Consumer Markets And Consumer Buying Behavior Is The .

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Consumer Buying BehaviorConsumer Markets andConsumer Buying BehaviorConsumer behavior is the actions a person takes inpurchasing and using products and services,including the mental and social processes thatprecede and follow these actions Prof. P.V. BalakrishnanConsumer Buying Behavior refers to the buying behavior of finalconsumersindividuals & households who buy goods and services forpersonal consumption.All these consumers make up the consumer market.The central question for marketers is: “How do consumers respond to various marketing efforts thecompany might use?”1CB-2Value of Customers1.Transaction basisa)Views each individual interaction as uniqueb)Calculate value of transaction 2.Lifetime Customer Value1.Determine margin on goods sold2.Increases efforts towards long-term goalsPrimary risk is overestimation of retention ratesFour things are needed to successfully utilize LCV Assess costs involved with customer acquisition3. Margin – Acquisition costs4.Lifetime Customer ValueFocuses firms’ efforts on retaining most valuable asset(Customers)a)Unique customer identificationa)Views each customer as an asset or a series of interactionsb)Customer purchase historyb)Calculate value of customerc)Customer communication datad)Accurate cost information Determine acquisition and response rates Compute relevant costs Cumulative Customer Profit 1Use acquisition and retention rates to compute lifetime customervalue2345YearCB-3Model of Buyer BehaviorMarketing andOther StimuliBuyer’s Black BoxMarketingBuyer CharacteristicsBuyer Decision nologicalPoliticalCulturalCB-4Factors Influencing Consumer BehaviorBuyer ResponsesCulturalSocialSocialProduct ChoiceBrand ChoiceDealer ChoicePurchase TimingPurchase iefsandandAttitudesAttitudesBuyerBuyerCB-61

Factors Affecting Consumer Behavior:CultureFactors Affecting Consumer Behavior:CultureCulture is the Most Basic Cause of a Person'sWants and Behavior.Culture is the Set of Values, Perceptions, Wants &Behavior Learned by a Member of Society fromFamily.Social ClassSubculture Group of people with sharedvalue systems based oncommon life experiences. Society’s relativelypermanent & ordereddivisions whose membersshare similar values,interests, and behaviors. Hispanic Consumers African American Consumers Asian American Consumers Measured by: Occupation,Income, Education, Wealthand Other Variables. Mature ConsumersCB-7CB-8Factors Affecting Consumer Behavior:SocialFactors Affecting Consumer Behavior:PersonalCars are often seen as a status symbol, andmarketers choose which element to present intheir advertising.Personal InfluencesCompare this ad to the one on the next slide.Click to continueGroupsGroups Membership Membership Reference ReferenceFamily Buying InfluenceChildren can exert astrong influence onfamily buying decisions.Johnson & Johnson remindscustomer’s of its commitmentto the American Family.What other companies usechildren to influencefamily buying decisions?Click or pre ss spa cebar to returnFamilyFamily (most(most important)important) Husband, Husband, wife,wife, kidskids Influencer, Influencer, buyer,buyer, useruserAge and LifeCycle StageSocialSocial ty &Self-ConceptLifestyleLifestyle IdentificationIdentificationRolesRoles andand OpinionsOpinionsCB-9CB-10SRI Values and Lifestyles(VALS)LifestyleLifestyleLifestyle isis aa modemode ofof livingliving thatthat isisidentifiedidentified byby howhow peoplepeople spendspend theirtheirtimetime andand resources,resources, whatwhat theythey considerconsiderimportantimportant inin theirtheir environment,environment, andandwhatwhat theythey thinkthink ofof themselvesthemselves andand thetheworldworld aroundaround them.them.High ResourcesInnovatorsInnovatorsHigh rsMakersMakersLow ResourcesCB-11SurvivorsSurvivorsLow InnovationCB-122

Factors Affecting Consumer Behavior:PsychologicalMaslow’s Hierarchy of Beliefs icesEsteem Needs(self-esteem)Social NeedsPerception(sense of belonging, love)Safety Needs(security, protection)Physiological NeedsLearning(hunger, thirst)CB-13AttitudeCB-14BeliefsAnAn attitudeattitude isis “a“a learnedlearned predispositionpredisposition totorespondrespond toto anan objectobject oror classclass ofof objectsobjectsinin aa consistentlyconsistently favorablefavorable ororunfavorableunfavorable way.”way.”BeliefsBeliefs areare aa consumersconsumers subjectivesubjectiveperceptionperception ofof howhow wellwell aa productproduct ororbrandbrand performsperforms onon differentdifferent attributes.attributes.CB-15CB-16Characteristics ofAttitudes and PreferenceAttitudes: Multi-attribute ModelValence Favorable / Neutral / UnfavorablePositive / Indifferent / NegativeIntensity Strongly held versus weakly heldVery important to not at all importantConfidence Evaluation portanceLevel of certaintyBrand ntoBuy(Ao)(BI)Behavior(B)SocialNormAo Σ biei SNCB-173

Measuring AttitudesMeasuring AttitudesHow important is each of the following attributesassociated with ISPs?VeryEntertainment ValueEducational ValueEase of Site NavigationNot at allImportant Coding5 43Important 2Evaluate AOL on each of the following attributes?Excellent Entertainment ValueEducational ValueEase of Site NavigationCoding2 Poor 10-1-21CB-19Measuring Attitudes VeryImportant z z z Not at allImportant Evaluate AOL on each of the following attributes?Entertainment ValueEducational ValueEase of Site Navigation Measuring AttitudesHow important is each of the following attributes associated with ISPs?Entertainment ValueEducational ValueEase of Site Navigation CB-20Excellentz zzPoor AttributeImportance (ei)AOLRoadrunnerEase of SiteNavigation5 X0 02 10EntertainmentValue4 X2 80 0EducationalValue3 X2 60 01410Overall RatingEvaluate Roadrunner on each of the following attributes?Entertainment ValueEducational ValueEase of Site NavigationExcellent z zz Poor CB-21Factors Influencing Attitude-Behavior RelationshipMeasuring Attitudes0Ease of Site NavigationEntertainment ValueEducational ValueCB-22 510 AOL RoadrunnerEvaluation lNormAttitudesIntentionsBehaviorCB-234

Simultaneous AttributeImportance-Performance GridStrategiesAo Σ biei erformancePoorPoor Strategies to stimulate interest: Redesign the product Alter beliefs about the brand Alter beliefs about competitors’ brands Alter the importance weights Call attention to neglected GoodGoodPoorGoodBalakrishnanTypes of Buying Decision . ComplexBuyingBehavior3. VarietySeekingBehavior2. DissonanceReducing BuyingBehavior4. HabitualBuyingBehaviorBuyer Decision ProcessPurchaseDecisionEvaluationof B-29NeedRecognitionCB-31Buyer Decision ProcessStep 1. Need RecognitionEvoked SetAnAn evokedevoked setset isis thethe groupgroup ofof brandsbrands thatthataa consumerconsumer wouldwould considerconsider acceptableacceptablefromfrom amongamong allall thethe brandsbrands ofof thetheproductproduct classclass ofof whichwhich hehe oror sheshe isisaware.aware.State Where theBuyer’s Needsare Fulfilled andthe Buyer isSatisfied.BuyerRecognizesaProblemor aNeed.Needs ArisingFrom:Internal Stimuli –HungerExternal Stimuli-FriendsCB-32CB-335

The Buyer Decision ProcessStep 2. Information SearchPersonalPersonal SourcesSources Family, friends, neighbors Most effective source ofinformationCommercialCommercial SourcesSources Advertising, salespeople Receives most informationfrom these sourcesExperientialExperiential SourcesSourcesStep 3. Evaluation of AlternativesConsumerConsumer MayMay UseUse CarefulCarefulCalculationsCalculations && LogicalLogical ThinkingThinkingConsumersConsumers MayMay BuyBuy onon ImpulseImpulse andandRelyRely onon IntuitionIntuitionConsumersConsumers MayMay MakeMake BuyingBuying DecisionsDecisionsonon TheirTheir Own.Own. Mass Media Consumer-rating groupsConsumersConsumers MayMay MakeMake BuyingBuying DecisionsDecisionsOnlyOnly AfterAfter ConsultingConsulting OthersOthers. Handling the product Examining the product Using the productMarketers Must Study Buyers to Find OutHow They Evaluate Brand AlternativesCB-34The Buyer Decision ProcessCB-35The Buyer Decision ProcessStep 4. Purchase DecisionStep 5. Postpurchase BehaviorPurchasePurchase IntentionIntentionSatisfied Customer!DesireDesire toto buybuy thethe mostmost preferredpreferred brandbrandAttitudesof ctations of Product’s Performance.Product’s CognitivePublicPublic SourcesSourcesThe Buyer Decision ProcessDissatisfied CustomerPurchasePurchase DecisionDecisionCB-37CB-38Complaint Response BehaviorPost Consumption Behavior:How Customers Dispose of Products 63% of customers with a loss between 1 and 5 did not complain Not buy again. 54% Problem unresolved 30% Problem resolved Not buy again.Not buy again.DON’T LET IT ARISE!CB-40 Pentice-Hall6

A Conceptual Model Of Service QualityLoyalty: Retaining CustomersCustomer retention higher profits5% retention rate increases profit by 25-95%In e-apparel, repeat customers spend twice asmuch in months 24-30Loyal Customers provide valuable referrals Referred customers cost lot less to acquire Word-of-MouthCommunicationsPast ExperiencePersonal NeedsExpectedServicesGap 5CUSTOMERPROVIDERPerceived ServiceGap 1E-bay spends less then 10 to get each new customerGap 4Service DeliveryGap 3Referred customers use less supportExternalCommunicationsto CustomersService QualitySpecificationsGap 2Management Perceptionsof Customer ExpectationsCB-45Five Critical GapsSource: Zeithaml, Parasuraman, and Berry (1990), Delivering Quality Service: Balancing Customer Perceptions and Expectations, TheCB-47Free Press, New York, New York.Satisfaction – Loyalty Link1. Service provider does not know what thecustomer expects;2. Wrong service-quality standards are set;3. Service quality standards are not met;4. What is delivered does not equal what waspromised;5. Gaps 1-4 leads to service that does not equalexpectations.Ref: Jones & Sasser, HBR, 1995CB-48Adopter CategoriesPercentage of areawareofofproduct,product,butbutlackslacks information.information.Interest:Interest: outabout uct.product.Trial: Consumer tries newproduct on a small scale.Early MajorityInnovatorsStages in the Adoption ProcessCB-49EarlyAdopters34%Late Majority16%13.5%2.5%EarlyLaggards34%Time of AdoptionLateAdoption: Consumer decidesto make regular use of product.CB-50CB-517

ACCORD:Influence (of Product Characteristics) on Rate of AdoptionAdopter Categorization for New ProductsEverett Rogers(1950s) surveyed alarge sample of people to find out theiradoption process for new products. Based on this survey, he came up with theclassification:2.5% Innovators13.5% Early Adopters34% Early Majority34% Late Majority16% CB-53BalakrishnanReview of ConceptsDefine the consumer market and construct asimple model of consumer buyer behavior.Name the four major factors that influenceconsumer buyer behavior.List and understand the stages in the buyerdecision process.Describe the adoption and diffusion process fornew products.CB-578

Consumer Markets and Consumer Buying Behavior CB-2 Consumer Buying Behavior Consumer behavior is the actions a person takes in purchasing and using products and services, including the mental and social processes that precede and follow these actions Consumer Buying Behavior refers t

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