilling to new products, promotions or advertising. Consumers low
in dogmatism is more likely to accept new and innovative products to
established alternatives and be more receptive to advertisement messages that
focus on product attributes and benefits.

iv) Susceptibility to influence

Consumers differ in terms of their proneness to persuasion attempts by others

especially when these attempts happen to interpersonal or face to face.

v) Self monitoring behavior

Individual consumers differ in the degree to which they look to others for
indication on how to behave. Those persons who are high self monitors tend to
look to others for direction and accordingly guide their own behavior. The low
self monitors are guided by their own preferences or standards and are less
likely to be influence by others expectations.

PERCEPTION

According to Schiffman and Kanuk “The process by which an individual selects

organizes and interprets stimuli into a meaningful and coherent picture of the
world.

It is a process of selecting, organizing and interrupting or attracting meaning to

events happening in the environment.

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For eg: If a worker in a factory met with an accident. The manager perceives
that because of workers carelessness he should have met with the accident.

PERCEPTUAL PROCESS

Perceptual inputs

Stimuli Stimulation which surrounds the human beings which may be in the
form of people, objects, information, conservation etc. Situation that makes to
think or see. The thing that makes you to feel or see or think is called as stimuli.

Perceptual throughputs

1. Receiving Through five sense organs eye (sees), ears (hears), nose (smells),
touch, tastes Receiving may be through sensory inputs.

2. Selecting

Selecting is nothing but screening out/ filtering out the important things and
neglecting the unnecessary things is called as selecting. Selecting the important
things, rejecting or neglecting the unnecessary things.

3. Organizing

Organizing may be in the form of

i) figure ground

ii) grouping

iii) simplification

iv) closure.

i) Figure ground

Neglecting the back ground and giving importance to the figure is called as
figure ground. In order to be noticed, stimuli must contrast with their
environment. We notice black against white and do not notice white in white.
Similarly a sound must be louder or softer to be noticed.

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ii) Grouping

Individuals have an inherent tendency of grouping or chunking a variety of

information or items close to each other in time and space and form a unified
picture. The tendency to group stimuli may result as a consequence of
proximity, similarity or continuity. Grouping means having some
characteristics.

iii) Simplification

Though there is lots of information concentrating on the important one. There

may be lots of information available but concentrating on a particular or
important thing or important one is called as simplification.

iv) Closure

When there is any incomplete information people will fill up the gaps
themselves to make the information meaningful. Individuals have a need for
closure and fulfill it by organizing their perceptions in a manner leads o forming
a complete picture. For eg: If a portion of a circle is left incomplete, it is mostly
perceived as a complete circle and not an arc.

4. Interpretation

Individuals themselves make a judgment. Whether it is good or bad, beautiful or

ugly they themselves makes a judgment is called as interpretation.

Perceptual output

Action

Output aspect of a perceptual process is called as action. Action may be in form

of i)covert ii) overt

Covert: Invisible attitudes/ opinions/ feelings or spreading the news which they
have not seen is called as covert

Overt: Visibly expressing, the news what they have seen is called as overt.

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ELEMENTS OF PERCEPTION

There are five elements of perception which are as follow.

1. Sensation (Exposure to stimuli)

Sensation is the immediate and direct response of sense organ to simple stimuli
such an advertisement, a brand name or a package etc. Sensitivity to stimuli
varies among individuals and depends on the quality of sensory receptors.

For eg: Some people have more accurate hearing or sharper eyesight.

A relatively static and unchanging environment provides little or no sensation

even though the sensory input is strong.

For eg: A person living near a busy railway station would probably receive no
sensation from car or train horns or other traffic noises.

2. Absolute threshold

Absolute threshold refers to the lowest level at which an individual can

experience a sensation. At this point an individual can detect a difference
between “something and nothing”.

For eg: If someone drives for half an hour through a corridor of bill boards, it is
doubtful that any particular will register any impression that is “something”. If
he again and again sees the same thing what he had registered will make him to
lose his impression that is called as “nothing”

3. Differential threshold

Differential threshold is the smallest detectable difference between two values

of the same stimulus. This is referred ad J.N.D (just noticeable difference). An
individual’s threshold exists when she/ he first notices that the stimulus had
changed. The difference between this value and the starting value is the just
noticeable difference.

For eg: I a producer raise the price of its car by four hundred rupees probably it
would not be noticed because the increase would fall below J.N.D.

4. Subliminal perceptions

When the stimulus is below the threshold of awareness and the perceived
process is called as sub luminal perception. Sub luminal perception is nothing
but unaware, unconscious about the particular product but will by the product is
called as sub luminal perception.
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5. Attention

Attention occurs when the stimulus activates one or more sensory receptor and
the resulting sensations reach the brain for processing. Evert individual is
unique because of experiences; no two people perceive the world precisely the
same way.

DYNAMICS OF PERCEPTION

1. Perceptual selection

2. Perceptual organization

3. Perceptual interpretation

1. Perceptual selection

Human beings sub consciously are quite selective in their perception. Every day
we look at so many things, ignore others and do not even notice many others.
We really perceive only a very small fraction of stimuli to which we are
exposed. In a market place a consumer is exposed to numerous marketing
related stimuli besides numerous others. The reason is that we all unconsciously
exercise selectivity in perception. The selectivity of stimuli depends on
consumer’s previous experience and motives besides the nature of stimulus
itself.

i) Stimulus factors

There are numerous marketing related stimuli that affect consumer’s perception
such as type of product, physical characteristics, packing, color, brand name,
advertisements or time of commercial etc. what things which make him to
response is called as stimulus factors.

For eg: In many print advertisements there are lots of white space and just few
words or the opening scene of a commercial is without sound.

ii) Expectations

People generally see what they expect to see and this expectation is based on
familiarity and previous experience. Consumers often perceive products and
product attributed as per their expectations.

For eg: I f the consumer has been expecting a new soft drink to have bitter after
taste because the friend’s said so, probably it would taste bitter.

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iv) Adaptation

Adaptation refers to gradual adjustments to stimuli to which consumers are

exposed for prolonged periods. Because of adaptation consumers do not notice
the stimuli to which they have become adjusted.

For eg: An air conditioned picture theater feels quite cool in the

beginning but after a short while we adapt to the temperature and

become less aware of it.

v) Perceptual vigilance and defense

Even when consumers are exposed to stimuli they do not want to see or hear
they unconsciously ignore such unconsciously ignore such undesirable stimuli.
Perceptual defense is more likely in anxiety producing situations. Because of
this reason unpleasant damaging or threatening stimuli have less of a chance to
be perceived compared to neutral stimuli at the same level of exposure.

vi) Perceptual blocking

Consumers are exposed to innumerable stimuli in a typical day. Outcome of

interaction between expectations, motives and stimulus factors. A number of
related concepts are important in the study of perception.

For eg: A person who is contemplating buying a computer is more likely to

notice advertisement of computers and ignore others advertisement irrelevant to
felt needs or interacts.

vii) Selective exposure

Exposure occurs when consumer’s senses are activated by stimulus. Consumers

are readily to expose themselves to advertisements of products they prefer or
admire or advertisements that reinforce their purchase decisions.

For eg: A consumer who has bought expensive Mac computer is more likely to
see or read its advertisements to reassure her/ his purchase decisions.

viii) Selective attention

Attention is based on consumers thinking capacity. They would readily notice

advertisements of products that they need or want. Some consumers are price
sensitive, for quality is more important.

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2. Perceptual organization

Individuals tend to organize these sensations into a coherent pattern and

perceive as unified wholes. The specific principles underlying perceptual
organization are sometimes referred as Gestalt psychology. Gestalt is a German
word and means “pattern” or “configuration”. The most basic principles of
perceptual organization focus on

i)figure ground

ii)grouping

iii)closure

i) Figure ground

Neglecting the back ground and giving importance to the figure is called ad
figure ground. For eg: We notice black against white and do not notice white in
white. Similarly a sound must be louder or softer to be noticed.

ii) Grouping

Individuals have an inherent tendency to grouping of chunking a variety of

information or items close to each other in time and space and form a unified
picture. The tendency to group stimuli may result ass consequences of
proximity, similarity, or continuity.

iii) Closure

When there is any incomplete information people will fill up the gaps
themselves to make the information meaningful. Individuals have a need for
closure and fulfill it by organizing their perception in a manner leads to form a
complete picture.

3. Perceptual interpretation

Individuals in their own unique manner understand the stimuli. A person sees
what he/ she expects to see, “Interpretation of stimuli by individuals is based on
their earlier experiences plausible explanations they can assign, their motives,
beliefs and interests at the time of perception. A number of factors influence
individuals that may distort their perceptions such as i) physical appearances ii)
stereotyping stimuli iii) irrelevant stimuli iv) first impression v)jumping to
conclusions and vii) halo effect etc.

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i) Physical appearances

People may or may not consciously recognize that they tend to attribute the
qualities which in their opinion are associated with certain individuals to others
who may resemble those persons.

According to Kathleen Debevee and Jerome B. Kernan research indicates that

attractive looking men are perceived as more successful in business than
average looking men.

ii) Stereotyping stimuli

People tend to form “pictures” in their minds of meaning of different types of

stimuli. This stereotyping stimulus helps them develop expectations about how
specific events, people or situations will turn to be.

For eg: Many people carry the “picture” of politician’s behavior in their minds.

iii) Irrelevant stimuli

In certain situations consumers are faced with different perceptual judgments. In

such circumstances they often respond to somewhat irrelevant stimuli.

For eg: i) they may consider the color of washing machines in making the final
purchase decision. ii) In case of expensive cars. Consumers often give
importance to the shape of headlamps or leather upholstery rather than technical
features.

iv) First impression

First impression is often lasting even when the perceiver is not exposed to
sufficient relevant or predictive information.

For eg: Just a few years ago, the word “ imported” was enough for a large
number of consumers to form favorable impressions about many products such
as wrist watches, shoes, clothes and many other different products.

v) Jumping to conclusions

Some people seem to have a strong tendency to draw conclusions based on

insufficient information. Without getting the current information of the products
or services coming into a conclusion is called as jumping to conclusions.

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vi) Halo effect

This refers to a tendency to evaluate one attribute or aspect of stimulus to distort

reactions to other attributes or properties. This is frequently seen in case of
brand or line extensions where the marketer takes advantage of a brands
reputation

For eg: Dettol soap, lux shampoo

CONSUMER’S RISK PERCEPTION

Risk perception can be defines as the consumer’s perceptions of uncertainty that

they face when they are unable to foresee various consequences of their
purchase decisions. Consumers may face several different types of risks in
making purchase decisions. The major ones are

i) Financial or monetary risk: it is the risk that the product will not be
worth for its cost. Expensive products and services are more subject to
think.
ii) Performance risk: it is associated with the possibility that the product
will not perform as anticipated or may even fail. The consumers wastes
time in getting it repaired or replaced. The risk is greater when the
product is technically complex.
iii) Physical risk: Which refer bodily harm self and others due to product
usage?

For eg: food and beverages, electrical or mechanical appliances or

medical services etc can sometimes prove risky.

iv) Social risk: it means that a poor product purchase may not meet the
standards of an important reference group and may result in social
embarrassment.

For eg: Clothes, jewellery, carpet or car etc.

v) Psychological risk: it relates to loss of self esteem or self image as a

result of poor choice and making her/him feel stupid.

For eg: High involvement category products or services.

LEARNING

Schiff man and kanuk have defined “Learning from a marketing perspective, as
the process by which individuals acquire the purchase and consumption
knowledge and experiences that they apply to future related behavior”.
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FUNDAMENTAL COMPONENTS OF LEARNING

There are four fundamental components of learning they as are as follows

1) motivation

2) cuse/ stimuli

3) response

4) reinforcement

1) Motivation

Motivation is the driving force that impels individuals to action and is the result
of unfulfilled needs. If an individual have strong motivation to learn something,
there is increased likelihood that learning takes place.

For eg: Students who wants to pursue a course in computer applications would
be motivated to seek information concerning the courses offered by different
institutes and possibly the quality of faculty and lab facilities.

2) Cues/ stimuli

Cues are relatively weak stimuli not strong enough to arouse consumers but
have the potential of providing direction to motivated activity.

For eg: An advertisement about a computer course is a cue that suggests a way
to satisfy the motives of learning computer applications.

Consumers are almost exposed to various cues almost every day such as
advertising, displays, packing and prices etc.

3) Response

The way an individual reacts to a cue or stimulus is the response and could
physical or mental in nature, leading to learning.

For eg: A computer marketers keeps on providing cues to a student through

promotional activities and may not be successful in eliciting the final purchase
behavior for variety of reasons through the student is motivated to buy.

4) Reinforcement

According to Edward L. Thorndike reinforcement can be anything that both

increases the strength of response and tends to induce repetitions of the behavior
that preceded the reinforcement.
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LEARNING THEORIES

1) Behavioral learning theory

Behavioral learning theories are sometimes also referred to as connectionist or

stimulus-response theories. Behavioral theories are based on stimulus –response
orientation (S-R) and the belief is that learning occurs through the connection
between the stimulus and a response.

There are two important behavioral theories

i) classical conditioning theory

ii) instrumental conditioning theory

i) Classical conditioning theory

The Russian psychologist, Ivan Pavlov was the first who pioneered the study of
classical conditioning. He noticed that since his hungry dogs salivated
(unconditioned response) at the sight of fight (unconditioned stimulus) the
connection between food and salivation is taught and is just a reflex action.
Pavlov reasoned that a neutral stimulus such as the sound ringing bell could also
cause the dogs to salivate if it was closely associated with the unconditioned
stimulus (food). To test this reasoning, Pavlov rang a bell while giving food to
the dogs. After a sufficient number of repetitions, the dogs after a sufficient
number of repetitions the dogs learned the connection between bell and food
when they heard the bell (conditioned stimulus) even in the absence of food
they salivated (conditioned response).

Form classical conditioning emerge three basic concepts important for

understanding consumer behavior i) repetition ii) stimulus generalization iii)
stimulus discrimination

i) Repetition

People have a tendency to forget and one proven method of increasing retention
of learning is repetition. Repetition is believed to work by strengthening the
bond of association and thus showing the process of forgetting. If a message is
not repeated consumers tend to forget most of it rapidly and repetition becomes
necessary just to maintain consumer’s level of learning. A number of
researchers consider three advertisement exposures as the optimum number
known as three hit theory. First exposure is needed to make consumers ware
about the product or services. Second exposure shows consumers the relevance
of the product or services. Third exposure is needed to remind the consumers.
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ii) Stimulus generalization

Pavlov also demonstrated that the dogs could learn to salivate on hearing
somewhat similar sound produced by jingling bells. This was the case of
stimulus generalization in dogs. Stimulus generalization occurs when two
stimuli are seen as similar. There are four elements under stimulus
generalization
a) Product line extensions: product line extensions are the strategy of
introducing variations of the same products. These variations may be
simply of color, packaging, size or flavor etc but the core product
remains the same. For. eg ; Palmolive soap is available in pink, white
and light bluish pack.
b) Product form extensions: means that the same product is available in
different physical forms such as dettol soap cake and dettol liquid soap
for eg: Many drugs are available as tablets, syrup, injections or as
inhalers.
c) Product category extensions: Product category extensions is diversifying
into producing products in different categories and using the same
established brand name. for eg: Maggi noodles and magi tomato chili
sauce similarly there is lux toilet soap lux shampoo.
d) Family branding: Family branding refers to the practice of marketing the
entire product mix of a company under the same family brand name. For
eg: Gillette is available in all category like Gillette deodram, Gillette gel,
Gillette shaving foam, Gillette after shave gel.
iii) Stimulus discrimination
Stimulus discrimination is just opposite to stimulus generalization unlike
reaction to similarity of stimuli; discrimination is reaction to differences among
similar stimuli.
For eg: Frequent users of a brand are better able to notice relatively small
differences among brands in the same product category.
ii) Instrumental conditioning (operant conditioning) theory
Instrumental conditioning also involves developing association between
stimulus and response but requires the subject to discover a correct response
that will be reinforced.

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For instance : Let us assume the skinner’s experiment, with dogs or rats are
provided with two levers one will produce food (reward) and other an electrical
shock (punishment) when hungry the animals would quickly learn to press the
lever that produced food and avoid the lever that produced an electrical shock.

2) Cognitive learning theory

Learning takes places as a result of mental activity is termed as cognitive

learning. According to their view learning is an intellectual activity based on
complex mental processes involving motivation, perception, formation of brand
beliefs, attitude development and change problem solving and insight. Most
likely to look for reliable information indulge in analysis evaluate what we learn
and try to make a balanced decision.

For eg: The commercial of Pepsi and coco-cola use playful and existing setting,
where Mc Donald’s advertisements shows pleasant surroundings where children
can play and parents can relax.

MEMORY PROCESS

Memory represents the information that an individual’s retains and stores and
that she/ he for future use. According to one concept called activation model.
Consumers have a large memory store at any given point in time only a portion
of the memory can be activated for use and the remaining inactive portions of
memory are not available to recall information stored in memory. A general
belief is that there are three separate store house for sensory memory, short term
memory and long term memory. The information is retained temporarily in the
first two stores before being finally stored in the long term memory.

i) Sensory memory

According to Sandra Blakeslee the senses do not relay the complete images like
a camera instead each sense organ receives a fragmented portion of information
such as flower’s shape, color, smell or feel etc. each sense transmits its bit of
sensation to the brain at the same time where all the sensation are co-ordinate
and perceived as a single image in a single moment of time.

For eg: If we close our eyes just after observing an object or viewing an image
on T.V we can ‘see’ the ‘after image’ in our mind’s eye’ for just a fraction of a
second.

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ii) Short term memory

It is believed to have short capacity that is less than a minute and an average of
seven pieces of information. Information in the short term memory store
undergoes a process called rehearsal (silent, mental repetition of information
called maintenance rehearsal). Before being transferred to long term memory
store through a process often called elaborative rehearsal. If the information in
the short term memory is not rehearsed and transferred to long term memory it
will be forgotten.

iii) Long term memory

The system of long term memory can be viewed as a relatively permanent place
of storage of information that has undergone elaborative rehearsal Allan G.
Reynolds and Paul W. Flagg says that people never forget anything that has
reached long term memory. Another view is that information stored in the long
term memory does not just decay over a period of time but appears to be
forgotten because of interference with intention.

Interference can be of two types i) Retroactive inhibition ii) Proactive inhibition

i) Retroactive inhibition: When new learning interferes with information already

stored in long term memory it is referred to as retroactive inhibition

ii) Proactive inhibition: Refers to interference with new learning by the material
already stored in the memory.

Retrieval: Process is concerned with accessing information from long term

memory store and activating it into consciousness

ATTITUDE

An attitude is an enduring organization of motivational, emotional perceptual

and cognitive process with respect to some aspect of our environment.

FUNCTIONS OF ATTITUDE

Understanding functions of attitude helps in learning how they serve consumers.

According to Daniel Katz, attitudes perform four important functions for
individuals

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1) Utilitarian function

This attitude function serves consumers in achieving desired benefits. We hold

certain brand attitudes partly because of brand utility. If a product has been
useful in the past our attitude towards it is likely to be favorable.

For eg: A consumers who considers quick relief as the most important criteria in
selecting an anti cold remedy will be directed to the brand that offers this
benefit.

2) Value expressive function

Attitude reflects the consumers self values and outlook, particularly in a high
involvement product.

For eg: If a person gives importance to fashion then attitudes are likely to be
reflected in this view point

3) Ego defensive function

Attitude formed to protect the ego or self image from anxieties and threats help
fulfill this function. This encourages consumers in developing a positive attitude
towards brand associated with social acceptance, confidence, appreciation or
being attractive and desirable.

For eg: Ads for many products such as mouth washes, toothpastes, deodorants,
anti pimple creams and cosmetics etc serve as a good example.

4) Knowledge function

Individuals generally have a strong need for knowledge and seek consistency,
stability and understanding. To fulfill this need attitudes help organize the
considerable amount of information to which they are exposed every day. The
knowledge function also reduces uncertainty and confusion. Advertising is a
means of acquiring information about products or services.

ATTITUDES MODELS

Psychologists have devoted considerable efforts to understand the relationship

between attitudes and behavior and a number of models have been developed to
understand underlying dimensions of an attitude.

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1) Tri component attitude model

According to these model attitudes consists of three main components i)

cognitive component (knowledge, beliefs) ii) affective component (emotions,
feelings) iii) cognitive component (behavioral aspects)

i) Cognitive component

Consumers beliefs about an object are the attributes they ascribe to it. These
beliefs are based on a combination of knowledge, experience and perceptions
about the attitude object.

For most attitude objects consumers have number of beliefs and that a specific
behavior will result in specific outcomes.

ii) Affective Component

Consumer’s feelings and emotional reactions to an object represent the affective

component of an attitude. This relates to consumers overall evaluation of the
attitude object, consumer belief about a brand’s attributes is multidimensional,
but the feeling component is mostly based on the behavior.

iii) Cognitive component

Behavioral component is the likelihood of an individual to respond in certain

manner toward an attitude object. This is mostly based on the consumer
behavior.

2)Multi attribute attitude models

According to these models consumer’s attitudes about an attitude “Object” is a

function of consumer’s perception and assessment of important attributes of
beliefs held about a certain attitude “Object”.

For eg: In case of automobile more mileage per liter or petrol, attractive styling,
reliable performance are viewed as favorable beliefs. The consumers will have a
number if attitudes on a particular object.

3 ) Fishbein Behavioral intention Models

The revised fishbein and azen model focuses on an individual’s attitude

towards toward her/his behaving or acting with respect to an object and not the
attitude towards the object itself.

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For eg: a consumer attitude towards Omega watch may be very positive but
her/his attitude towards the act of purchasing such an expensive watch may be
negative.

The appeal of this model is that it seems to better predictor of an

individual actual behavior than the attitude toward object model.

REPRESENTATION OF FISHBEIN’S BEHAVIORAL MODEL

On the basis of fishbein’s attitude model four strategies can be considered to

change attitude

i) By changing the value consumers place on product attributes

ii) By changing consumers brand beliefs

iii) By changing brand evaluations

iv) By changing behavioral intentions

1) Changing the value consumers place on product attributes

Most consumers consider some product attribute to be more important those

others. Marketers often try to convince consumers about superiority or
importance of those attitudes on which their brands are relatively strong.

For eg: Apple computers do not have a floppy drive and convince consumers
that floppies are not reliable for storing data.

ii) Changing consumer’s beliefs

A common and effective approach adopted by most marketers to changing

attitudes is to focus on the cognitive component. The strategy of changing
beliefs focuses on shifting beliefs about the performance of brand on one or
more attributes.

For eg: Nizoral shampoo ads, convince consumer’s that the ketoconazole
ingredient gives better protection against dandruff.

iii) Changing brand evaluations

This strategy focuses on influencing consumer’s overall brand attitudes without

any reference to specific attributes without any reference to specific attributes.
This can be accomplished by associating a positive feeling with product usage.

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iv) Changing behavior

Consumer’s purchase or use behavior may precede the development of

cognition and effect. Consumers frequently try inexpensive new brands in the
absence of any prior knowledge or affect.
For eg: A consumer feels thirsty and notices a new brand of cold drink with a
vendor and uses it.
SELF CONCEPT
Everyone has a concept of what they are and who they are. Some people are
more aware of this than others, because there are individuals who go through a
day of work or social interaction without considering who they really are or
how they fit into the world around them.
It’s not as easy as knowing the person we see in the mirror, because self concept
is much more an internal factor in our lives, separate from how we look to
others. Certainly, what we see of our face and body is part of the concept, but it
is, according to psychologists, psychologists and counselors, only a part.
Self concept is made up of how we assess ourselves, how we see our
personality and how we rate our skills and abilities. When we have self esteem,
our assessment is more positive, sometimes falsely as give ourselves more
credit than is due.
Those who focus on the subject of self concept also note that a concept of who
we are is more permanent than how we feel at the moment, or even how we feel
for a day or two. A consistent concept will put us in a state of mind, and will be
an understanding that does change dramatically over time.
A concept of the self actually reaches both into the past and into the future, as
we know who we were and who we are. Included in this picture are all the
memories, fears, goals and possibilities that remain in our minds. For example,
a concept of self from our early life might involve how we looked physically
and how we associated with friends and playmates. What we remember of this
is part of our personal concept.
In the present, our concept might also involve how we work, what success we
achieve and, most importantly, if those things are important to whom we think
we are. Studies of personality and behavior have shown that as we grow older,
our concept of self becomes more abstract and more idea oriented. We begin to
make connections between social ideas and political issues, for instance, and
judge ourselves on how we fit with these. Deciding if this is good or bad can be
part of self. On the other hand, either our actions or associations are good or bad
is a judgment by society.
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Self concept s distinct from self esteems, and may be more akin to self worth.
Esteem means that we think something is important or has a particular value.
While this idea can be a small part of our concept of self, they are not
necessarily one and the same. In short, self concept is a lifelong and often
complex view of the person we are.

Lewis (1990) suggests that development of a concept of self has two aspects:-

(1)The Existential Self

This is the most basic part of the self-scheme or self-concept; the sense of being
separate and distinct from others and the awareness of the constancy of the
self”(Bee 1992).

The child realizes that they exist as a separate entity from others and that they
continue to exist over time and space. According to Lewis awareness of the
existential self begins as young as two to three months old and arises in part due
to the relation the child has with the world. For example, the child smiles and
someone smiles back, or the child touches a mobile and sees it move.

(2) The Categorical Self

Having realized that he or she exists as a separate experiencing being, the

child next becomes aware that he or she s also an object n the world. Just as
other objects including people have properties that can be experienced (big,
small, red, smooth and so on) so the child is becoming aware of him or herself
as an object which can be experienced and which has properties. The self too
can be put into categories such as age, gender, size or skill. Two of the first
categories to be applied are age(“I am 3”) and gender(“I am a girl”)

In early childhood the categories children apply to themselves are very

concrete (e.g. Hair color, Height and favorite things). Later, self-description also
begins to include reference to internal psychological traits, comparative
evaluations and to how others see them.

Carl Rogers Believes that the self concept has three different components:

• The view you have of yourself (Self image)

• How much value you place on yourself (self esteem or self-worth)
• What you wish you were really like(Ideal self)

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SELF IMAGE

This does not necessarily have to reflect reality. Indeed a person with anorexia
who is thin may have a self image in which a person believes they are fat. A
person’s self image is affected by many factors, such as parental influences,
friends, the media etc.

Kuhn (1960) investigated the self-image by using The twenty statements test.

He asked people to answer the question ‘Who am I?’ in 20 different ways. He

found that the responses could be divided into two major groups. These were
social roles (external or objective aspects of oneself such as son, teacher, friend)
and personality traits(internal or affective aspects of oneself such as gregarious,
impatient, humorous).

The list of answer to the question “who am I?” probably include examples of
each of following four types of responses:

1. Physical description: I’m tall, have blue eyes…etc

2. Social roles: We are all social beings whose behavior is shaped to some
extent by the roles we play. Such roles as student, housewife, or member
of the football team not only help others to recognize us but also help us
to know what is expected of us in various situations.
3. Personal traits: These are a third dimension of our self-descriptions. “I’m
impulsive… I’m generous..I tend to worry a lot”… etc.
4. Existential statements (abstract ones): these can range from “I’ m a child
of the universe” to “I’m a human being” to “I’m a spiritual being”..etc.

Typically young people describe themselves more in terms of such personal

traits, whereas older people feel defined to a greater extent by their social roles.

SELF ESTEEM AND SELF WORTH

Self esteem refers to the extent to which we like accept or approve of ourselves
or how much we value ourselves. Self esteem always involves a degree of
evaluation and we may either a positive or a negative view of ourselves.

HIGH SELF ESTEEM. i.e we have a negative view of ourselves. This tends to
lead to

• Confidence in our own abilities.

• Self Acceptance.
• Not worrying about what others think
• Optimism
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LOW SELF ESTEAM i.e. we have a negative view of ourselves. This tends to
lead

• Lack of confidence
• Want to be/look like someone else
• Always worrying what others might think
• Pessimism

There are several ways of measuring self-esteem. For example, Harrill self
esteem inventory is a questionnaire comprising 15 statements about a range of
interest. Another example is the Thematic Apperception Test (TAT), which is a
neutral cartoon given to the participant who then has to devise a story about
what’s going on.

Morse and Gergen (1970) showed that in uncertain or anxiety arousing

situations our self-esteem may change rapidly. Participants were waiting for a
job interview in a waiting room. They were sat with another candidate (a
confederate of the experimenter) in one of two conditions:

a) Mr. Clean- dressed in smart suit, carrying a briefcase opened to reveal a

slide rule and books.
b) Mr. Dirty- dressed in an old T-shirt and jeans, slouched over a cheap sex
novel.

Self esteem of participants with Mr. Dirty increased whilst those with [Link]
decreased. No mention made of how this affected subjects’ performance at
numerous tasks though (Coopersmith 1967) so could expect Mr. Dirty subjects
to perform better than Mr. Clean.

Even though self-esteem might fluctuate, there is when we continue to believe

good things about ourselves even when evidence to the contract exists. This is
known as the perseverance effect. Ross et al (1975) showed that people who
believed they had socially desirable characteristics continued in this belief even
when the experimenters tried to get them to believe the opposite. Does the same
thing happen with bad things if we have low self-esteem? Maybe not, perhaps
with very low self-esteem all we believe about ourselves might be bad.

Argyle believes there are 4 major factors that influence self –esteem.

1. THE REACTION OF OTHERS. If people admire us, seek out our

company, listen attentively and agree with us we tend to develop a
positive self- image . if they avoid us, neglect us, tell us about ourselves
that we don’t want to hear we develop a negative self-image
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 2. COMPARISON WITH OTHERS. It the people we compare ourselves
with (our reference group) appear to be more successful, happier, richer,
better looking than ourselves we tend to develop a negative self image
but if they are less successful than us our image will be positive
3. SOCIAL ROLES. Some social roles carry prestige eg. Doctor, airline
pilot, tv. Presenter, premiership footballer and this promotes self-esteem.
Other roles carry stigma. Eg. Prisoner, mental hospital patient, refuse
collector or un employed person.
4. IDENTIFICATION. Roles aren’t just “out there” they also become part
of our personality i.e. we identify with the positions we occupy, the roles
we play and the groups we belong to.
Ideal self (what you’d like to be)

If there is a mismatch between how you see yourself (e.g. yourself image) and
what you’d like to be (e.g. your ideal self) then this is likely to affect how much
you value yourself. Therefore, there is an intimate relationship between self-
image, ego-ideal and self-esteem. Humanistic psychologists study this using Q-
Sort method.

A person’s ideal self may not be consistent with what actually happens in life
and experiences of the person. Hence, a difference may exist between a person’s
ideal self and actual experience. This is called incongruence.

When a person’s ideal self and actual experience are consistent or very similar,
a state of congruence exists. Rarely, if ever does a total state congruence exist;
all people experience a certain amount of incongruence. The development of
congruence is dependent on unconditional positive regard. Roger’s believed that
for a person to achieve self- actualization they must be in a state of congruence.

Michael Argyle says there are four major factors which influence its
development:

• The ways in which others (particularly significant others) react to us.

• How we think we compare to others

• Our social roles

• The extent to which we identify with other people

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 UNIT – IV
4.1 Socio-Cultural Influence, Cross Culture
4.2 Family group – Reference group
4.3 Communication

4.4 Influences on Consumer behaviour

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4.1 SOCIO-CULTURAL INFLUENCE
REFERENCE GROUP
A reference group is a concept referring to a group to which an individual or
another group is compared

Sociologists call any group that individuals use as a standard for evaluating
themselves and their own behavior a reference group.

Reference groups are used in order to evaluate and determine the nature of a
given individual or other group’s characteristics and sociological attributes. It is
the group to which the individual relates or aspires to relate him or herself
psychologically. It becomes the individual’s frame of reference and source for
ordering his or her experiences, perceptions, cognition, and ideas of self. It is
important for determining a person’s self- identity, attitudes and social ties. It
becomes the basis of reference in making comparisons or contracts and in
evaluating one’s appearance and performance.

“Reference groups are those groups that people refer to when evaluating their
own qualities, circumstances, attitudes, values and behaviors .”

-William Thompson & Joseph Hickey,

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 Understanding the power of reference groups

There are three types of reference they are

i) Normative reference group

ii) Comparative reference group

iii) Indirect reference group

1. Normative reference group

Reference group that influence generally or broadly defines values or

behavior are called normative reference group.

For Eg: A child normative reference group is the immediate family likely to
play an important role in moulding the child’s general consumer’s values and
behaviors ( such as which food to select for good nutrition , appropriates way to
dress for specific occasions, how and where to shop or what constitute “good”
value.)

2. Comparative reference group

i) Reference group that serve as benchmarks for specific or

narrowly attitudes or behavior are called Comparative reference group

For eg;(a comparative reference group be a neighbouring family whose life style
appears to be admirable and worthy of imitation ) the way they maintain their
home, their choice of home furnishings and cars ,their taste in clothing or the
number and types of vacations they taste.

3. Indirect reference group

Indirect reference group consists of those individuals or groups with whom a

person does not have direct face to face contact.

For eg: Movie stars, sports heroes, political leaders, TV personalities or even
well dressed and interest looking people on the street’

4.2 FAMILY

A family is a domestic group of people, or a number of domestic groups linked

through descent (demonstrated or stipulated) from a common ancestor, marriage
or adoption

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In most western societies three types of families dominate

1) Married Couple- The simplest type of family in number of members is the

married couple a husband and a wife. As a households unit, the married couple
generally is representative of either new married who have not yet started a
family or older couples who have already raised their children.

2) Nuclear family- A husband and wife and one or more children constitute a
nuclear family. This type of family is still common but has been on the decline.

3) Extended family- the nuclear family with at least one grant parent living
within the households is called as extended family.

FAMILY DECISION MAKING AND CONSUMPTION ROLES

Although many marketers recognize the family as the basic consumer decision
making unit they most frequently examine the attitudes and behavior of the one
family member whom they believe to be the major decision maker. In some
case they also examine the attitude and behavior of the person most likely to the
primary user of the product or service.

i) Key family consumption roles

The number and identify of the family members who fill these roles vary from
family to family and form products to products. In some cases a single role will
be performed jointly by two or more family members. In other cases one or
more basic roles may not be required. For eg: A family member may be
working down the cookie aisle at a local super market when she picks, act an
interesting new fat free cookie her selection of other family members. We can
indentify eight distinct roles in the family decision making process.

➢ Influencers

Family member who provide information to other members about a

product or service.

➢ Gate keepers

Family members who control the flow of information about a product or

services into the family.

➢ Deciders

Family members with the power to determine unilaterally or jointly

whether to stop for purchase, use, consume.
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➢ Buyers

Family member who make the actual purchase of a particular product or

services

➢ Prepares

Family members who transform the product into a form suitable for
consumption by other family members.

➢ Users

Family members who use or consume a particular product or service.

➢ Maintainers

Family members who serve or repair the product so that is will provide
continued satisfaction.

➢ Disposers

Family members who initiate or carry out the disposal or discontinuation

of a particular product or service.

i) Dynamics of husband wife decision making

Marketers are interested in the relative amount of influence that a husband

and wife have when it comes to family consumption choices. The relative
influence of husbands and wives can be classified as

a) Husband dominated
b) Wife dominated
c) Joint (either Equal)
d) Autonomic (solitary or unilateral)

For Eg: During 1950’s the purchase of a new automobile was strongly husband
dominated. Whereas food and financial banking decisions more often were wife
dominated. China and in United States was substantially joint decisions.

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i) The expanding role of children in family decisions making

Over the past several decades there has been a trend towards children playing a
more active role in what the family as well as in the family decision making
process. As a result of family having fewer children which increase the family
influence of each child more, equal income couples who can afford to permit
their children to make a greater number of the choice and the encouragement by
the media to allow children to express themselves..Still further, single parent
households often push their children towards house hold participation and self
reliance.

FAMILY LIFE CYCLE

Family life cycle (FLC) as a means of depicting what was once a rather steady
and predictable series of stages through which most family progressed. The
FLC is a composite variables created by systematically combining such
commonly used demographic variables as marital status, size of family, age of
family members and employment, status of the head and the relative. The age of
the parents and the relative amount of disposable income usually are inferred
from the stage in the family life cycle. To reflect the current realities of a wide
range of family and life style arrangements our treatment of the FLC concept is
divided into two sections.

i) Traditional FLC Schema

The family life cycle is a progression of stages through which many families
pass, starting with bachelor hood moving on to marriage (and the creation of the
basic family unit) then to family growth, to family contraction and ending with
the dissolution of the basic.

The traditional FLC (Models proposed over the years can be synthesized into
five stages as follows

Stage I - Bachelor hood –Young single adult living apart from parents

Stage II- Honey mooners- Young married couple

StageIII- Parenthood- Married couple with at least one child living at home

Stage IV –Post parenthood- an old married couple with no children.

Stage V- Dissolution- One surviving spouse.

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Stage I- Bachelor hood

The first FLC stage consists of young single men and women who have
established households apart from their parents. Although most members of this
FLC stages are fully employed, many are college or graduate students who have
left their parents home. Young single adults are apt to spend their incomes on
rent, basic home furnishings the purchase and maintenance of automobiles,
travel and entertainment and clothing and accessories. Members of the
bachelorhood stage frequently have sufficient disposal income to indulge
themselves marketers target single for a wide variety of products or services.

Stage II- Honey mooners

The honey mooners stage start immediately after the marriage vows are taken
and generally continues until the arrival of the couple’s first child. This FLC
stages serves as a period of adjustments to married life. Because many young
husbands and wives both work. These couples have available a combined
income that often permits a lifestyle that provides them with the opportunities of
more indulgent purchasing of possessions or allows them to save or invest their
extra income. During this stage the advice and experience of other married
couples are likely to be important to newly weeds.

Stage III Parent hood

The parenthood stage (sometimes called the full nest stage) usually extends over
more than a 20 year period. Because of its long duration phase, the preschool
phase, the elementary school phase, the high school phase and the college
phase. Through these parenthood phases the interrelationships of family
members and the structure of the family gradually change. Further, more
financial resources of the family change significantly as one parent’s progress in
a career and a child rearing increase and family decrease as children become
self supporting.

Stage IV- Post parent hood

Because parenthood extends over many years it is only natural to find that post
parenthood. The post parenthood is also called as empty nest stage. It is during
these stages that married couples tend to be most comfortable financially.
Today’s empty nesters have more leisure extended vacations and are likely to
purchase a second home in a warmer climate. They have higher disposable
incomes because fewer expense. They look forward to being too far away
places.

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Stage V- Dissolution

Dissolution of the basic family unit occurs with the death of one spouse. When
the surviving spouse is in good health is working or has adequate savings and
had supportive family and friends the adjustments are easier. The surviving
spouse (usually the wife often tends to follow a more economical life style)
Many surviving spouses seek each other out for companionship others enter
into second marriages.

i) Non traditional FLC

The Family Life Cycle, Individuals and families tend to go through a “ life
cycle:” The simple life cycle goes from young single to older unmarried.

NON TRADITIONAL FAMILY LIFE CYCLE

Middle
aged
divorced
without
children

Young
divorce
Middle
without
aged
children
married
without
children

Young Young Young Middle Middle Ol Older

single married married aged aged der unmarr
without with married married ma ied
children children with without rrie
children dependent d
children

Young Middle Middle

divorced aged aged
with divorced divorced
children with without
children dependent

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Generally, there are two main themes in the Family Life Cycle, subject to
significant exceptions:

• As a person gets older, he or she tends to advance in his or her career

and tends to get greater income (exceptions: maternity leave, divorce,
retirement).
• Unfortunately, obligation also tend to increase with time ( at least until
one’s mortgage has been paid off). Children and paying for one’s house
are two of the greatest expenses.

Note that although a single person may have a lower income than a
married couple, the single may be able to buy more discretionary items.

4.3 SOCIAL CLASS

The division of members of a society in to a hierarchy of distinct status classes,

so that members of each class have relatively the same and members of all other
classes have either more or less status.

Each social class by the amount of status the members of that class have in
comparison with members of other social classes.

SOCIAL COMPARISON THEORY

How status operates within the minds of consumers. There are two types of
social comparison i) Upward comparison ii) Downward Comparison

i) Upward comparison

In Upward comparison an individual consumer might decide to compare

himself with some who is superior to him.

ii) Downward comparison

Down ward comparison is a type of comparisons in which individual consumer

might decide to compare himself with someone who is worse of people (ie
down to him) and making things better to the down people.

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DYNAMICS OF SOCIAL COMPARISON

It is important to mention a recent study in Australia examined the two inter

related concepts of i) Status consumption and ii) conspicuous consumption

i) Status consumption

Status consumption is the degree to which a consumer is likely to consume for

status.

ii) Conspicuous consumption

Conspicuous consumption is the extent to which a consumer is to consume

conspicuously. The research revealed that females were more prone than males
to conspicuously consume.

Social class categories usually are ranked in a hierarchy ranging from low to
high status. Social class categories suggest that others are either equal to them
(about the same social class) sometimes superior to them (higher social class) or
inferior to them (Lower social class). Consumers may purchase certain products
because these products are favoured by members of either their own or higher
social class.

Eg: Higher priced Swiss wrist watches.

Consumers may avoid other products because they perceive the product to be
lower class products.

Eg: Soaps without brand.

SOCIAL CLASS CATEGORIES

Most early studies divided the members of specific communities into five or six
social class groups.

i) Two category social Class scheme

Upper, Lower

ii) Three Category social Class schemes

Upper, lower, middle

iii) Four Category social class schemes

Upper, lower, lower middle, upper middle

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 iv) Five Category social class schemes

Upper, lower, lower middle, upper middle, middle

v) Six Category social Class schemes

Lower- Lower, Upper- Lower, and Lower- middle, upper-middle, lower-upper

and upper-upper

MEASUREMENT OF SOCIAL CLASS

Systematic approaches for measuring social class fall into the following broad
categories

MEASUREMENT OF SOCIAL CLASS

Subjective Measures Reputational Measures Objective Measures

Single

i) Multiple Variable Index

Subjective Measures

In the subjective approach to measuring social class, individuals are asked to

estimate their own social class positions.

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For Eg: Which one of the following four categories best describes your social
class?

Class [ ]

Upper Variable Index

Lower class [ ]

Lower middle [ ]

Upper middle [ ]

The resulting classification of social class membership is based on the

participants self perception or self images. This feelings of social group
membership is often referred to as social consciousness

1) Reputational Measures
The reputational approach for measuring social class requires selected
community informants to make initial judgment concerning the social class
membership of others within the community. The task of assigning community
members to social class positions however belongs to the trained researchers.
2) Objective Measures
Objective Measures consist of selected demographic or socio economic
variables concerning the individuals under study. These variables are measured
through questionnaires that ask respondents several factual questions about
themselves their families or their places of residence.

Objective measures of social class fall into two categories

1) Single variable Index

2) Composite variable Index
i) Single variable index

A Single variable index just one socio economic variable to evaluate social class
membership. Some variables that are used for this purpose are

a) Occupation
b) Education
c) Income

d) Social class
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ii) Multiple Variable indexes

Composite indexes systematically combine a number of socio economic factors

to form one over all measure of social class standing

For instance: Research exploring consumers perceptions of mail and phone

order shopping reveals that the socio economic status (in terms of a composite
of income, occupational status and education)

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UNIT – V
5.1 High and low involvement

5.2 Pre-purchase and post-purchase behavior

5.3 Online purchase decision process

5.4 Diffusion of Innovation

5.5 Managing Dissonance

5.6 Emerging Issues

5.7 Case studies.

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5.1 High and low involvement
INVOLVEMENT THEORY

According to Harold [Link], consumer behavior is considered as an

important variable that can help explain how consumers process information
and how this information might influence their purchase on consumption related
behavior.

Zaickkowshy has developed an involvement construct that influence three

antecedents (reasons or causes)

i) Traits of person such as needs importance ,interest values and unique

experience
ii) The characteristics of stimuli, such as differentiation of alternatives,
communications, media and message content.
iii) Situational factors such as purchase or use occasion for a particular
product

There are two types of involvement. They are

i) High involvement

ii) Low involvement

1) High involvement purchase

High involvement purchases are those which are considered very important to
consumers such as complex, expensive, risky or ego intensive products and
require extensive information processing.

1) Low involvement purchase

Low involvement purchases are not important to consumer. They just choose
the products or services without collecting rather information.

CONCEPT OF INVOLVMENT

The concept of involvement has evolved from the split – brain theory. Herbert
Krugman observed that advertisement on television cannot be slowed down or
stopped as per the viewer’s convenience and for this reason there was little
opportunity to think deeply about them.

He hypothesized that TV is a low involvement medium because it primarily

pictorial allowing viewers passive and holistic processing of information. Print
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media such as newspaper and magazines are believed to be high involvement
media because information is processed cognitively leading to attitude
formation and final behavior. To furnish detailed product related information for
cognitive processing, newspaper and magazines are considered as most suitable.

Involvement variables

The variables related to person refer to personal values, interests and experience
etc.

for e.g.: A person who is deeply interested in learning computers reads

computers related magazines, such as digit, PC quest and computers at home
etc, to learn about new development in processor, Hard devices and other
related products.

Stimulus/ object variables refers to products or stimuli that consumers perceives

to be closely related to her/ his values experiences and interests etc and will
stimulate higher degree of involvement. For e.g.: In case of computers one
should not expect the same level of involvement for all consumers.

Different situations that consumers face can also affect the degree of
involvement they will experience in making purchase decisions. For e.g.:
consumers buy candles for emergency use without much involvement at all but
if the candled are needed for being placed on wife’s birthday cake the
consumers become more involved in the products. For e.g.: consumers buy pens
for every day without much involvement but if the pen is to be presented as a
gift, then the level of involvement might increase significantly. Many conditions
may be present to limit the influence of involvement variables.

For e.g.: A consumer is interested to buy a cellular phone and the commercial
she/he is watching would be quite interested to her/him. Suddenly somebody
nosily knocks on the door and his distract her/his attention from the
advertisement or the consumer may not possess much knowledge about a
particular product and fail to understand some of the information contained in
advertisement.

Involvement properties

A consumer’s involvement represents an internal state and may be viewed to

have three main characteristics

1. Involvement intensity refers to the severity of involvement as

experienced by the consumer and is generally categorized as high or
low.
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 2. The direction refers to the focus of involvement and involvement
variables will strategy affects this focus.
3. Persistence describes the length of time the consumers remains involved
with purchase decisions

Response factors

Response factors concerns how a consumer behave under involvement

conditions of different intensity. These factors include different patterns of
information’s search, information’s processing evaluation of alternatives and
post purchase actions. One may expect that consumers high in enduring
involvement for a product will undertake regular ongoing search for information
and low involvement will result in little if any active information acquisition.

FOUR TYPES OF CONSUMER BEHAVIOR

Considering the level of consumer behavior and the complexity of decision

making four type of consumer choice process emerges .Most consumer’s
purchases are less involving and consumer may act without thinking. Types of
consumer behavior are as follows.

1. Complex decision making

2. Brand loyalty
3. Limited decision making
4. Inertia

1. Complex decision making

Best describes is the traditions hierarchy models, the consumer develops

beliefs, norms, form attitude about the product category. Consumer will be
highly involved and aware of important differences among brands and possess
little knowledge about the product category. Cognitive learning theory best
describes this sequence as it involves detailed information processing before
making decisions.

2. Brand loyalty

Brand loyalty describes consumer making buying with little deliberation though
they are highly involved. This results a deliberate move because post
dissatisfaction with the product ant strong commitment to the brand. Another
possibility is that a consumer will shop around and learn what is available and
then quickly make purchase decision.

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3. Limited decision making

Limited decision making describes a situation that occasionally involves some

information processing. This is characterized by low involvement but there are
important brand differences. This may happen in case of new product
introduction, product modifications or just a desire for variety might stimulate
the consumer to shift from routines or making limited decisions making.
Though involvement with the product category is low, yet the new product or
incorporation of new features in the existing product evokes mild interest and
curiosity. There is a little information and brand evaluation the consumer forms
beliefs about the brand, purchase it and finally makes evaluation.

4. Inertia

Describes buying behavior where a consumer forms beliefs passively makes

decisions on as a habit with little information processing and makes post
purchase evaluation. Inertia causes repast purchasing of the same brand
avoiding decisions making and evaluates the brand after new purchases. I f the
brand proves satisfying at a minimum level, the consumer will continue buying
the same brand routinely. This type of purchase behavior is something referred
to as fake brand loyalty.

BEHAVIOR RELATED TO THE PURCHASE/PRE PURCHASE

EVALUATION

Once a consumer makes a decision to purchase, there can be several types of

additional behavior associated with that decision. There such decisions related
to the purchase have been recognized to be of importance. Their decisions are-
(i) decision on financing the purchase, (ii) decision on the product installation
and use, and (iii) decision on products or services related to the item purchased.

i) Decision on product payment

An average Indian purchases goods mainly durables for credit. Modern

society is increasingly run on credit. Modern households pay for 57 percent of
their expenditures with cheques,36 percent with cash, and 6 percent with credit
cards. Only 14 percent of households use cash exclusively and over one-third of
these use money orders to pay for approximately 40 percent of their
expenditure. Only small purchases are made for cash. A number of credit
avenues are available to households such as Mater card, Visa card, and oil
Company and department store credit card that are increasingly used in making
purchasing especially expensive durables. A major decision in making the
purchase involves the nature of payment to be used in the purchase. Such
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payment decisions may be very simple. He may use cash or credit card for the
purchase. Thus, a consumer may shop around for the most favorable credit term,
thus considering numerous alternatives. Today, banks also play an important
role in paying for the consumer goods purchase and extend credit.

ii) Decisions on Product set up and Use.

Other decisions required at the time of purchase of durables are to have their
product set up or installed. The products the most be ready to use. Durable such
as car, Television, washing machine, refrigerator, air-conditioner etc, needed
some sort of set up or installation if the consumer is to find satisfaction from
their use. Many other products need very little in the way of set up and use.
Sometimes, a very simple product can be very complicated and frustrating in
their set-up processes.

Of course, another element in product set up and use concerns instructions to

the buyer for assembly and operation of the item. Products such as autos,
calculators, micro-ovens, air conditioners and so forth may require detailed
explanation as to mode of operation. In order to ensure, buyer satisfaction, such
brochures, or booklets for some durables are made available to buyers to
provide sufficient instructions to maintain the product.

iii) Decisions on related Products or Services

It often happens that a buyer of one product may become for other related
products or services. For example, car sellers may extend service and other
related products to new car buyer or old buyers. A car buyer, for example will
purchase accessories for the car. Retailers know the fact that big profits are
often in the optional extras that a consumer purchases, rather than in the original
product itself. As result, for example, the sellers sell the main product marginal
profits or no profit or sometimes even on loss and change huge profits on extras.
The consumer has to made decision on related products and services.

MARKETING IMPLICATIONS

Marketers are more concerned with the customers post purchase decisions –
payment, product set up and other related products. First of all, the marketers
must make arrangement of payment as easy as possible. Retailers may make
payment problem easy in many ways. They may accept cash or cheque or partly
in cash/cheque and partly by way of credit cards. They may also numerous
alternatives to buyers in order to meet their needs. Bank also plays important
roles in facilitating purchase payment decisions. Not only are the bank cards and
loan plans available, but even after regular banking hours, electronic funds
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transfers may affect in order to obtain the necessary credit or cash to pay for
purchases. Retailers and financial institutions need to research their chosen
market segment to determine their desired financing alternatives, and if
possible, to offer and promote these alternatives.

A second set of implications flows from decisions on products set up and use.
As stated earlier, the marketers must take necessary steps to set up products and
explain the buyers, for their use .Unless these activities are consciously
undertaken consumer, dissatisfaction is disastrous for the marketers. The
manufactures, therefore, must select their team of Retailers who will provide the
kind of quality after Sale installation or warranty service that will enhance the
manufacturer’s as well as retailer’s image.

Information supplied by the manufacturer’s for the use of product along with
the product is even more important in case the purchase is made from self
service store and the store does not undertake to have the product setup or
installed. As a result, buyers depend more on literature supplied along with the
product. The manufacturer must understand that such information must be
easily understandable by the users.

The marketers or manufacturers must first understand how his product is used
by the consumers and how this product fits into their consumption system. This
is required to know how his product is used by consumers not only to make
improvements in the quality of the product and functions, but also to suggest
some new uses for it. It is also important for the marketers to understand the
system i.e. the manner in which the product is used by the consumer and what
he wants further to make it more workable so that marketers may research for
such additions.

The third factors for the marketer to consider with regard to post purchase
activities concerns buyer’s interest in related products and services because
buyers may become interested in related items, they need to be aware of the
potential products that exist. Thus, literature enclosed with the product could
present other products in the line. For example a car seller/ manufacturer must
present full line accessories required for a car, so that buyer may take advantage
of it when needed. Thus marketers of durable and non- durable items might
cultivate the potential products that exist by linking products together.

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POST PURCHASE BEHAVIOR

Once the consumer has purchased the product, he engages in an evaluation of

his purchase decision. Because, he is quite uncertain about wisdom of his
purchase decision, he rethinks the decision in the post purchase stage. Thus
evaluation of his purchase decision important because (i) it broadens the
consumer’s set of experiences, stored in memory, (ii) it provides a check on
how well he doing as a consumer in selecting products and stores, and (iii)the
feedback that the consumer receives from his stage helps to make adjustments
in future purchasing strategies.

Consumer’s satisfaction /Dissatisfaction

Consumer satisfaction’s is an important element in the evaluation stage.

According to Howard and Sheth , satisfaction refers to the buyer’s state being
adequately rewarded in a buying situation for the sacrifice he has made.
Adequate satisfaction is a result of matching actual post purchase and
consumption experience with the expected reward from the brand in terms of
its potential to satisfy the consumer’s motives.

Hunt has summarized concept of satisfaction in the following manner-

“satisfaction is a kind of stepping away from an experience and evaluating it…
one could have a pleasurable experience that caused dissatisfaction because
even though pleasurable, it was not as pleasurable as it was supposed or
expected to be. So satisfaction/dissatisfaction is not an emotion, it is the
evaluation of emotion”.

Consumers have certain expectations prior to the purchase. These expectations

may be about. (i) The nature and performance of the product or services (i.e.
anticipated profits to be derived directly from the product) (ii) the cost and
efforts expended before obtaining the benefits of the product or service, and (iii)
The social benefits or costs accruing to the consumer as a result of purchase.
Advertising may often be an important factor influencing these expectations.

Consumers may be satisfied or dissatisfied with the purchase of the product.

Research has uncovered a number of factors that influence the satisfaction
including demographic and personality variables, expectations and other factors,
For example, older consumer tend to have lower expectations and higher
satisfaction. Higher education tends to be associated with the lower satisfaction.
Men to be more satisfied than women. The more confidence one has in purchase
decision making and more competence in a given product area. The greater
one’s satisfaction tends to be. There is also greater satisfaction with relevant

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others are perceived to be more satisfied. Higher levels of product satisfaction
are also indicated by persons who are more satisfied with their lives as a whole.

The interaction between expectation and actual product performance produce

either satisfaction or dissatisfaction .However, there is no direct relationship
between the level of expectations and the level of satisfactions. Where level of
satisfaction is not up to expectations, the situations are one of the
disconfirmation. Disconfirmation may be positive or negative. If it is better than
expected, it is positive disconfirmation and if it is worse than expected, it is
negative. Thus any situation where consumers judgment is wrong (whether
positive or negative) it is disconfirmation.

The result of satisfaction to the consumer from the purchase of a product or

service is that more favorable purchase attitudes, higher purchase intentions and
brand loyalty are likely to occur, that is similar behavior will be repeated in
similar purchase situation. Thus as long as positive reinforcement takes place,
the consumer will tend to continue to purchase the same brand. The consumer,
however, in some cases, behaves differently simply for the sake of novelty. On
the other hand, if consumer is dissatisfied with the purchase of the product, his
post purchase attitude will be lower non-existent brand switching, complaining
or negative etc

MANAGING DISSONANCE

As explained by Festinger , cognitive dissonance occurs as result of discrepancy

between consumer’s decision and the consumer’s prior evaluation. When the
consumer faces certain problem with product or brand he has purchased, this is
called post purchase dissonance. Festinger’s theory is based on two basic
principles (i) dissonance is uncomfortable and will motive the person to reduce ,
it and (ii) individuals experiencing dissonance will avoid the situation that
produce more dissonance, how the consumers deal with the conflict, and what
marketing implications are embodied in the concept.

Conditions leading to Dissonance

Engel and Blackwell suggest that dissonance is likely to occur in the following
conditions.

1. There is a limit of tolerance of inconsistency. Once this minimum

threshold is passed, dissonance appears.
2. The action/ Purchase decision is irrevocable. Once a product is
purchased, there is likelihood of reversing the action. Product cannot
return.
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 3. Unselected alternatives may also have all attractive features.
4. There are several desirable alternatives. A car buyer, for example, has
abundance of choice among similar attractive models. In fact, research
indicates that those consumers who experience great difficulty in make
purchase decisions, or who consider a wider range of store and brand
option, are more likely to experience greater magnitude of post purchase
dissonance.
5. Available alternatives may be dissimilar in their qualities. But, others
also have some unique characteristics.
6. The buyer is committed to his decision because of its psychological
significance, philosophy and lifestyle. Ego involvement may also be
quite high.
7. There is no pressure applied to the consumer to make the decision. If the
consumer is subject to outside pressure, he will do what he is forced to
do without letting his own view point or preference really be challenged.

The post purchase dissonance is likely to be strongest in case of durable ,

although it may exist for every purchase.

Dissonance Reduction

There are several ways to reduce dissonance. The consumer (i) changes his
evaluation of the alternatives, (ii) seeks new information to support his choice,
and (iii) changes his attitude.

i) Changing his evaluation of the alternatives

One of the ways of reducing dissonance is to re-evaluate product alternatives.

This can be accomplished by enhancing the attributes of the product selected
while decreasing the importance of the attributes of unselected product
alternatives. I.e. consumers seek to polarize alternatives in order to reduce their
dissonance.

Another approach to reduce dissonance is for the consumer to re-evaluate

product alternatives to view them as being more alike than was thought at the
time of purchase, that is, to imagine that cognitive overlap exists. As because
have been viewed as being alike, it makes no difference which one is selected.

In addition, the consumer should be allowed to forget the positive features of

the products not selected and negative features of product selected while
remembering positive features of the selected product and negative features of
unselected ones to reduce dissonance.

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ii) Seeking new information

A second way to reduce dissonance is to seek new information about the

product in order to confirm the wisdom of choice of the product. According to
Festinger theory, the dissonant individual should avoid information that increase
his dissonance and seek information which support his decision. Consumers
sometimes seek consonant information to support their choice, sometimes to
seek discrepant information to refute it, and sometimes look merely for useful
information; no matter what the contents are .It depends on the amount of
information gathered before the decision and whether he perceives that he has
made a wise choice.

Research in this field has failed to support the hypothesis. So it cannot be

concluded that dissonance factors have any effect on the consumers post
purchase information seeking behavior.

iii) Changing attitude

As a result dissonance the consumer may changes his attitude to make

them consonant with his behavior. For example, When the marketers secure
new product trail among consumer who initially have an unfavorable attitude
towards the item, this situation is likely to produce dissonance. That is
unfavorable attitude towards the product are inconsistent with the behavior of
product trail. Motivation to achieve consonance will likely to take the form of
attitude change because that is easier than renouncing the purchase and
returning the product. By re evaluating the product and adopting a positive
attitude towards it, attitudes and behavior, are now consistent and consonance is
achieved.

MARKETING IMPLICATIONS

The marketing implications of consumer’s cognitive dissonance are numerous.

Important of them are

[Link] expectation

2. Inducing attitude change

3. Reinforcing buyers.

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1. Confirming expectation

When the product confirms the buyer expectation, reinforcement takes place.
That is, the consumer re-purchases the product and when it fails to confirm the
expectation, the result may be initial sale, repeat sale or unfavorable word –of-
communication. It is, therefore, important for the product to confirm
expectations. It is imperative for the marketer not to build up expectation
unrealistically. The marketer should first design the product that will fulfill the
consumers’ expectations in so far as possible. The product should be carefully
developed with the consumers in mind. A clear understanding of how the
product will be used and how it fits into the consumer’s life style is necessary.

The advertisement done today may appear harmless exaggeration of puffery, but
it may contribute less satisfaction on the part of consumers when they actually
purchase it. Where promises in promotion are more than what the product can
deliver, may be destined for problems. As a result, disconfirmed consumers can
spread unfavorable word-of-communication and refuse to purchase the item
again. Thus promises made in the advertisement, must be met by the product.
For this purpose, two sided approach is being adopted by the advertisers. In this
type of ad, the marketers mention certain attributes of his product as
counteracted with the attributes of the products.

Marketers may also conduct surveys to find out what consumers like and dislike
about a product and also how well the firms product is meeting the expectations
both manufacturer and dealer promotion should be assessed to determine if
either is promising more than can be delivered.

A large scale survey, focusing on satisfied as well as unsatisfied users, might

yield several important types of information (i) Areas of improvement of the
physical product (ii) ideas for promotional copy to create favorable
attitude towards the firm’s brand. (iii) Promotional copy illustrating
why our brand is better, based on competitive brand features (iv) guidelines for
developing warranties other kind of guarantees.

Thus marketers are advised not to create unrealistic expectations in the minds of
consumers.

2. Inducing attitude change

We saw earlier that when attitudes are inconsistent with purchase behavior, they
are likely to change. Therefore the marketer must seek to change the attitudes of
consumer through various means. For this purpose, a number of promotional
avenues like cents-off, or force samples etc. are used by the marketers. By
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offering the incentives, customers are enticed to try the item and as result adopt
the product or switch the brand. However, the size and the nature of
inducements should be carefully considered. There are some research evidences
to suggest that that the smaller the incentive, the greater the consumer’s
dissonance and the greater the attitude change. So marketer should offer small
incentives.

In case of free samples, however acceptance of the brand may never take place
because consumer could fail to expose himself fully to attitude change from use
of the sample.

3. Reinforcing buyers

It has been not proved that post-purchase information seeking may reduce the
dissonance. It may nevertheless be prudent marketing approach to proceed on
this supposition. Such an approach may pay a handsome divided to the company
undertaking same promotion aimed at new buyers. It is especially important in
case the company is launching an innovation.

The marketer may not have to develop special ads aimed at new buyers. Much
of his regular advertising may be sufficient to reinforce buyers about their
decision. The ads must stress innovativeness in products to interest new buyers,
but also convey a feeling of satisfaction among present users. The marketers
should supply sufficient literature to dealers which could provide new buyers
with reinforcement. Instruction manuals should not only contain instructions to
install and use the product, but also seek to convince the buyer of his wisdom of
his selection of the product. Information in the manual about warranties and
guarantees and where and how to secure service should help reduce post
purchase dissonance .These materials should be packed with the product.

Manufactures and retails/dealers may initiative correspondence with the new

buyer as a part of dissonance – reducing campaign.

Thus, marketers may develop several effective informational programmes

aimed at reducing cognitive dissonance in buyers.

PRODUCT DISPOSITION

Product disposition is another problem in post purchase scenario. The topic of

disposition of what the consumer has purchased is important from a public
policy perspective as well as from a marketing orientation to better understand
how consumer makes disposition decision for a product.

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In addition, the method of disposition may vary considerably across the
products. For example, a bicycle may be given away to somebody but this is not
true in case of record player which is usually thrown away or stored the factors
influencing the disposition choice may be categorized in the following manner.

1. Psychological characteristics of the decision making

These variables are personality, attitude, emotions, perception, learning,

creativity, intelligence, social class, level of risk tolerance, peer pressure, social
conscience, and so on. The demographic variables have not been proved to be
very enlightening in understanding disposition behavior; lifestyle factors have
proved to be moderately useful.

2. Factors Intrinsic to the product

The Intrinsic value of the product also influences the disposition such as
condition, age, style, value, color, power source of the product, technological
innovations, adaptability, reliability, durability, initial cost, replacement cost
and so on.

3. Situational factors Extrinsic to the product

These factors are finance, storage space, urgency, fashion changes,

circumstances of acquisition, and functional use economic factors like demand
and supply legal considerations and so on. It has been recognized that consumer
disposition is a process involving the steps of problem recognition, search and
evaluation, disposition decision and post disposition

CONSUMER COMPLAINT BEHAVIOR

There are several negative outcomes when consumer experience dissatisfaction.

Consumer may exhibit unfavorable word of mouth communication that is they
will tell others about their problem. In fact studies show that customers tell
twice as many people about bad experiences as good ones. Such behavior can
damage company’s image. The consumer is to complain several generalizations
exist from research on consumer complaining.

• Complainers tend to be members of more upscale economic groups than

more complainers
• The severity of the dissatisfaction or problems positively related to
complaint behavior.
• Complaining is more likely when there is more positive perception of
retailers responsiveness to customer complaints.

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Consumer may complain not to the seller but to some formal third parties such
as better business bureau, news paper or legal system ( Third party responses)

They may engage in private CCB actions about the bad experience and
changing their own patronage behavior (Word of mouth communication)
Private response take action even when dissatisfied if they are loyal to the seller
believe complaining is pointless

INNOVATION

According to Hubert Gatign on ant Thomas S. Robetson, an innovation is a

product, service, attribute, or idea that consumers within a market segment
perceives as new.

There are three types of innovation 1) Continuous innovation 2) Dynamically

continuous innovation 3) Discontinuous Innovation

1) Continuous innovation

A continuous innovation is one that has limited influence on consumption

behavior of consumers. Consumers would use a product representing
continuous innovation in much the same way they would that came before it,
product alteration is on a continuous basis.

2) Dynamically continuous innovation

A dynamically continuous innovation is one that affects consumer’s

consumption behavior in a pronounced way. Adoption requires a moderate
change in an important behavior or major change in an area of behavior that is
of low or moderate importance to the individual

E.g. Internet s hopping, Digital camera notes book computers.

3) Discontinuous innovation

Discontinuous innovation represents a product so product so new that the

consumers have never known anything like it before. According to peter
Wildman a former aeronautics professor has introduced a product called “sky
car” which is a machine that flies through the air I the same manner as cars do
in cartoon shows in TV.

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Breadth of Innovation

Breadth of innovation describes the new and different uses to which a product is
put For Eg: Baking soda has been used as baking ingredients, a tooth paste
polisher, a carpet deodorizer and refrigerators deodorizer.

DIFFUSION

The diffusion process is the manner in which innovations spread overtime to

other consumer’s through communications across a market. The diffusion
identifies innovators is the introductory phase of life cycle. There are early
adopters during the grouped period. The early majority and late majority adopt
the products in the maturity. Laggards (Late adopters) are the last to adopt the
product.

During the introductory phase, the marketer’s objectives are related to

establishing distribution, building brand awareness among members of the
target market and encouraging trial to begin the diffusion process.

As the product gains some acceptance the marketers can define its early
adapters. It now tries to strengthen its foothold in the market by shifting from
the objective of creating brand awareness to one of broadening product appeals
and increasing availability by increasing its distribution

As the brand matures competition intensity gradually increases and sales begin
to level off Majority of the adopters enter the market at this stage largely
because of the influence of early adopters.

When the brand is viewed to have entered in its decline phase, lower prices
become more relevant and the marketers consider the brand or adopt the
strategy of harvesting or divesting. It is during the decaying maturity and
decline phase of product life cycle that laggards enter the market.

FACTORS AFFECTING DIFFUSION OF INNOVATION

The following factors influence the process of diffusion of innovation.

• Type of target segment

• Number of people involved in decision making

• Extent of marketing efforts involved

• Need fulfillment

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• Compatibility

• Relative advantage

• Complexity

• Observability

• Trial ability and

• Perceived risk

The adoption of an innovation requires that an individual or a group of

consumers decide on buying a new product.

ADOPTION PROCESS

The adoption of an innovation is likely to be a reasonably difficult task for most

of those who are among the first to buy the product and can be represented by a
hierarchy of effect by consumers when a new product, services ideas involved.

For E.g.: The decision to buy a DVD writer or have laser eye surgery will most
likely to be a high involvement process.

The process shows that the consumers becomes aware and recognizes the need
for the product.

In next step to acquire about the product the consumer gets involved in
information search

The third step is brand evaluation with the number of alternatives choosing best
with the number of alternatives

Next is trial of the product before making a purchase decision and finally the
consumer decides whether to adopt the product.

As consequences of using the product the consumer makes post purchase

evaluation. The outcomes of consumer’s decision process can be adoption or
rejection of the product many consumers evaluation of cellular products had led
them to reject these wonderful products because they consider the convenience
of keeping a cellular phone is not worth the expenses involved.

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Classification of Adopters

Five categories of adopters are identified based on the time of adoption

1) Innovators

During the introductory phase the marketers objective are related with
establishing distribution. Innovators who constitute roughly about 2.5percent of
all those consumers adopt the new product and technology enthusiasts they are
venturesome and risk takers and willing to live with buts and deficiencies
Innovators tend to be younger better educated have higher incomes and active
outside of their community than non-innovators.

2) Early adopters

Early adopters represent on an average the next 13.5 percent who adopt. They
like new products not so much for its features abilities to create revolutionary
breakthrough in way things are normally accomplished. Through they are not
among the earliest individuals to adopt the product, yet they adopt the product
in the early stage of its life cycle

3) Early maturity

The early maturity adopters constitute 34 percent of the adopters. They look for
innovation that offer incremental and predictable improvements of existing
technology. They adopt innovations earlier than most of other social groups but
only after the innovation is viewed successful by others. They tend to collect
more information before adoption.

4) Late maturity
Late maturity depends on tradition and generally adopts innovations in
response to group norms and social pressure or due to decreased availability of
the innovation. They tend to be older with below average income and education
and have less social status and mobility then those who adopt earlier.

5) Laggards

Laggards represent the last 16.0 percent of adopters include the group’s norms.
Laggards are tradition bound tend to be dogmatic and make decision in terms of
the past. By the time they adopt an innovation it is old and has been superseded
by something else. They tend to be suspicious of new products and alienated
from a technologically progressing society and adopt innovations

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BARRIERS TO ADOPTION OF INNOVATION

[Link] and Jadish N. Sheth have mentioned three of above mentioned as major
factors at inhibit adoption of innovation

1. Value barrier

Refers to a product results relative advantage compared with substitute

products.

For eg: when cellular phones were introduced they were too experience for most
generally consumer relative to the value they could get from commonly used
telephone.

2. Usage Barrier

Refer to a product results when an innovation is incompatible with most

Indian’s shopping habits and its diffusion is extremely slow in this country.

[Link] barrier

Risk barrier is concerned with physical, economic, functional or social risk for
adopting an innovation.

ONLINE CONSUMER BEHAVIOUR

The internet and World Wide Web is a large system of interconnected networks.
In USA, it came into existence during 1960’s for preparing for the possible
effects of a nuclear attack, commissioned the development of networks that
could operate independently without central control. The network model was
used to connect four computers in 1969- one each at the University of California
at Santa Barbara, and University of California at Los Angles, SRI international
and the University of Utah laying the foundation for the first network ,called the
ARPANET. Many computers were connected to this network over several years
and several applications, like e-mail, FTP (file transfer protocol) and Telnet,
were developed to send and receive messages and files across computers on the
network.

Several other networks, such as the BITNET, CSNET, and USENET came into
existence in the later years. The early 80’s saw an explosion in personal
computer use with powerful and affordable computers in the market. Soon there
was a need for public network across which business could interact with each
other for commercial transactions.

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The World Wide Web, according to Tim burners Lee, the inventor of the hyper
text system, is an abstract space of information. The web exists because of
programs that communicate between computers on the internet. The web made
the internet useful for commercial use by making it ample to organize and
retrieve information.

According to Nielson/ Net ratings, internet use in United States grew 15 percent
in October 2001 to about 115.2 million people, up from 100.3 million in
October 2000.

Approximately, 60 percent of U.S residents have access to internet at home and

the average user spent 19 hours online in October 2001.

Characteristics of the Internet that aid E-commerce

The Internet is amenable to commerce because of a few very salient

characteristics. According to the researcher Peterson, Balasubramanian and
Bronnenbrg, the following are the main characteristics of the Internet.

1. Storage facility. It inexpensively stores vast amount of information at

different virtual location.

2. Search information. It has powerful and inexpensive means of searching,

organizing and disseminating such information.

3. Information facility. It provides information on demand.

4. Perceptual experience. It provides perceptual experiences that are far

superior to printed catalog, although not rich as personal inspection.

5. It provides a transaction medium.

6. It provides a physical distribution medium for certain goods (e.g software)

It offers relatively low entry and establishment costs for retailers.

The above characteristics of the Internet have changes the way customers shop
for products and services, The Internet has totally removed the time and place
constraints that are imposed by traditionally retailing. It provides access to the
vast availability of information, the ease with which it can be searched , and the
comparison aids available To evaluate the information have resulted in an
informed consumer. Armed with such information, the customer is able to
exercise a log more power in buying decision today, both offline and online. For
example today there are few consumers who purchase a car without obtaining
information on the invoice price of the car on the web, knowing the invoice

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price makes it easy for the customer to bargain for process with the dealer. The
internet also increases revenues for marketers by allowing them to personalize
their products or services and marketing communications. The internet gives
revenues for marketers by allowing them to personalize their products or
services and marketing communications for customers. It reduces the costs for
marketers through the use of web self service channels at the consumer end and
through e- procurement and market research at the supplier. Today’s world wide
web communication bandwidths rise with the increase of broadband
connections and as customer terminals (i.e. internet access devices) becomes
more powerful, sophisticated, easier to use, affordable and portable, it will be
possible to exchange an enormous range of services on the web at nominal cost.

If is found from the table that 50.3 percent of the online population is female,
49.7 percent is male. Table presents a gender breakup of the internet population
until 2003. This trend is also being seen in other markets worldwide, but most
rapidly in Asia pacific, where in Australia women now make up 48 percent of
the internet population, followed by New Zealand (46 percent) South Korea (45
percent) Hong Kong (44 percent), Singapore (42 percent) and Taiwan (41
percent). The largest age group on the internet is the 35-49 age group,
comprising 29.9 percent of the total online population, followed by the 25-34
and 2-17 age groups with 19.2 percent each. And while 17.3 percent of the
population online is in the 50+ age group, 14.4 percent falls in the 18-24 age
groups. In terms of income, the largest income group on the internet is the
$60,000 to $ 100,000 comprising about 28.4 percent of the population online.
Compared to the situation from 1995 to 1996, the population distribution of the
internet population is divided almost equally among the income classes with
about 27.8 percent of the internet population having an annual income of under
$400,000, 25.8 percent having an income between $40,000 and $60,000 and
about 18.1 percent having an income above $100,000. Thus the internet is no
longer the bastion of the economically privileged class. Even in terms of the
time spent online; these four income groups are quite similar. Thus the internet
population is fast becoming representative of the general population of United
States. Total online population by gender 1999-2003 (millions) and percentage
of females online In case of individual decision making the user and buyer roles
are combined in the same person. He also plays the payer role. Therefore, the
customer has more control over what to buy and is less likely to indulge in
impulse purchases. The three roles come into play in the online decision making
process; problem recognition, information search, alternative evaluation, choice
or purchase, and post choice experience.

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Through the user role considers the problem recognition as a major issue the
other two roles can also be the source of problem recognition. We can quote an
example, where from the payer perspective, the perception that online purchases
may cost less than offline purchases, may act as an impulse to browse the
internet for bargains. The main problem is to demonstrate price value for online
products. For example airlines suggest a 10 percent reduction in tickets if you
buy online as opposed to purchasing tickets through travel agents or call centres.
Likewise, buyers when exposed to banner ads on the internet may feel that
current vendors do not provide convenient or satisfactory service.

As there is no product information, the user can evaluate a wide variety of

products benefits more thoroughly. The payer can compare prices across a wide
variety of vendors and the buyer finds it easy to collect all the information.
Buyers who enjoy browsing help the user role identify new solutions, where as
those who are comparison shoppers help the payer find the best value. Although
traditionally the customers have been restricted to a fairly narrow evoked set of
brands, this has now expanded greatly due to the ease of accessing information
on the internet.

Limitations of websites

When people buy things, they engage in a decision-making process. Research

shows that one of the major problems with commerce sites is that they fail in
supporting the customers in this process. By understanding their needs and
concerns as they progress through the decision- making cycle, we can build
better and more successful commerce sites.

The consumer decision –making process

The consumer decision-making process is that we go through when we decide

to purchase something.

Imagine having to buy yourself a new cell phone. The first step in this process is
of course to recognize that you need a new cell phone. Though you may have an
idea of which phone you would like to purchase, you probably want to do some
research in order to narrow down a few alternatives.

You go online to investigate manufacturers, resellers, and independent

consumer organizations; you ask friends and colleagues for advice. You
compare you options and finally decide to purchase what seems to be the best
alternative, based on different criteria such as design, features, price, and
trustworthiness of the supplier.

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A decision-making process like this can be described as five different stages:

Information system

The basic perquisite for customers to make their way through the information
search stage is that they are able to find products and that they can easily
identify purchase option from the product list pages.

In order to support the customer decision-making process at this stage, we need

to know:

• Which words will customers use when browsing and searching for
purchase options?
• What basic information do customers need in order to identify purchase
options?
• What educational information do novices need in order to decide which
product criteria are important to them?

Evaluation of alternatives

The problem with the web is that there’ no one to ask if you have a question. A
large number of customers dropped out at this stage simply because the product
information was so inadequate, that they couldn’t decide whether the products
they were interested in would fit their needs. A commerce site should act as a
skilled salesperson, and have answers ready to any question or concern that the
customer might have.

Some of the critical questions that we need answer to are:

• What detailed product information does the customers need when

evaluating product alternatives?
• Which product evaluation criteria will customers use and which are most
important to the customers?
• Which concerns will the customers have about the products and how can
we address them proactively?
• How can we encourage customers to contact the sales and support
department if they have further questions?

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Purchase decision

At this stage emphasis should be on providing the easies possible way for the
customers to carry their orders through if the products are sold online, we
should remove any such obstacles. If products are not sold online, customers
would want an easy way to find out where and how to buy, or an easy way to
contact the sales department.

Purchase evaluation

The outcome of the post-purchase evaluation stage is a level of customer

satisfaction or dissatisfaction, which is determined by the customer’s overall
feelings about the product and buying experience.

Besides not receiving the product at all or getting the wrong one, customers
returned their purchases because the products didn’t live up to their
expectations. This problem is a consequence of not encouraging accurate
customer expectations at the product evaluation stage. In order to avoid this, we
have to make sure that the content presenting the products set up the right
expectations.

Advantages of online shopping

The major advantage of online shopping is the convenience it offers. By sitting

back at home you can now shop anything from candles to vehicles by several
clicks of mouse buttons.

The worry you may have on travelling, traffic blocks and parking constraints in
real world shopping can be avoided while shopping online. With online
shopping, you need not have to worry about weather conditions as well.

Another big advantage of online shopping is the flexibility of shopping. Unlike

offline shops, online shops have no holidays, closing times or any other
problems. You can shop 24 hrs a day, 7 days a week and 365 days a year. Isn’t
that amazing to have a shop open always?

One of the advantages of online shopping is the facilities available for product,
price comparisons. Since so many companies have come up with the facilities of
online shopping, the price comparison and quality comparison of the products
and services are possible. Some online malls also provide customer reviews
about each product, thus you can easily find out what other customers think
about the product or services before buying it.

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You can efficiently use these facilities to decide whether a product or service is
worth the price quoted. If you are lucky you will be also getting amazing offers
from different online stores that will effectively reduce the price than buying
offline.

In short, online shopping offers more convenience and time in comparison with
real- world shopping.

Disadvantages of online shopping

One of the important disadvantages of online shopping is lack of personal

interaction. Another disadvantage of online shopping is tangibility factor.
Seeing the picture of a product is far inferior to that of seeing it in real world.
When you go for real world shopping, you can actually touch, feel or sense it
with different means, but for online shopping you can actually touch feel or
sense it with different means, but for online shopping, you can only view the
electronic catalogues, some online malls still uses the old fashioned images in
product catalogues.

Another factor is shipping cost. lf the shipping cost is more than that you need
to actually carry the product home, then online shopping become un attractive.

Yet another concern is about online security. If you are shopping online you
have to take additional care about your credit cards so that to protect from
unauthorized usage.

Even though online shopping has several disadvantages, the advantages

outnumber the disadvantages and thus more and more people started buying
online.

CONSUMER BEHAVIOR IN INDIA

This study on Indian consumer behavior is aimed at helping Malaysian

businessman to get a better understanding of the Indian market place thus
enabling them to embark on selected strategies to effectively reach the Indian
consumers.

India is a big country with 28 states, over one billion people and 120
dislects/languages.

From the market perspective, people of India comprise different segments

consumers, based on class, status, and income. An important and recent
development in India’s consumerism is the emergence of the rural market for
several basic consumer goods, three fourths of India’s population lives in rural
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areas and contribute one third of the national income. This rural population is
spread all over India, in close to 0.6 million villages.

India is a lucrative market, even through the per capital income in India is low
and its remains a huge market, even for costly products

Among the total 164.8 million households in India, 80.7 million households
comes unter low income group (<USS 581), followed by 50.4 million lower
middle income households (USS 581 to uss 1162), 19.7 million middle income
group (USS 1162 to USS 1190), 8.2 million upper middle income group
(USS1790 to USS2465) and 5.8 million high income group (<USS 2465).

Characteristics of the Indian Consumer Behavior

The Indian consumers are noted for the high degree of value orientation. Such
orientation to value has labeled Indians as one of the most discerning consumers
in the world. Even luxury brands have to design a unique pricing strategy in
order to get a foothold in the Indian market.

Indian consumers have a high degree of family orientation. This orientation in

fact, extends to the extended family and friends as well. Brands with identities
that support family values tend to be popular and accepted easily in the Indian
market.

Indian consumers have a high degree of family orientation. This orientation in

fact, extends to the extended family and friends as will. Brands with identities
that support family values tend to be popular and accepted easily in the Indian
market.

Indian consumers are also associated with values of nurturing, acre and
affection. These values are far more dominant that values of ambition and
achievement. Product which communicate feelings and emotions gel with the
Indian consumers.

Apart from psychology and economics, the role of history and tradition in
shaping the Indian consumer behavior is quite unique. Perhaps, only in India,
one sees traditional product alongside modern products. For example, hair oils
and tooth powder existing with shampoos and toothpaste.

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[Link]

Socialites belong to the upper class. They prefer to shop in specialty stores, go
to clubs on weekends, and spend a good amount on luxury goods. They are
always looking for something different. They are the darlings of exclusive
establishment they go for high value exclusive product. Socialites are also very
branding conscious and world go only for the best known in the market.

[Link]

The conservatives’ belong to the middle class. The conservative segment is the
reflection of the true Indian culture. They are traditional in their outlook,
cautious in their approach towards purchases; spend more time with family than
in partying and focus more on savings than spending. Slow in decision making,
they seek a lot of information before making any purchase. They look for
durability and functionality but at the same time is also image conscious.

They prefer high value consumer products, but often have to often have to
settle for the more affordable one. These habits in turn affect their purchasing
habits where they are trying to go for the middle and upper middle level priced
products.

[Link] women

The working women segment is the one, which has seen a tremendous growth
in the late nineties. This segment has opened the floodgates for the Indian
retailers. The working women today have grown out of her long- standing
image of being the homemaker. Today, she is rubbing shoulders with men,
proving herself to be equally good, if not better. Working women have their
own mind in decision to purchase the products that appeal to them.

[Link] People

India’s rich can be categorized into five major categories as follows:

The Rich

The rich have income greater than US$ 11,000/- per annum. Total household
having such incomes are 1,058,961. These people are upwardly mobile. Some
of them in this category are double income no kids (DINK) households. They
spend more on leisure and entertainment- activities than on future looking
investments. Across the category, backgrounds are distinctly middle class. They
aspire, therefore, to attain the super-rich status.

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The Super Rich

The super rich have income greater than US$ 22,000/- per annum. Total number
of households is 320,900. There are less DINK families here than in the rich
category. The super Rich are mainly professionals and devoted to consumerism.
They buy many durables and are status conscious.
The Ultra Rich
The Ultra Rich have income greater than US$ 44,000/- per annum. The number
of households in this category is 98,289. There is no typical profile of the ultra-
rich. There are some DINK households of middle-level executives. Some single
earning households are of first generation entrepreneurs. Some rich farmers,
who have been rich for a long time, belong to this category.
The Sheer Rich
The Sheer Rich is made up by households having income exceeding US$
110,000/- per annum. Such households are 20,863. They do not have a
homogenous profile. There are joint families as well as nuclear families in this
category. They consume services greatly. They own multiple cars and houses.
They aspire to social status and power.
The Obscenely Rich
The obscenely rich is made up of households having income exceeding US$
222,000/- per annum. There are hardly 6,515 such households in India. They are
first-generation entrepreneurs who have made it big. Some of them are techies.
A variety of people belong to this category. They are just equivalent to the rich
in the developed countries. They crave for exclusivity in what they buy. Most
premium brands are relevant to them.
[Link] consumers
About three quarters of the Indian population are in the rural areas and with the
growing middle class, especially in the Indian cities; the spillover effect of the
growing urban middle class is also felt in the rural areas.
The Indian rural market has been growing at 3-4% per annum, adding more than
1 million ne consumers every year and now accounts for close to 50% of the
volume consumption of fast-moving consumer goods (FMGG) in India. The
market size of the fast moving consumer goods sector is projected to more than
double to US$ 23.25 billion by 2010 from the present US$ 11.16 billion. As a
result, it is becoming an important market place for fast moving consumer
goods as well as consumer durables.
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Increasing awareness of Indian consumers

Over the years, as a result of the increasing literacy in the country, exposure to
the west, satellite television, foreign magazines and newspaper, there is a
significant increase of consumer awareness among the Indians. Today more and
more consumers are selective on the quality of the products/services.

This awareness has made the Indian consumers seek more and more reliable
sources for purchases such as organized retail chains that have a corporate
background and where the accountability is more pronounced. The consumer
also seeks to purchase from a place where his/her feedback is more valued.

Indian consumers are now more aware and discerning, and are knowledgeable
about technology, products, and the market and are beginning to demand
benefits beyond just availability of a range of products that came from trusted
manufacturers. The Indian consumers are price sensitive and prefer to buy value
for money products.

Marketing strategies

Online marketing

A study by the confederation of Indian industry (CII) and thee international

trade centre predicts that e-commerce activity in India will rise from US$ 0.10
million in US$ 5.8 billion in 2005-06, of which the business to business
segment will account for US$5.41 billion.

Currently, the products Indian consumers are buying through online are greeting
cards, clothes, CD/VCDs/DVDs, cassettes, books, magazines, medicine and
educational material.

The popular online shops in India include:

• [Link]

• [Link]

• [Link]

• [Link]

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Celebrity influence

This is an important tool which is able to influence Indian consumer buying

behaviour. In India, celebrities are being increasingly used in marketing
communication by marketers to lend personality to their products. With the
visual media becoming more popular the use of celebrities in the TV media has
increased. Celebrities create headlines. Their activities and movements are
being closely watched and imitated. What they endorse sell like hot cakes. It is
not surprising therefore that using celebrities in advertisements has become
common practice.
In India especially, it is not difficult to look for the reasons as to why companies
are increasingly using celebrities. Indians always love their heroes and heroines.
Consumers like advertisements more if they are admires of the celebrities in the
advertisements. When a consumer likes the celebrity in the advertisement, he or
she is more likely to accept what the celebrity says about the advertised product
and therefore will develop more positive feelings toward the advertisement and
the brand itself. Famous celebrities are able to attract attention and retain
attention by their mere presence in the advertisements.
In the midst of the advertisement clutter, the advertisements that celebrities
endorse also achieve high recall rates. When people see their favoured reference
group members or celebrities in the advertisements, they pay more attention to
them.
Celebrities may also help reposition products. Products with sagging sales needs
some boosting and in these Indian celebrities can help by the way of the
endorsing the product concerned. The Malaysian businessman can contact
celebrities for endorsing their products through advertising agencies.

Quality oriented outlets

Indian consumers looking for quality choose expensive brands as they feel that
price is an indicator of quality.
However in the absence of well known brands in selected product range,
consumers are likely to take cues from well established retail outlets hoping that
these outlets carry quality products.
Malaysian businessman who prefers not to go for high-visibility, costly
campaigns may embark on the strategy to engage well known retail outlets to
capture the segment of Indian consumers looking for quality products. Some of
the established retail outlets in India for selected products are found in appendix
II.
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Freebies

Indian consumer buying behavior is influenced by freebies. Freebies are

consumer products given free of charge as gifts to purchase of selected products
above a certain value. TVs, washing machines, refrigerators, and readymade
clothes are some of the product categories in which freebies are given to Indian
consumers. Freebies generally comprise tooth paste, soaps, detergent, cooking
oil etc.

Malaysian companies wanting to penetrate the Indian market perhaps should

consider giving freebies for the purchases made by the Indian consumers.
Malaysians can work the local business partners to attract the consumers by way
of such promotion campaigns.

Eco-friendly products

The environmental awareness in India has started affecting marketing of

products based upon their eco- friendliness. In general, Indian consumers are
likely to buy environmentally responsible products and packs. The future key
for marketing could be to select more ethical and ecological responsible
products and packaging, which is also convenient for consumers, thus,
balancing environmental concerns with commercial considerations. Consumers
in India are taking lead in prompting manufacturers to adopt technologies to
produce eco-friendly products.

Changing ends in Indian consumer behavior

Bulk purchasing

Urbanization is taking place in India at a dramatic pace and is influencing the

life style and buying behavior of the consumers.

The working urbanites are depending more on fast and ready-to-serve food, they
take less pain in traditional method of cooking and cleaning.

Bulk purchases from hyper stores seems to be the trend these days with
purchasing becoming more of a once-a-week affair, rather than frequent visits to
the neighborhood market/store/vendor.

The popular growing shopping trend among urbanities is purchasing from super
markets to hyper stores.

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Trendy lifestyles

The current urban middle and upper class Indian consumer buying behavior to a
large extent has western influence. There is an increase in positive attitude
towards western trends. The Indian consumer has become much more open-
minded and experimental in his/her perspective. There is now an exponential
growth of western trend reaching the Indian consumer by way of the media and
Indians working abroad.

Foreign brands have gained wide consumer acceptance in India, they include
items such as;

• Beverages

• Packed food

• Ready to eat food

• Pre-cooked food

• Canned food

• Personal care products

• Audio/video products

• Garment and apparel

• Footwear

• Sportswear

• Toys

• Gift items

Foreign brands vie increasingly with domestic brands for the growing market in
India. Foreign made furniture is well accepted by the Indian consumers.
Malaysian, Chinese, Italian furniture are growing in popularity in India.

Indian consumers have also developed lifestyles which have emerged from
changing attitudes and mind sets; exposure to western influences and a need for
self-gratification. Beauty parlors in cities, eateries, designer wear, watches, and
hi-tech products are a few instances which reflect these changes.

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Buyers’ market in the making

The sellers’ market is slowly moving towards becoming the buyers’ market.

Since, India’s economic liberalization policies were initiated in 1991, many new
product offerings have entered the Indian market and product variety has also
increased manifold.

Import licensing restrictions are being eliminated and tariffs significantly

reduced and this has led to large range of consumer goods made available in
India.

Indian consumers have always preferred foreign goods and with the
liberalization, they now have a choice of foreign products vis-a-vis the local
products.

Consumer spending behaviour

The Indian consumer spending has increased from US$ 133.60 in 1992-93 to
US4 350.74 in 2002-03, a compound annual growth of 10.13 percent at current
prices.

The way Indian consumers are spending their money on various items has
changes in recent years. The share being spent on the basis (food and beverages)
has fallen from from 54.07 percent in 1992-93 to 44.8 percent in 2002-03. Other
items have increased in importance, for example, medical and healthcare
spending has increased from 3.5 percent to 8.5 percent of total expenditure over
the same period, a compound growth rate of 19.71 percent. Similarly spending
on transport and communication has grown at 13.2 percent.

While the compound annual growth rate (CAGA) in total consumer spending
has been around 12 percent a year over the past decade, there have been sharp
ups and downs. Consumer expenditure has been in tandem with the annual GDP
growth.

For rural India, per capital 30 days’ consumer expenditure of US$ 12.34 was
split up into US$ 6.78, on an average, for food, and US$ 5.56 for non-food.
Food expenditure included US$ 2.25 for cereals and cereal substitutes, and US$
2.37 for milk, milk products, vegetables, edible oil and US$ 2.16 on others.
Non-food expenditure included US$ 1.11 for fuel and light another US$ 1.00
for clothing, footwear and US$3.45 on other non-food expenditure.

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For the urban sector, average Monthly per Capital Consumer Expenditure
(MPCE) of US$ 23.53 was split up into US$ 10.00 for food US$ 13.53 for non-
food. Of food expenditure, US$ 2.37 went towards cereals and cereal substitutes
while US$ 3.67 was spent on milk, milk products, vegetables and edible oil and
US$ 3.96 on other food items. US4 2.11 was spent per person per month on fuel
and light, and US$ 1.65 on clothing and footwear and US$ 9.77 on other non-
food items.

Urban expenditure levels per capital exceeded rural levels for all the product
groups, except on cereals and cereal substitutes. The average monthly per
capital expenditure on cereals and cereal substitutes for rural and urban areas
are very close to each other.

The gap between rural and urban averages of MPCE was of the order of US$
[Link] item-groups viz. Milk and milk products, beverages etc, fuel and light,
education miscellaneous consumer goods and services, conveyance and rent
contributed to the gap significantly.

Non-food expenditure per person in the urban sector was more than double of
that for the rural sector, where it was about US$ 5.55.

In India, the higher income group (>US$ 2,465) spends more amount of their
income on luxury goods and trendy products than fast moving consumer
[Link] middle income group (US$ 1,162- US$ 1,190) spends more on
consumer expendables than the rich. Combined the middle and lower income
group provide 60 percent of the value of the Indian market.

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