Consumer Behaviour

Consumer behaviour is the study of when, why, how, and where people do or do not
buy product. It blends elements from psychology, sociology, social anthropology and
economics. It attempts to understand the buyer decision making process, both
individually and in groups. It studies characteristics of individual consumers such as
demographics and behavioural variables in an attempt to understand people's
wants. It also tries to assess influences on the consumer from groups such as family,
friends, reference groups, and society in general.

Customer behaviour study is based on consumer buying behaviour, with the

customer playing the three distinct roles of user, payer and buyer. Relationship
marketing is an influential asset for customer behaviour analysis as it has a keen
interest in the re-discovery of the true meaning of marketing through the re-
affirmation of the importance of the customer or buyer. A greater importance is also
placed on consumer retention, customer relationship management, personalisation,
customisation and one-to-one marketing. Social functions can be categorized into
social choice and welfare functions.

Each method for vote counting is assumed as a social function but if Arrow’s
possibility theorem is used for a social function, social welfare function is achieved.
Some specifications of the social functions are decisiveness, neutrality, anonymity,
monotonicity, unanimity, homogeneity and weak and strong Pareto optimality. No
social choice function meets these requirements in an ordinal scale simultaneously.
The most important characteristic of a social function is identification of the
interactive effect of alternatives and creating a logical relation with the ranks.
Marketing provides services in order to satisfy customers. With that in mind, the
productive system is considered from its beginning at the production level, to the
end of the cycle, the consumer (Kioumarsi et al., 2009).

Belch and Belch define consumer behaviour as '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'.'

Black box model

ENVIRONMENTAL FACTORS BUYER'S BLACK BOX
BUYER'S
Marketing Environmental Buyer RESPONSE
Decision Process
Stimuli Stimuli Characteristics

Product Economic Attitudes Problem Product choice

Price Technological Motivation recognition Brand choice
Place Political Perceptions Information Dealer choice
Promotion Cultural Personality search Purchase
 Alternative
evaluation timing
Demographic Lifestyle
Purchase decision Purchase
Natural Knowledge
Post-purchase amount
behaviour

The black box model shows the interaction of stimuli, consumer characteristics,
decision process and consumer responses.[1] It can be distinguished between
interpersonal stimuli (between people) or intrapersonal stimuli (within people). [2]
The black box model is related to the black box theory of behaviourism, where the
focus is not set on the processes inside a consumer, but the relation between the
stimuli and the response of the consumer. The marketing stimuli are planned and
processed by the companies, whereas the environmental stimulus are given by social
factors, based on the economical, political and cultural circumstances of a society.
The buyers black box contains the buyer characteristics and the decision process,
which determines the buyers response.

The black box model considers the buyers response as a result of a conscious,
rational decision process, in which it is assumed that the buyer has recognized the
problem. However, in reality many decisions are not made in awareness of a
determined problem by the consumer.

Once the consumer has recognised a problem, they search for information on
products and services that can solve that problem. Belch and Belch (2007) explain
that consumers undertake both an internal (memory) and an external search.

Sources of information include:

 Personal sources
 Commercial sources
 Public sources
 Personal experience

The relevant internal psychological process that is associated with information

search is perception. Perception is defined as 'the process by which an individual
receives, selects, organises, and interprets information to create a meaningful
picture of the world'

The selective perception process

Stage Description

- Selective exposure consumers select which promotional messages they will expose
themselves to.
- Selective attention consumers select which promotional messages they will pay
attention to
- Selective comprehension consumer interpret messages in line with their beliefs,
attitudes, motives and experiences
- Selective retention consumers remember messages that are more meaningful or
important to them

The implications of this process help develop an effective promotional strategy, and
select which sources of information are more effective for the [Link]

Information evaluation

At this time the consumer compares the brands and products that are in their
evoked set. How can the marketing organization increase the likelihood that their
brand is part of the consumer's evoked (consideration) set? Consumers evaluate
alternatives in terms of the functional and psychological benefits that they offer. The
marketing organization needs to understand what benefits consumers are seeking
and therefore which attributes are most important in terms of making a decision.

Purchase decision

Once the alternatives have been evaluated, the consumer is ready to make a
purchase decision. Sometimes purchase intention does not result in an actual
purchase. The marketing organization must facilitate the consumer to act on their
purchase intention. The organisation can use variety of techniques to achieve this.
The provision of credit or payment terms may encourage purchase, or a sales
promotion such as the opportunity to receive a premium or enter a competition may
provide an incentive to buy now. The relevant internal psychological process that is
associated with purchase decision is [Link] the integration is achieved, the
organisation can influence the purchase decisions much more easily.

Postpurchase evaluation

It is common for customers to experience concerns after making a purchase

decision. This arises from a concept that is known as “cognitive dissonance”. The
customer, having bought a product, may feel that an alternative would have been
preferable. In these circumstances that customer will not repurchase immediately,
but is likely to switch brands next time.

To manage the post-purchase stage, it is the job of the marketing team to persuade
the potential customer that the product will satisfy his or her needs. Then after
having made a purchase, the customer should be encouraged that he or she has made
the right [Link] is not effected by advertisement.
Internal influences

Consumer behaviour is influenced by: demographics, psychographics (lifestyle),

personality, motivation, knowledge, attitudes, beliefs, and feelings. consumer
behaviour concern with consumer need consumer actions in the direction of
satisfying needs leads to his behaviour of every individuals depend on thinking

External influences

Consumer behaviour is influenced by: culture,sub-culture, locality, royalty, ethnicity,

family, social class, reference groups, lifestyle, and market mix factors.

Product (business)

The noun product is defined as a "thing produced by labor or effort" [1] or the "result
of an act or a process",[2] and stems from the verb produce, from the Latin
prōdūce(re) '(to) lead or bring forth'. Since 1575, the word "product" has referred to
anything produced.[3] Since 1695, the word has referred to "thing or things
produced". The economic or commercial meaning of product was first used by
political economist Adam Smith.[4]

In marketing, a product is anything that can be offered to a market that might satisfy
a want or need.[5] In retailing, products are called merchandise. In manufacturing,
products are purchased as raw materials and sold as finished goods. Commodities
are usually raw materials such as metals and agricultural products, but a commodity
can also be anything widely available in the open market. In project management,
products are the formal definition of the project deliverables that make up or
contribute to delivering the objectives of the project.

In general, product may refer to a single item or unit, a group of equivalent products,
a grouping of goods or services, or an industrial classification for the goods or
services.

A related concept is subproduct, a secondary but useful result of a production

process.

Dangerous products, particularly physical ones, that cause injuries to consumers or

bystanders may be subject to product liability.
Product groups

Tangible and intangible products

Products can be classified as tangible or intangible.[6] A tangible product is any

physical product that can be touched like a computer, automobile, etc. An intangible
product is a non-physical product like an insurance policy.

In its online product catalog, retailer Sears, Roebuck and Company divides its
products into departments, then presents products to shoppers according to (1)
function or (2) brand.[7] Each product has a Sears item number and a manufacturer's
model number. The departments and product groupings that Sears uses are
intended to help customers browse products by function or brand within a
traditional department store structure.[8]

Sizes and colors

A catalog number, especially for clothing, may group sizes and colors. When ordering
the product, the customer specifies size, color and other variables. [9]

Product line

A product line is "a group of products that are closely related, either because they
function in a similar manner, are sold to the same customer groups, are marketed
through the same types of outlets, or fall within given price ranges." [10]

Many businesses offer a range of product lines which may be unique to a single
organization or may be common across the business's industry. In 2002 the US
Census compiled revenue figures for the finance and insurance industry by various
product lines such as "accident, health and medical insurance premiums" and
"income from secured consumer loans".[11] Within the insurance industry, product
lines are indicated by the type of risk coverage, such as auto insurance, commercial
insurance and life insurance.[12]

National and international product classifications

Various classification systems for products have been developed for economic
statistical purposes. The North American Industry Classification System (NAICS)
classifies companies by their primary product [this is not even close to true, NAICS is
a production-oriented classification system, not a product-oriented classification
system – the NAFTA signatories are working on a system that classifies products
called NAPCS as a companion to NAICS [1]. The European Union uses a "Classification
of Products by Activity" among other product classifications. [13] The United Nations
also classifies products for international economic activity reporting. [14]
The Aspinwall Classification System [15] [16]classifies and rates products based on five
variables:

1. Replacement rate (How frequently is the product repurchased?)

2. Gross margin (How much profit is obtained from each product?)
3. Buyer goal adjustment (How flexible are the buyers' purchasing habits with
regard to this product?)
4. Duration of product satisfaction (How long will the product produce benefits
for the user?)
5. Duration of buyer search behavior (How long will consumers shop for the
product?)

The National Institute of Governmental Purchasing (NIGP)[17] developed a commodity

and services classification system for use by state and local governments, the NIGP
Code.[18] The NIGP Code is used by 33 states within the United States as well as
thousands of cities, counties and political subdivisions. The NIGP Code is a
hierarchical schema consisting of a 3 digit class, 5 digit class-item, 7 digit class-item-
group and an 11 digit class-item-group-detail.[19] Applications of the NIGP Code
include vendor registration, inventory item identification, contract item
management, spend analysis and strategic sourcing.

Economics

Economics is the social science that is concerned with the production, distribution,
and consumption of goods and services. The term economics comes from the Ancient
Greek οἰκονομία (oikonomia, "management of a household, administration") from
οἶκος (oikos, "house") + νόμος (nomos, "custom" or "law"), hence "rules of the
house(hold)".[1] Current economic models developed out of the broader field of
political economy in the late 19th century, owing to a desire to use an empirical
approach more akin to the physical sciences.[2]

Economics aims to explain how economies work and how economic agents interact.
Economic analysis is applied throughout society, in business, finance and
government, but also in crime,[3] education,[4] the family, health, law, politics,
religion,[5] social institutions, war,[6] and science.[7] The expanding domain of
economics in the social sciences has been described as economic imperialism.[8][9]

Common distinctions are drawn between various dimensions of economics. The

primary textbook distinction is between microeconomics, which examines the
economic behavior of agents (including individuals and firms consumers and
producers), and macroeconomics, addressing issues affecting an entire economy,
including unemployment, inflation, economic growth, and monetary and fiscal
policy. Other distinctions include: between positive economics (describing "what is")
and normative economics (advocating "what ought to be"); between economic
theory and applied economics; between mainstream economics (more "orthodox"
dealing with the "rationality-individualism-equilibrium nexus") and heterodox
economics (more "radical" dealing with the "institutions-history-social structure
nexus"[10]); and between rational and behavioral economics.

Economists study trade, production and consumption decisions, such as those that
occur in a traditional marketplace.

Consumer
Consumer is a broad label for any individuals or households that use goods and
services generated within the economy. The concept of a consumer occurs in
different contexts, so that the usage and significance of the term may vary.

In economics and marketing

Typically when business people and economists talk of consumers they are talking
about person as consumer, an aggregated commodity item with little individuality
other than that expressed in the buy/not-buy decision. However there is a trend in
marketing to individualize the concept. Instead of generating broad demographic
profiles and psycho-graphic profiles of market segments, marketers have started to
engage in personalized marketing, permission marketing, and mass customization.[1]

There is increasing backlash from the public over use of the label "consumer" rather
than "customer", with many finding it offensive and derogatory. [2][dead link]
The consumer is the backbone of the American Retail Sales System (See picture). The
consumer drives the economy by purchasing goods and services from vendors.

In law and politics

The law primarily uses the notion of "consumer" in relation to consumer protection
laws, and the definition of consumer is often restricted to living persons (i.e. not
corporations or businesses) and excludes commercial users.[3] A typical legal
rationale for protecting the consumer is based on the notion of policing market
failures and inefficiencies, such as inequalities of bargaining power between a
consumer and a business.[4] As of all potential voters are also consumers, consumer
protection takes on a clear political significance.

Concern over the interests of consumers has also spawned much activism, as well as
incorporation of consumer education into school curricula.[citation needed] There are also
various non-profit publications, such as Consumer Reports and Choice Magazine,
dedicated to assist in consumer education and decision making, and Consumer Direct
in the UK.

In India, the Consumer Protection Act 1986 clearly differentiates a consumer as

consuming a commodity or service either for his personal domestic use or to earn
his livelihood. Only consumers are protected as per this act and any person, entity or
organization purchasing a commodity for commercial reasons are exempted from
any benefits of this act.[5] Furthermore, Indian case law has quite a few references on
how to distinguish a consumer from a customer.[citation needed]

Behaviorism

Behaviorism (or behaviourism), also called the learning perspective (where any
physical action is a behavior), is a philosophy of psychology based on the proposition
that all things that organisms do—including acting, thinking and feeling—can and
should be regarded as behaviors.[1] The behaviorist school of thought maintains that
behaviors as such can be described scientifically without recourse either to internal
physiological events or to hypothetical constructs such as the mind.[2] Behaviorism
comprises the position that all theories should have observational correlates but
that there are no philosophical differences between publicly observable processes
(such as actions) and privately observable processes (such as thinking and feeling). [3]

From early psychology in the 19th century, the behaviorist school of thought ran
concurrently and shared commonalities with the psychoanalytic and Gestalt
movements in psychology into the 20th century; but also differed from the mental
philosophy of the Gestalt psychologists in critical ways.[citation needed] Its main influences
were Ivan Pavlov, who investigated classical conditioning although he did not
necessarily agree with Behaviourism or Behaviourists, Edward Lee Thorndike, John
B. Watson who rejected introspective methods and sought to restrict psychology to
experimental methods, and B.F. Skinner who conducted research on operant
conditioning.[3]

In the second half of the twentieth century, behaviorism was largely eclipsed as a
result of the cognitive revolution.[citation needed] Though these two schools of
psychological thought may not agree theoretically, they have complemented each
other in practical therapeutic applications. One notable legacy of behaviorist
investigations is cognitive-behavioral therapy, a popular treatment that uses
cognitive models alongside behaviorist techniques such as "systematic
desensitization" and "contingency management" that have demonstrable utility in
helping people with certain pathologies, such as simple phobias, PTSD, and
addiction. In addition, behaviorism sought to create a comprehensive model of the
stream of behavior from the birth of the human to his death (see Behavior analysis of
child development).