Consumer Markets & Consumer Buyer Behaviour

1Why study consumer behaviour?

• Organisations exist to satisfy consumers' needs and wants, and they can only do that by understanding the people who buy, better than competitors do.
• We can't open a head to read the thinking process, so marketers study behaviour instead: behaviour is the outward sign of mental intentions.
• Understanding behaviour makes it easy to match products to needs.

2Consumer markets

• A consumer market is the system through which individuals and households buy goods and services for personal consumption, not resale. Buying groceries or paying for a car wash both count.
• The more people actively buy, the more active the consumer market.

Consumers differ in tastes and habits along four sets of characteristics (the same as the segmentation bases):

3The black box model (stimulus → response)

 STIMULI                      BUYER'S BLACK BOX                     RESPONSES
 Marketing: Product,     →   Buyer characteristics:          →   Product choice
   Price, Place,              Cultural · Social                   Brand choice
   Promotion                  Personal · Psychological            Dealer choice
 Other: Economic,             Buyer decision process:             Purchase timing
   Technological,             Problem recognition → Search →      Purchase amount
   Political, Cultural        Evaluation → Decision → Post-purchase

• Stimuli: the 4 Ps plus other environmental stimuli (economic, technological, political, cultural).
• Desired responses: buying or not buying a product, buying at a particular place, buying from a particular dealer.
• The challenge: people don't respond uniformly to the same stimuli at different times, because of the buyer's black box: their characteristics and decision process. Marketers try to understand what goes on inside it.

4Factors influencing consumer behaviour

1. Cultural factors

• Culture is the most fundamental determinant of buyer behaviour: the sum of learned beliefs, values and customs that direct the behaviour of a society's members.
• Subculture is a more homogeneous group within a culture, with its own values, customs and traditions.
• Social class is a relatively homogeneous, enduring, hierarchically ordered division whose members share values, interests and behaviour.

2. Social factors

Reference groups influence attitudes and behaviour, directly or indirectly:

Reference groups
├── Membership groups
│     ├── Primary   (family, friends, neighbours: frequent, informal)
│     └── Secondary (clubs, professional bodies: formal, less frequent)
└── Non-membership groups
      ├── Aspirational groups   (you want to belong)
      └── Dissociative groups   (you want to avoid)

They influence buyers in three ways:

1. Expose the person to new behaviours and lifestyles.
2. Influence attitudes and self-concept.
3. Create pressure to conform, which affects product and brand choices.

• Family is the most important consumer buying organisation and the nucleus of buying units. It socialises people and instils buying habits.
• Roles and statuses: the roles people play give them status, which influences purchases.

3. Personal factors

• Age and life-cycle stage
• Occupation and economic circumstances: spendable income, savings, debts, borrowing power, attitude to spending vs saving
• Lifestyle: the pattern of living in activities, interests and opinions (Kotler, 2000)
• Personality and self-concept: distinguishing psychological characteristics leading to relatively consistent, enduring responses (Kotler, 2000). Consumers express their personality through products.

4. Psychological factors

• Motivation: a need drives goal-directed action. Consumers are need-driven. Theories: Maslow's hierarchy of needs, Herzberg's two-factor theory, McClelland's need theory.
• Learning: changes in behaviour arising from experience.
• Beliefs and attitudes:
• A belief is a descriptive thought.
• An attitude is an enduring favourable or unfavourable evaluation, feeling and action tendency towards an object or idea.
• Perception: the internal representation of the external world. "Consumer perception should be the marketer's reality."

5The buyer decision process — 5 stages

6Four types of buying behaviour

The type depends on involvement (how important or expensive the purchase is) and differences between brands:

7Contemporary trends — Sri Lanka & global

Sri Lanka (Nielsen consumer insights, 2015–2017)

1. Consumer confidence fell: from 87 (Oct 2015) to 46 (Jul 2016), recovering to 54 (Dec 2016), then flat. 80% expected job prospects not to improve, 90% expected unsatisfactory personal finances, and 92% expected purchasing power to fall.
2. Rising food, utility and education costs: people cut usage of personal care (e.g. shampoo), and penetration fell in some hygiene categories. FMCG firms missed their budgets.
3. Top three issues: political stability, utility bills, children's education costs. Drought hit 14 districts, and imported basics (rice, dhal, sprats, sugar) rose with currency swings.
4. Moving away from supermarkets: supermarket shoppers fell from 23% (2015) to 19% (2016), while grocery shopping rose from 46% to 53%. Consumers became more rational.
5. Local companies growing: 67% of incremental sales came from local firms vs 55% for multinationals, helped by quality parity.
6. Internet use rising to 32% penetration, with companies spending proportionately more on digital media.

Global (Euromonitor Global Consumer Trends 2019)

8Quiz 05: model answer

From Week 06/Quiz 05.docx in the Marketing folder.

9Quick revision sheet