CHAPTER ONE: INTRODUCTION

Consumer Behavior (C.B.) may be defined as the decision process where individuals engage in
evaluating, while acquiring, using, or disposing of goods and services. (Solomon: 2002)
According to Shifmen, Consumer behavior is a study about how or why individuals spend their
time, energy and resource while making purchase decisions.
Technical Terms of Consumer Behavior
A. Customers and Consumers
The term customer is typically used to refer to someone who regularly purchases from a
particular store or company. On the other hand, the term consumer generally refers to anyone
engaged in any of the activities used in our definition of consumer behavior. Therefore, a
customer is defined in terms of a specific firm while a consumer is not. E.g., Customer of
Commercial Bank of Ethiopia, Financial Service Consumer.

B. The Ultimate Consumer

The primary attention of marketers is directed towards ultimate consumers those individuals who
purchase for the purpose of individual or household consumption. Basically there are two types
of consumers. They are personal and organizational.

C. The Individual Buyer

The most commonly known consumer situation is that of an individual making a purchase with
little or no influence from others. However, in some cases a number of individuals can be jointly
involved in a purchase decision. These situations suggest that people can take different roles
such as initiators, influencers, buyers, and users in consumer behavior definition.

Some purchase situations involve at least one person in each of these roles, while in other
circumstances a single individual can take on several roles at the same time.

However we will focus only on the buyer, i.e. the individual who actually makes the purchases in
terms of analyzing the factors involved in purchase decisions.

D. The Decision Process

Consumer behavior involves a mental decision process as well as a physical activity. The actual
act of purchase is just one stage in a series of mental and physical activities that occur during a
certain period of time. Some of these activities precede the actual buying, while others follow it.
Therefore, to understand consumers adequately, decision process should be known in addition to
the physical activities.
E. A subset of Human Behavior
Consumer behavior is actually a subset of human behavior. That is, factors affecting individuals
in their daily lives also influence their purchase activities. Internal influences, such as learning
and motives, and external factors, such as social expectations and constraints, affect our role as
consumers. The fact that consumer behavior is a subset of human behavior advantageous.
Several disciplines, collectively referred to as the behavioral sciences have studied human
behavior for sometime, and we can draw their contributions to understanding consumer. And it
included:

1. Psychology – which is the study of the behavior and mental process of individuals
2. Sociology – the study of the collective behavior of people in groups.
3. Social psychology – the study of how individuals influence and are influenced by groups
4. Economics – study of people’s production, exchange, and consumption of goods and
services.
5. Anthropology – study of people in relation to their culture.

ETHICS IN CONSUMER BEHAVOIR

The primary purpose of studying consumer behavior as part of marketing curriculum is to

understand why and how consumer makes their purchase decisions. These insights enable
marketers to design more effective marketing strategies. Some critics are concerned that an in-
depth understanding of consumer behavior makes it possible for unethical marketers to exploit
human vulnerabilities (weaknesses) in the market place. In short, they are concerned that
knowledge of consumer behavior gives marketers unfair advantage.

Newspaper headlines have identified a number of highly unethical, often illegal marketing
practices undertaken by seemingly honest, educated, and respectable business people who were
obviously caught up in the quest for commercial superiority, for profits, for market share etc.
Unethical marketing practices occur at every level of the marketing mix: in the design of
products, in packaging, in pricing practices, in distribution efforts, and in promotional schemes.
They also occur at the other side of the marketing equation, with consumers sometimes
practicing unethical behavior as well. Although most studies of marketing ethics focus on
marketers’ practices, some researchers are beginning to study consumer ethics as well.

Unfortunately, there is no universally accepted definition for the term ethics. A study of ethical
philosophies reveals two different groups of theories: technological theories and deontological
theories.

Teleology deals with the moral behavior as determined by its consequences. One’s choice is
based on what is best for every one involved. Utilitarianism, a teleological theory, is summarized
best by the notion of “the greatest good for the greatest number.” According to this theory, it is
perfectly ethical for a company to conceal potentially negative consequences of a production
from early consumers. If a large number of people are likely to benefit, the product is perfected.
To an utilitarian, ethics is evaluated on the basis of a cost/benefit analysis: i.e., as long as the
benefits to society exceed the costs, a behavior is considered ethical.

Ideally, a cost/benefit analysis should explore human and financial, long-and short-range
implications of a business decision. Responsible decisions require that all individuals who may
be affected by the decision should be correctly identified, and the consequences of the
contemplated actions should be anticipated. It is especially important that ethical decision
makers anticipate all negative consequences that may occur, and take actions to avert such
outcomes.

Deontology deals with the methods and intentions involved in a particular behavior.
Deontological theories focus on the results of a particular action, and they tend to place greater
weight on personal and social values than on economic values.

Kant’s categorical imperative is a deontological theory. It suggests that individuals should be

willing to have their actions become universal laws that would apply equally to themselves as
well to others. The reverse of the “golden rule,” which most of us learned in grammar school,
aptly expresses the notion of ethical behavior in marketing: "Do not do unto others what you
would not have others do unto you (or your loved ones)." Clearly, this is a deontological theory,
not a utilitarian theory. Of the two dominant traditions, deontology is favored by most moral
philosophers today.
Ethics is clearly a two-way street. For the marketing process to work beneficially for all of the
society, marketers and consumers alike must understand and practice ethical behavior. Once
again, the golden rule should prevail. (See [Link] for unethical activities of consumer behavior).

THE DEVELOPMENT OF CONSUMER BEHAVIOR AS A DISCIPLINE

There are a number of reasons why the study of consumer behavior developed as a separate
marketing discipline. Marketers had long noted that consumers do not always act or react as
marketing theory suggested they would. Consumer preferences are changing and becoming
highly diversified. Even in industrial markets, where needs for products are always more
homogeneous than in consumer markets, buyers are exhibiting diversified preferences and less
predictable purchase behavior.

To better meet the needs of specific groups of consumers, most marketers adopted a policy of
market segmentation, which called for the division of their total potential markets into smaller,
homogenous segments for which they could design specific products and promotional
campaigns. They also use promotional techniques to vary the image of their products so that they
shall be perceived as better fulfilling the specific needs of certain segments – /a process now
known as positioning/. Other reasons for the developing interest in consumer behavior includes
the rate of new product development, growth of the consumer movement, public policy concerns,
environmental concerns, and the growth of both non-profit marketing and international
marketing.

Indeed, a major stumbling block of many international marketing efforts has been the general
lack of familiarity with the needs, preferences, and consumption habits of consumers in foreign
markets. Marketers now use cross-cultural consumer studies as the basis for product
development and promotional strategies to meet the needs of targeted foreign consumers.

WHY DO WE STUDY CONSUMER BEHAVIOR?

Understanding the reasons for studying consumer behavior enables one to better appreciate its
contributions. Some of the reasons are:
 1. Significance in daily lives
In a general sense, the most important reason for studying consumer behavior is the significant
role it plays in our lives. Much of our time is spent directly in the market place, shopping or
engaging in other activities. A large amount of additional time is spent thinking about products
and services, talking to friends about them, and seeing or hearing advertisements about them. In
addition, the goods we purchase and the way in which we use them significantly influence how
we live our daily lives.
These general concerns alone are enough to justify our study. However, many seek to understand
the behavior of consumers for what are thought to be more immediate and tangible reasons.

2. Application in consumers’ decision making

Consumers are often studied because certain decisions are significantly affected by their
behavior or expected actions. For this reason, consumer behavior is said to be applied discipline.
Such applications can exist at two different levels of analysis.

- Micro perspective: This involves understanding consumers for the purpose of helping a
firm or as organization to accomplish its objectives. Advertisement managers, product
designers, and many others in profit oriented businesses are interested in understanding
consumers in order to be more effective at their tasks. In addition, managers of various
non-profit making organizations have benefited from the same knowledge.
- Macro perspective:
perspective: on the Macro/aggregate level we know that consumers collectively
influence economic and social conditions within an entire society. In market systems
based on individual choice, consumers strongly influence what to be produced.
Consequently, the collective behavior of consumers has a significant influence on the
quality and level of our standard of living.

Understanding consumer behavior from a macro perspective can provide insight into aggregate
economic and social trends and can perhaps even predict such trends. In addition, this
understanding may suggest ways to increase the efficiency of the market system and improve the
well being of people in society. It also includes understanding the implication of political and
technological factors on a consumer purchase behavior.
Application Areas of consumer behavior knowledge
The field of consumer behavior has a variety of practical applications. The applications could be
from macro or micro perspectives. Together they contribute to the importance of understanding
consumers for solving a variety of contemporary problems. Some of the applications included:
1. Consumer Behavior and Marketing Management
Effective business managers are realizing the importance of marketing to the success of their
firm.

Marketing is the process of planning and executing marketing strategies, pricing, promotion and
distribution of ideas, goods and services to create exchanges that satisfy individual and
organizational objectives.

A sound understanding of consumer behavior is essential to the long run success of any
marketing program. In fact, it is seen as a corner stone of the marketing concept, an important
orientation of philosophy of many marketing managers. The essence of the marketing concept is
captured in three interrelated orientations:

A. Consumers want and needs.

needs. When the focus is on identifying and satisfying the wants and
needs of consumers, the intention of the firm is not seen as merely providing goods and services.
Instead, want and need satisfaction is viewed as the purpose of providing products and services
as a means to achieve that end.

B. Company objectives: Consumers wants and needs are numerous. Therefore, a firm that
concentrates on satisfying a small proportion of all desires will most effectively utilize its
resources. Company objectives and any of the firm’s special advantages are used as criteria to
select the specific wants and needs to be addressed.

C. Integrated strategy: An integrated effort is most effective in achieving a firm’s objective.

Consumer marketing efforts can closely be coordinated with each other and with other activities
of the firm. Several major activities can be undertaken by an organization in a market oriented
way. These include market opportunity analysis, target market selection and marketing mix
determination, which includes decisions on the proper combination of marketing variables to be
offered to consumers.
 - Marketing opportunity analysis – this activity involves examining consumers’ needs
and wants that are not being fully satisfied. The analysis begins with a study of general
market trends, such as consumers’ life styles and income levels, which may suggest
satisfied wants and needs.
- Target – market selection.
selection. The process of reviewing market opportunities often results
in identifying distinct groupings of consumers who have unique wants and needs. This
can result in a decision to approach each market segment with a unique marketing
offering. (Market segmentation).
- Marketing – Mix determination – This stage involves developing and implementing a
strategy for delivering an effective combination of want – satisfying features to
consumers. There are four major ingredients frequently referred to as the marketing mix
variables: product, price, place, and promotion.

I. Product – The nature of the physical product and service features are of concern here. Among
decisions that need to be considered by consumer behaviors are:
 What product to offer?
 What size, shape, and features should a product has?
 How should it be packaged?
 What aspects of service are most important to consumers?
 What types of warranties and service programs should be provided?
 What types of accessories and associated products should be offered?

II. Price - Marketers must make decisions regarding the prices to change for the company’s
products or services and any modification of those prices. These decisions will determine the
amount of revenues the firm will generate. A few of the factors involving consumer behavior are:
 Analyzing factors that affect price/internal & external/ factors?
 How is the price awareness of consumer in the relevant product category?
 How sensitive are consumers to price differences among brands?
 How large a price reduction is needed to encourage purchases during new product
introductions and sales promotions?
 What size of discount should be given to those who pay with cash?
III. Place - The place variables involves consideration of where and how to offer products and
services. Same decisions influenced by consumer behavior include:
 What type of retail outlet should a firm select?
 Where should it be located, and how many outlets should there be?
 What arrangements are needed to distribute products to retail?
 What image and clients should the retailer seek to cultivate?
 What internal and external variables affect modes of distribution and channel relation?
IV. Promotion - Of concern here are the goals and methods of communicating aspects of the
firm and its offerings to target consumers. Consumer related decisions include:
 What methods of promotion are best for each specific situation
 What are the most effective means for gaining consumers’ attention?
 What methods best convey the intended message?
 How often should a given advertisement be repeated?
 How can sub mixer of promotion be manipulated?
These examples indicate the relevance of consumer behavior to marketing – management
decision making.

2. Consumer Behavior in Non Profit and Social Marketing

Can crime prevention, charitable contribution, or the concept of family planning be sold to
people in much the same way that some business firms sell their products? The answer is simply
yes.

A number of scholars have suggested that various social and non-profit organizations have
services or ideas that they need to market for their target groups. Such organizations include
governmental agencies, religious organizations, universities and charitable institutions. Often
these groups must also appeal to the public for support in addition to attempting to satisfy some
want or need in society. Clearly a sound understanding of consumer decision processes can assist
their efforts. A single example is the role of public relations (PR).
3. Consumer Behavior and Governmental Decision-making
In recent years the relevance of consumer behavior principles to governmental decision-making
has become quite evident. The two major areas of activity that have been affected (by:
government services) are:
 1. Government policies that provide service to the public result in decisions that influence
consumer behavior. The effectiveness of these decisions will be influenced by the extent
to which they are based on an adequate understanding of consumers. This requires
knowledge of people’s attitudes, beliefs, perceptions, habits as well as reactions under a
variety of circumstances
2. Consumer protection. Many agencies at all levels of government are involved with
regulating business practices for the purpose of protecting consumers’ welfare. Some
government programs are also designed to influence certain consumer actions directly
and discourage others.

But researches show that the effect of many consumer protection efforts has been considerably
less than expected, and in some cases the efforts may actually have had negative consequences
for consumers. This is because officials have not made their decisions on the basis of consumers.

4. Consumer behavior and Demarketing

The history of the world in general has long been characterized by the intensive efforts of private
enterprises to stimulate the public for greater levels of consumption.

Various government policies have supported such efforts because of their favorable effect on
economic development. Recently, however, it has become increasingly clear that we are entering
an era of scarcity in terms of some natural resources such as oil, natural gas, and even water.
These scarcities have led to promotions stressing conservation rather than consumption.

The term “demarketing” refers to all such efforts to encourage consumers to reduce their
consumption of a particular product or service. Some demarketing efforts have met with
considerable success while many others have made hardly any impact on changing long
established consumption patterns. An analysis of the successes and failures of various efforts
strongly suggested that demarketing programs must be based on a sound understanding of
consumer’s motives, attitudes, and historically established consumption behavior.
5. Consumer Behavior and Consumer Education
Consumers also stand to benefit directly from orderly investigations of their own behavior. This
can occur on an individual basis or as part of more formal educational programs. As we study
what has been discovered about the behavior of others, we can gain insight into our own
interactions with the market place. What is learned about consumer behavior can also directly
benefit the consumer in more formal sense. To be most effective, these educational programs
should be based on a clear understanding of the important variables influencing consumers.

CONSUMER BEHAVIOR MODEL

Consumer behavior model is a factor of three important components of the company model;
these are marketing environment factors, consumer behavior factors and buying decision factors.
The following diagram illustrates the components of consumer behavior model.

Environmental Factors Consumer Behavior Factors Buyers Decision

Micro environment Culture Decision Process - Product choice

o Customer, competitor, Problem recognition - Brand choice
supplier, human resource - Information - Dealer choice
intermediaries Social Class search - Purchase timing
Macro environment - Evaluation of - Purchase amount
o Political, economical, alternatives - Marketing mix
socio-cultural, Personality - Purchase influence
technological decision
factors/PEST) - Post purchase
o Segmentation variables, Psychology evolution
geography, demography,
psycho grapy-behavioral
Marketing mixes

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So the central aim of consumer behavior is to act as a link between marketing environment and
decision in understanding the impact of consumer behavioral factors and buying decisions.