cb lecture 2 and 3 2015

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Consumer Markets and Buyer Behavior

• Decision Making in Buying Process

• Buyer Behavior and effects of – Family – Social Class, and – Reference Group

• Global Marketing

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Buyer Behavior: Decision Making• Marketers need to know consumer’s decision

process because the following issues have potential values to the marketing managers:

• How consumers collect their product information

• What are the possible sources

• What are relative influences of these sources

• How they form beliefs

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Buyer Behavior: Decision Making• How consumers make their decisions

• How they compare brands

• What is their decision process

• Why they reject one brand or why they are loyal to another brand

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Buyer Behavior: Decision Making

Then based on those answers,

• Companies develop appropriate products with required attributes

• Marketers tailor promotional strategies

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Buyer Behavior: Decision Making• Consumer decision process is not same for all

products• It depends on degree of novelty or risk

associated with decision• Since some purchase decisions are more

important than others, amount of effort we put into such one differs

• Some decision making process is almost automatic

• Sometimes it needs huge efforts and information

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Buyer Behavior: Decision MakingFour Types of Buying Behavior

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Buyer Behavior: Decision MakingComplex Buying Behavior

• When products are expensive, risky, purchased infrequently, and highly self-expressed with significant differences

• Consumers undertake complex buying behavior when they are highly involved in a purchase decision and perceive significant differences among brands

• Laptop, a new model car

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Buyer Behavior: Decision MakingDissonance Reducing Buying Behavior

• When products are expensive, risky, and purchased infrequently

• Consumers undertake this buying behavior when they are highly involved in a purchase decision but perceive little differences among brands

• Gold Ornament, Furniture

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Buyer Behavior: Decision MakingHabitual Buying Behavior

• When products are inexpensive and purchased frequently.

• Consumers undertake this buying behavior when they have low involvement in a purchase decision and perceive little differences among brands

• Salt, Flour, Sugar

• Since customers are not brand oriented, marketers often use price and sales promotion to stimulate product

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Buyer Behavior: Decision MakingVariety Seeking Buying Behavior

• When products are inexpensive and purchased frequently

• Consumers undertake this buying behavior when they have low involvement in purchase decision but perceive significant differences among brands

• Cookies, Tea

• Since customers are not brand oriented and switch from one brand to another for variety rather than dissatisfaction, market leader try to implement different advertising strategy to encourage habitual buying behavior

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Buyer Behavior: Decision Making• A decision is actually composed of a series of

stages that results in selection of one products over competing options

Process of Decision-making (High Effort):

• Problem recognition (your TV sound system is not working properly)

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Process of Decision-making (High Effort):

• Information search (what brands are available and their comparative merits and demerits)

• Evaluation of alternatives (comparison among brands)

• Product choice (final brand selection)

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Buyer Behavior: Decision MakingTypes of consumer Decision-making process

Extended Problem Solving• Corresponds most closely to traditional decision-

making perspective• When we feel outcome of decision is very important,

we try to collect as much information as possible both from our memory and outside sources

• We consider attributes of one brand at a time, see how each brand’s attributes relate to results we hope to get from our choice.

• Buying a Computer, Apartment, Vacuum Cleaner

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Buyer Behavior: Decision MakingLimited Problem Solving

• Usually more straightforward and simple

• Not interested in searching for all information and compare each alternative

• Use simple decision rules to satisfy our needs

• Buying a dress, USB memory drive, a mobile set

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Habitual Decision-making

• Both extended and limited problem-solving methods involve some degree of information search

• For some products, buying is occurring just from routine efforts to pick up from shelves and put it on shopping carts

• Without conscious control

• Without comparing information

• Ball pen, Eraser, Tea (Not bag), Sugar

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Evaluative Criteria• Selecting dimensions to judge

merits of competing options• Assigning weights for these

dimensions based on importance

• Decision Process Model– Compensatory Model

– Noncompensatory Model

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Buyer Behavior: Decision MakingNoncompensatory Decision Model

– We use this rule when we feel that a product with low standing on one attribute cannot compensate for this flaw even if it performs above expectation on other attributes

– Simply eliminate all options that do not meet some basic standards on some attributes

– You are looking an apartment for renting less than 20,000 taka monthly and also have some other criteria like location, security, quality, kitchen, room number, owner etc.

– If one apartment costs more than 20,000 taka monthly, you will outright reject it based on the noncompensatory decision processing rules

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Buyer Behavior: Decision MakingNoncompensatory Decision Model

• Lexicographic Model– Consumers order attributes in terms of

importance and compare options one attribute at a time, starting with most important attribute

– Selects brand that perform best on the most important attribute.

– If two or more tie on this attribute, they are evaluated on second most attribute

• I want to get brand that does best on my most important attribute

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Buyer Behavior: Decision MakingNoncompensatory Decision Model……continued

• Elimination-by-Aspects Model– Consumers rank evaluative criteria in terms of importance

and establish a cut off for each criterion– All brands first considered on most important criterion.

Those that do not meet or exceed cut off point are dropped from consideration

– If more than one brand remains after first elimination, process is repeated among remaining brands for second most important criterion

• I will eliminate any brands that do not meet or exceed cut off point , beginning with the most important attribute.

• I will eliminate any brands that have a value of 3 or below, beginning with the most important attribute.

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• Conjunctive Model– Consumers set up minimum cutoffs for each

attribute (represent absolute lowest value they are willing to accept) and selects first or all brands that meet or exceed these minimum performance standards

– Motive is to rule out unsuitable alternatives as soon as possible.

– Any brand falling below these minimum standards (cut off point less than 3) would be eliminated for further consideration.

• I will consider all brands that are acceptable on the attributes I think are important

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• Disjunctive Model– Similar to conjunctive, with two exceptions– One, consumer sets up acceptable levels for

cutoffs – levels that are more desirable. Two, evaluations are made on several (rather than all) of most important attributes.

– Consumers set up desirable cutoffs for each important attribute (not for all) and selects first or all brands that meet or exceed these desirable performance standards for those important attributes

– Suppose for price:1, weight: 3, Processor:4, Battery:4, After Sales:3, Display: 3 are desirable score)

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Buyer Behavior: Decision MakingCompensatory Decision Model

– When consumers highly involved in purchase, they are willing to exercise and evaluate entire picture comprehensive way

– We feel a product can be evaluated for its aggregate attributes

– Consumer evaluates brand options in terms of each relevant attribute and computes a weighted or summated score for each brand

– This rule compensates a product for its shortcomings

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Buyer Behavior: Decision MakingCompensatory Decision Model

– Looking an apartment for rents around 20,000 taka monthly and also other criteria like location, security, quality, kitchen, room number, owner etc.

– If one apartment costs more than 20,000 taka monthly, you will not outright reject it rather consider all other criteria and get an aggregate picture to evaluate among different options.

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Evaluative criteria Epson Canon Compaq Samsung IBM Toshiba Importance

Price 5 3 3 4 2 1 30

Weight 3 4 5 4 3 4 25

Processor 5 5 5 2 5 5 10

Battery life 1 3 1 4 1 5 05

After-sale support 3 3 4 3 5 3 10

Display quality 3 3 3 5 3 3 20

* evaluations: 1 = very poor; 5 = very goodOr belief strengths: –3= very weak; +3= very strong if stated in terms of attribute level (e.g., low price, light weight, long battery life, etc.))

Different Choices, Depending on Different Decision Rules

Decision Rule Brand Choice

Compensatory Samsung

Conjunctive Canon

Disjunctive Toshiba

Lexicographic Epson

EBA Samsung


Compensatory Model: Score for Samsung Score for Epson

30 * 4 = 120 30 * 5 = 15025 * 4 = 100 25 * 3 = 75 10 * 2 = 20 10 * 5 = 5005 * 4 = 20 05 * 1 = 0510 * 3 = 30 10 * 3 = 3020 * 5 = 100 20 * 3 = 60 ____ ____ 390 370

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Buyer Behavior: Decision MakingDecision rule to purchase an apartment• Compensatory rule– We selected apartment that came out best when we balanced good

ratings against bad ratings• Noncompensatory rule

– Conjunctive rule• We picked the apartment that had no bad features

– Disjunctive rule• We selected the apartment that excelled in at least one attribute

– Lexicographic rule• We looked at feature that was most important to us and chose apartment

that ranked highest on that attribute– Elimination-by-Aspects

• We compared apartments based on acceptable standards for features those were sequentially most important to us and finally chose apartment that qualified on those attributes which were ranked on their importance

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Buyer Behavior: Decision MakingMultiple models to take decision

• Consumers often use a combination of decision-making strategies

• For example, when there are a large number of options, first use a noncompensatory strategy (conjunctive model) to reduce size of consideration set and get rid of bad ones and then use a more thorough model (a compensatory strategy) to evaluate remaining options

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Buyer Behavior: Decision Making• Decisions sometimes made simply because

they feel right rather than they resulted from a detailed and systematic evaluation

• Affective Decision Making

– Emotions and feelings• Experience-based (Lux Soap, Philips Bulb)

– Imagery• Visualization (Honey bottle, Pulse)

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Buyer Behavior: Decision MakingDecision making when alternatives cannot be compared

• Non-comparable Decisions– ‘What to do with this bonus money?’

– Visiting Cox’s Bazar or village home

– Buying a large screen HD TV with home theater or a Laptop

– Investing in Share market

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Buyer Behavior: Decision MakingDecision making when alternatives cannot be compared

• Alternative-Based Strategy (top-down)– Develop an overall evaluation of each option

(perhaps using compensatory strategy) and make decision based on this evaluation

• Attribute-Based Strategy (bottom-up)– Make comparisons easier by forming abstract

representations of comparable attributes– Thus, the choice is constructed or built-up

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• When decision based on low consumer effort

Routine buying (salt)

• Few product differences perceived (flour, mosquito coil)

• Convenience (soft drinks available close to home)

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Low-Effort Decision-Making ProcessSimplifying Strategies

– Satisfice • (flour, salt)

– Choice Tactics

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Low-Effort Decision-Making Process

• Choice Tactics

– Price tactics• ‘It’s the cheapest’

– (Spice: Cumin, Cinnamon)

– Affect tactics• ‘I like it’

– (Lux soap)

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Low-Effort Decision-Making Process

• Choice Tactics

–Performance tactics• ‘It removes stains better’

– (Harpics)

–Normative tactics• ‘My mother bought it’

– (Powder Spice)

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Buyer Behavior: Decision MakingLow-Effort Decision-Making Process• Choice Tactics

–Habit tactics• ‘I buy the same brand I bought last time’

–(Basmoti Rice)

–Brand loyalty tactics

• ‘I buy the same brand for which I’ve a strong preference’

–(Singer Sewing Machine)

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Buyer Behavior: Decision MakingLow-Effort Decision-Making Process• Choice Tactics

– Variety seeking tactics • ‘I need to try something different’

– (Cookies)

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Low-Effort Decision-Making Processes

• How Low-Effort Decision Making Differs from High-Effort?

– Hierarchy of Effects

– Passive or Incidental Learning

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• Roles of Spouses

–Husband-Dominant Decision

–Wife-Dominant Decision

–Joint Decision

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Consumer Markets and Buyer Behavior• Stages in Family

Life Cycle

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Consumer Markets and Buyer BehaviorDecision-making process for family• Initiator(s): Family member who first

recognizes a need or starts purchase process

• Information gatherer(s): Individual who has expertise and interest in a particular purchase

• Influencer(s): Person who influences alternatives evaluated, criteria considered, and final choice

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Consumer Markets and Buyer BehaviorDecision-making process for family

•Decision maker(s): Individual who makes final decision, may be joint decision

•Purchaser(s): Family member who actually purchases the product, typically an adult or teenager

•User(s): User of product, may be single or multiple.

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Consumer Markets and Buyer Behavior• Decision-making process for Kids Cereal

Communication targeted at children (taste, image)

Influencer (children)

Communication targeted at parents (nutrition)

User (children)

Purchaser (parents)

Decision maker (parents, children)

Information gatherer (parents)

Initiator (parents, children)

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Social Class and Consumer Behavior

• Concept of social class implies that some have more power, wealth, status and opportunity than others

Social class: An identifiable group of individuals who tend to share similar values and behavior patterns different from those of other classes

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U.S. Bangladesh

JapanLatin America

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• Upper class (elite families, top business people, huge land owners, and political leaders)– View themselves elite. This image leads to an

increase in behaviors such as investment in art, travel (esp. Europe, North America), donations to good causes, prestige schooling and membership in elite private clubs

– Self-expression is also important, resulting in purchase of high-quality, prestige brands with ideal of spending in good taste

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• Upper-middle class (top professionals and medium businesspeople)– View themselves as intellectual, liberal, political

and socially conscious. This image leads to an increase in behaviors such as theater attendance, purchases of arts, travel (esp. Thailand, India, Nepal, Singapore), prestige schooling and membership in new private clubs.

– When items are purchased, conspicuous consumption is often goal.

– For advertising and personal selling messages, English words and western models are very appealing

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• Lower-middle class (General service people and educated white-collar employees)– Dependence on spouse for both economic and social

support– More cultural minded, and nationality oriented socially,

psychologically and geographically than other classes– More likely to judge product quality on basis of price, shop

in mass merchandise– Want to ‘do the right thing’, ‘buy what’s popular’, ‘do what’s

good for the children’ and ‘be fashionable’– Likely to spend on education, shop at somewhat balanced

(price and quality) clothing stores with medium quality brand names, stick with price sensitive brands

– Foreign brands, English words and western models are very appealing for advertising and personal selling messages

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• Lower class (labors and farmers)– Mainly represented by blue-collar workers; heavy

dependence on family members for both economic and social support

– Traditional male dominated buying– Judge product quality on basis of price, shop in

mass merchandise or discount stores, and have less product information when purchasing

– Second-hand consumers– TV advertisement is appealing

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Social Class and Consumer Behavior• Across most societies, upper classes are

more similar – more cosmopolitan and international in orientation

• Middle classes are most likely to borrow from other cultures because this may represent a means of achieving upward social mobility.

• Lower classes are most likely to be culture bound (unaware of other cultures and therefore little influenced by them)

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Social Class and Consumer Behavior• Conspicuous Consumption

– Acquisition and visible display of luxury goods and services to demonstrate one’s ability to afford them

– Experience facilitators – The visibility of these goods/services is critical because the message will not be communicated if others cannot see them!

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• Status Symbols and Judging Others– Status Symbols (to indicate who they are in the social

hierarchy based on what they own/possess)• Examples: Rolex, Golf, Mercedes

– Parody Display (status symbols moving in reverse direction)• Example: tattoo and ripped jeans becoming more acceptable in

upper and upper-middle classes

– Fraudulent Symbols (when status symbols are widely possessed, they lose their status connotations)

• Example: cell phones

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Reference Group and Consumer Behavior

• A useful framework of analysis of group influence on individual is 'reference group'

–term comes about because an individual uses a relevant group as a standard against which oneself is compared.

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Exhibit: Sources of Influence

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Reference Group and Consumer BehaviorReference Group• Aspirational Reference Group

– Aspirational reference group refers to those celebrity whom one would like to compare oneself

• many firms use athletes, actors/ actress, models in advertisement and these represent what many people would ideally like to be.

• Nike, Adidas etc. uses famous sports celebrity

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Reference Group and Consumer Behavior• Associative Reference Group

– Associative reference groups include people who more realistically associated with individuals' current status

• coworker, neighbor, friend

• Your favorite friend is using Nokia mobile handset

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Reference Group and Consumer Behavior• Dissociative Reference Group

– Dissociative reference group includes people that individual would not like to be like

• Teenage people do not like to use umbrella because it resembles old people

• Store named 'The Gap' was created because many younger people wanted to actively be distinguished from parents and other older and 'uncool' people.

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Normative Informational

CommunicatedVerbally

CommunicatedNon-verbally

Example: Your friendtells you, you shouldn’twear that outfit again.

Example: Your friendlooks at you in a weirdway whenever you wearthe outfit.

Example: Your friend tells you there is a discount package at Grameen Phone

Example: You see so many peopleWearing Arong Panjabi anddecide to buy one

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Global Marketing• Country of origin effects

– Consumers use their knowledge of where products are made in evaluation of their purchase options

– Common associations• France – perfumes, wine, clothing• Italy – shoes, sports cars, furniture• Japan – cameras and consumer electronics• Germany – cars, tools and machinery• India – spices, textiles, jewellery • US – computers, entertainment, fast-food

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Global Marketing

PRODUCT

STRATEGY

Product

Vs.

Communication

Standardized communication

Localized Communication

Standardized product

GLOBAL STRATEGY

MIXED STRATEGY

Localized product

MIXED STRATEGY

LOCAL STRATEGY

COMMUNICATION STRATEGY

Laptop

Automobile McDonald’s

French Wine

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Global MarketingStandardized or Adaptation???• Standardization is best advocated by Theodore

Levitt (Levitt, 1983)

• According to Levitt, cultural differences may be compensated by offering better quality at a lower price

• Standardization can offer cost effectiveness, quality consistency, same product image and economies of scale

• Adaptation Strategy: Marketing mix will be adjusted to the local situation (NOT entirely) Localized) when needed

cb lecture 2 and 3 2015

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