UNIT – II

CONSUMER IN SERVICE INDUSTRY

Meaning of Consumer
A consumer is a person (or group) who pays to consume the goods and/or services
produced by a seller.
A consumer is defined as a person who buys goods and services and makes use of
public utilities as well as natural resources like air and water::~n its most basic sense it refers
to those who use goods and services for the satisfaction of their personal wants thus
excluding buyers who purchase for manufacturing purposes or for resale.
According to the Consumer Protection Act, 1986, a "Consumer" means any person
who buys goods or hires any service for a consideration which has been paid, or promised, or
partly paid and partly promised, or under any system of deferred payment, and includes any
user of such goods other than the person who buys such goods for consideration.
Need
A customer need is a need that motivates a customer to purchase a product or service.
The need can be known or unknown, and is the ultimate factor that determines which solution
the customer purchases.
Ultimately, all customer needs can be categorized into three main types: functional,
social, and emotional needs.
1. Functional Needs
Functional needs are the most tangible and obvious of the three main types of
customer needs. Customers typically evaluate potential solutions based on whether they will
help them achieve a particular task or function. The product or service that best addresses
their functional need is likely to be the one they purchase, or hire.
Functional needs can be broad or extremely specific, depending on the customer’s
buying criteria.
For example, a customer who’s planting a garden for the first time might say, ―I need
a garden hose.‖ Meanwhile, an experienced gardener might tailor their criteria by saying, ―I
need a pipe that’s long enough to reach my vegetable garden from my backyard spigot.‖
Another customer who’s dealt with the frustration of using a low-quality product might tailor
their need differently by saying, ―I need a high-quality garden hose that won’t tear or kink
from regular use.‖

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 With this kind of insight into customers’ functional needs, a company that
manufactures garden hoses might develop new products, such as hoses that come in a range
of lengths and don’t bend.
2. Social Needs
A social need is a customer need that relates to how a person wants to be perceived by
others when using a product or service. While social needs aren’t typically a customer’s
primary concern when considering a purchase, they can influence their final decision.
Social needs are often more difficult for a company to identify, and vary substantially
from customer to customer. By understanding various social needs, you can look for patterns
among your users. If enough of your customers share a particular need, consider how it can
inform your product development, sales, and marketing processes.
Returning to the garden hose example, imagine the customer is a member of a
gardening association. Members of this association have an affinity for high-tech gardening
tools and regularly discuss new products they’ve tried. The customer may decide, either
consciously or unconsciously, to purchase a hose with advanced features—for example, one
that connects to a smart water controller—to bond with other association members.
If, on the other hand, the customer is an environmentalist who’s active in various
communities, they might be more concerned about whether a hose is made from sustainable
materials that their fellow environmentalists use.
3. Emotional Needs
Emotional needs are similar to social needs in that they’re typically secondary to
functional needs. Whereas social needs refer to how a customer wants to be perceived by
others when using a product, emotional needs refer to how a customer wants to feel.
Returning once more to the garden hose example, consider the reasons why the
customer gardens. If they find gardening to be a relaxing hobby, they may be more likely to
choose a basic hose over a high-tech option. Alternatively, if gardening triggers memories of
the customer’s grandparents, they might opt for a brand that evokes that nostalgia.
While emotional needs can be difficult to pinpoint, companies that identify those of
their customers can use the information to tailor and optimize their product messaging.
Factors influencing consumer behaviour
Consumer behavior refers to the selection, purchase, and consumption of goods and
services for the satisfaction of their wants.
Some factors that influence consumer behavior may be temporary and others are long-
lasting. Let’s now look at some of the influences in more detail.
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1. Psychological Factors
Factors based on human psychology are a major determinant of consumer behavior,
and they are on four aspects:
Motivation
Motivation is the inward drive we have to get what we need. Every person has
different needs such as physiological needs, security needs, social needs, esteem needs, and
self-actualization needs. Basic needs such as food, water, and sleep are in nature most
pressing, while others are least pressing. Therefore, a need becomes a motive when it is more
pressing to direct the person to seek satisfaction.
Perception
Customer perception is a process where a customer collects information about a
particular product and interprets the information to make a meaningful image of it. There are
three different perceptual processes, as follows:
Selective attention
It is the process of filtering out information based on how relevant it is to you, and
through which marketers try to attract the customer's attention.
Selective retention
In these, where people forget information that contradicts their belief, even if it’s
quite relevant to them. Here, marketers try to retain information that supports consumers’
beliefs.
Selective distortion
It is the misinterpretation of the intended message. Customers tend to interpret the
information in a way that will support what they already believe, but not necessarily what the
product provides.
Learning
Refers to the process by which consumers change their behavior after they gain
information or experience. It doesn’t just affect what you buy; it affects how you shop.
Learning can be either conditional or cognitive, as follows:
Conditional learning
When the consumer is exposed to a situation repeatedly, resulting in positive or
negative consequences. Companies engage in conditional learning by rewarding consumers,
which causes consumers to want to repeat their purchasing behaviors.

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Cognitive learning
The consumer will apply his knowledge and skills to find satisfaction and a solution
from the product that he buys. It occurs by associating a conditioned stimulus (CS) with an
unconditioned stimulus (US) to get a particular response.
Attitudes
Attitudes are enduring ―mental positions‖ or emotional feelings, favorable or
unfavorable evaluations, and action tendencies people have about products, services,
companies, or ideas. Since such beliefs and attitudes make up brand image and affect
consumer buying behavior, marketers aim to change the beliefs and attitudes to positive ones
through designing special campaigns.
2. Social Factors
People wish to be socially accepted, so they tend to imitate others including their
purchases. Among the most important social factors are:
Family
Buyer behavior is strongly influenced by the family they belong to. A person develops
preferences from his childhood by watching family buy products and continues to buy the
same products even when they grow up. Companies, therefore, are interested in which family
members have the most influence over certain purchases.
Reference Groups
Reference groups are groups (social groups, workgroups, or close friends) a consumer
identifies with and may want to join. The impact of reference groups varies across products
and brands. For example, if the product is visible such as dress or car, then the influence of
reference groups will be high.
Roles and Status
A role consists of the activities that a person is expected to perform. Each role carries
a status. For example, if a woman works as a finance manager, she plays two roles: finance
manager and mother. Therefore, she is largely influenced by her role and will choose
products that communicate it.
3. Cultural Factors
A group of people is associated with a set of values and ideologies that belong to a
particular community. Therefore, cultural factors have a strong influence on consumer buying
behavior. They include:

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Culture
Culture is a handed-down way of life and is often considered the broadest influence
on a consumer’s behavior. The influence of culture on buying behavior varies from country
to country, therefore marketers have to be very careful in analyzing the culture of different
groups, regions, or even countries.
Subculture
A subculture is a group of people within a culture who are different from the
dominant culture but share the same set of beliefs and values. Marketers can use these groups
by segmenting the market into various small portions by, for example, designing products
according to the needs of a particular geographic group.
Social Class
A social class is a group of people who have the same social, economic, or
educational status in society. To some degree, consumers in the same social class exhibit
similar purchasing behavior. In this way, marketing activities could be tailored according to
different social classes.
4. Personal Factors
Personal factors vary from one person to another, thereby producing different
perceptions and consumer behavior. Some of the personal factors are:
Age
Age and life-cycle have a potential impact on consumer buying behavior. Each age
stage has different buying choices that differ from the other. For example, teenagers will be
more interested in buying colorful clothes and beauty products, while middle-aged are
focused on house, property, and vehicle for the family.
Occupation & Lifestyle
Lifestyle refers to the way a person lives in a society and is expressed by the things in
his/her surroundings. Along with occupation, it makes up a great determinant of consumer
behavior. For example, a vegetarian consumer would naturally buy vegan products instead of
regular or meat-containing types of food. Similarly, the doctor will have different buying
patterns than a farmer.
Personality
Personality describes a person’s disposition, helps show why people are different, and
encompasses a person’s unique traits. The ―Big Five‖ personality traits include openness,
conscientiousness, extraversion, agreeableness, and neuroticism. Depending on these traits,
marketers determine the consumer behavior for a particular product or service.
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5. Economic Factors
Economic factors bear a significant influence on the buying decision of a consumer,
and they can be on several aspects, as follows:
Country Economic Situation
Consumer buying habits and decisions greatly depend on the economic situation of
their country. When a nation is prosperous, the economy is strong, which leads to a greater
money supply in the market and higher purchasing power for consumers. In contrast, a weak
economy reflects a struggling market that is impacted by unemployment and lower
purchasing power.
Personal Income
The disposable personal income refers to the actual income remaining after deducting
taxes from the gross income. When a person has a higher disposable income, the purchasing
power increases simultaneously. On the contrary, when the disposable income reduces,
parallelly the spending on multiple items is also reduced.
Liquid Assets
Liquid assets refer to those assets, which can be converted into cash quickly without
any loss. When a consumer has higher liquid assets, it gives him more confidence to buy
luxury goods. On the other hand, if they have fewer liquid assets, they cannot spend more on
buying comforts and luxuries.
BUYER OR CONSUMER DECISION MAKING
Consumer behaviour is influenced by many things: psychological, social, cultural,
personal, and economic factors. In turn, businesses, for the purpose of improving their profits,
try to figure out trends so they can reach and influence the people most likely to buy their
products in the most cost-effective way possible such as the layout of a store, music,
grouping, and availability of products, pricing, and advertising
Decision is made to solve a problem of any kind. Suppose the problem is to create a
cool atmosphere in your living room. For this, what you will do? You will carry out
information search, to find ways to cool the atmosphere of your living room, for example, by
an air-conditioner, or by a water cooler, or by a wall fan. For this, you will evaluate all the
known alternatives and made cost benefit analysis to decide which product and brand will be
suitable. Finally, you will purchase that product. Consumer behaviour has two aspects – the
final purchase activity which is visible to us and the decision making process interplay of
various variables which are not visible to us.

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BUYER OR CONSUMER DECISION MAKING PROCESS
Consumer Decision Making Process - Problem or Need Recognition, Information
Search, Alternatives Evaluation, Purchase Decision, Post-purchase Use and Evaluation
Consumer decision making process consists of a series of steps which a consumer undergoes.
Consumer decision making process generally involves five steps – Problem recognition,
information search, evaluation of alternatives, purchase, and post purchase evaluation.
1. Problem or Need Recognition
Consumer decision making process begins with an unsatisfied need or problem.
Everyday we face multiple problems which individuals resolve by consuming products or
services. Consumer problem can be routine or unplanned. For example – run out of milk or
cooking oil, car indicating low level of fuel, are some of the routine problems that individuals
face. Such problems are quickly recognised, defined, and resolved. Recognition of unplanned
problem may take much longer time as it may evolve slowly over time. For example - need of
a new refrigerator as existing one is not working properly.
An individual recognise problem through information processing arising as a result of
internal and external stimuli. After problem recognition the action to solve the problem
depends on the magnitude of discrepancy between the current state and desired state and the
importance of the problem for the concerned consumer. If the problem is highly important for
an individual and there is high discrepancy between current state and desired state of the
individual, he will start the purchase process.
2. Information Search
Information search is done to know about product or service, price, place and so on.
In the process of decision making, the consumer engages in both internal and external
information search. Internal information search involves the buyer identifying alternatives
from his memory. Internal information search is sufficient for low involvement products or
services. For high involvement product or service, buyers are more likely to do external
information search. The amount of efforts a buyer put in information search depends on
various factors like market, competition, difference in brands, product characteristics, product
importance, and so on.
3. Alternatives Evaluation
At this step the buyer identifies and evaluates different alternatives to choose from. It
is not possible to examine all the available alternatives. So, buyer develops evaluative criteria
to narrow down the choices. Evaluative criteria are certain characteristics that are important
to buyer such as price of the product, size, colour, features, durability, etc. Some of these
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characteristics are more important than others. To narrow down the choices the buyer
considers only the most important characteristics.
4. Purchase Decision
The earlier mentioned evaluation step helps the consumer in arriving at a purchase
intention. In the decision evaluation stage, the consumer forms preferences among the brands
in the choice set. The consumer may also form a purchase intention and lean towards buying
the most preferred brand. However factors can intervene between the purchase intention and
the purchase decision. A buyer who decides to execute a purchase intention will be making
up to five purchase decisions brand decision, vendor decision, quantity decision, timing
decision and payment-method decision.
5. Post-purchase Use and Evaluation
Once the buyer makes a decision to purchase a product or service there can be several
types of additional behaviour associated with that decision such as decisions on product uses
and decision on services related to the product purchased. The level of satisfaction
experienced by the buyer after his purchase will depend on the relationship between his
expectations about the product and performance of the product. If the buyer is satisfied then
he will exhibit a higher probability of repeat purchase of the product or service. The satisfied
buyer will also tend to say good words about the product or service. Whereas a highly
dissatisfied buyer will not buy the product or service again and spread negative words about
service and company.
What is the consumer decision making process?
The consumer decision-making process involves five basic steps. This is the process
by which consumers evaluate making a purchasing decision. The 5 steps are problem
recognition, information search, alternatives evaluation, purchase decision and post-purchase
evaluation.
5 steps of the consumer decision making process
1. Problem recognition: Recognizes the need for a service or product
2. Information search: Gathers information
3. Alternatives evaluation: Weighs choices against comparable alternatives
4. Purchase decision: Makes actual purchase
5. Post-purchase evaluation: Reflects on the purchase they made.

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Difference between Consumer Buying Behaviour and Organizational Buying Behaviour
The differences between consumer buying behaviour and organizational buying
behaviour can be listed as follows:
Bases Consumer Buying Behaviour Organizational Buying
Behaviour
Purpose of Buying The individual consumers buy The organizations buy goods or
goods or services for ultimate services for their business needs
use or satisfy their needs. and to earn profit
Quantity Consumers buy only the Organisational buying is done in
necessary quantity of goods large quantities. They have
which they need for regular use several reasons to buy to sell, to
maintain stock etc.
Purchase decision Consumer buying takes decision Organisational purchasing is a
by consumers themselves. rational process because the
purchasing behaviour is guided
by organisational objectives
Market knowledge Most of the consumers may not The organizational buyers have
have adequate knowledge and full knowledge of market and
information about market suppliers.
situation
Types of goods Consumers buy many goods to Organizational buyers buy
use to satisfy personal or family limited goods to use to conduct
needs. business.
Effect Consumer buying behaviour is Many individuals are involved in
effected by age, occupation, the buying process.
income level, education, gender
etc. of consumers.
Buying process The consumer buying process is Buyers and sellers in the
very simple. No need to fulfill organisational market must
any formality. There is also no maintain extensive contact
need to maintain extensive
contact with sellers.