Thursday, 13 September 2012

Consumer Behaviour Essay

ABSTRACT
Consumer products are designed in such a manner that they appeal consumers, encouraging them to buy those products. To meet that end, the industrial R&D organisation tends to focus preferably on understanding and manipulating product attributes. However, it is observed that buying behaviour is not only a function of the product but also, and in some cases perhaps to a considerable extent, a function of the consumer, the social environment of other consumers, the other competing products in the marketplace, and the marketing strategy of the company. In order to design a fast-moving product or the best product, it is essential to understand not only the physics and chemistry or composition of the product, but also the psychology of consumers and the sociology of consumer groups or networks. The purpose of this study is to have a model of the marketplace that describes certain aspects of consumer behaviour. There are basically two main parts to such a model:

1. The elaborate description of a population of ‘consumers’, who each select (buy) repeatedly one of a number of competing ‘brands’ (we can neglect the difference between product and brand for these purposes). This further subdivides into a description of the behaviour of a single consumer (‘psychology’), and of the collective behaviour of a group, in other words, of the interactions between a group of consumers (‘sociology’).

2. The elaborate description of ‘brand management’, i.e. the strategy made by brand managers when changing the attributes of a brand such as quality or price or in response to the events in the marketplace. Traditional marketing models tend to focus more on the second element, and prefer to treat the large number of consumers in a macroscopic, averaged way. Alternatively, individual consumers and their buying behavior should be looked at, it should be tried to derive observable large scale effects, like changes in market share. Ideally one would like to connect the ‘macroscopic’ viewpoint of the brand manager to the ‘macroscopic’ viewpoint of the consumer.

INTRODUCTION
Every one of us is a consumer. We consume things daily as per use, we also consume and buy these products according to our requirement, choice and buying capacity. These can be any type of product like FMCG (Fast Moving Consumer Goods ),consumable durable goods, specialty goods or industrial products. Our self concept, perception, social and cultural background and our age and family cycle, our attitudes, beliefs, values, motivation, personality, social class and many other factors which are both internal and external to us are the key factors to decide what we buy, how we buy, where and when we buy, in what quantity we buy, etc. While deciding to buy a product, we also consider whether to buy it or not, from which seller or source to buy it. Some societies considerably affluent and, these societies can afford to buy in greater quantities, sometimes more than required, and they buy comparatively more frequent intervals. On the other hand in poor societies, the consumer can hardly afford to meet his required ends. The marketers therefore put considerable effort to understand the needs and behaviour of different consumers which requires an in-depth study of their internal and external environment, they on the basis of that they formulate their plans for marketing.

CONSUMER BEHAVIOUR
Management is a discipline which is considered as the youngest of sciences and the oldest of arts and furthermore, consumer behaviour in management is a very young discipline. The scholars and academicians started concentrating on this discipline at a much later stage. It was around 1950s, when the concept for marketing developed, and thus the need was recognized to study the behaviour of consumers. Marketing strategy begins with the needs of the customer and ends with their satisfaction. When everything is done keeping the customer’s needs and satisfaction in mind, then the study of consumer behaviour becomes a necessity. Consumer behaviour starts with the buying of goods which can be bought individually, or in groups. Goods are bought under stress (to satisfy an immediate or urgent need), it can also be bought for comfort and luxury and it can also be bought in small quantities or in bulk. For all these transactions, exchange is required. This exchange usually happens between the buyer and the seller. It can also happen between consumers. Thus, consumer behaviour can be defined as the process of decision-making and physical activities involved in acquisition, evaluation, use and disposal of goods and services. This definition definitely makes it clear that it is not just the buying of goods or services that gets attention in consumer behaviour but, the process starts much before the goods have actually been acquired or bought. The process of buying, in fact, starts in the minds of the consumer, when he starts thinking of alternatives between products that is needed to be acquired with their relative advantages and disadvantages. This further leads to internal and external research by the consumer. Then starts the process of decision-making for purchasing and using the goods, and then comes the post purchase behavior of the consumer which is also equally important, because it gives the clue to the marketers whether the product has been a success or not.

Extensive consumer research studies are being conducted to understand the likes and dislikes of the consumer. These researches try to get the answers of:

a. What is the view of the consumer about the company’s products/ services and those of its competitors?
b. How can the quality of the product be improved in their opinion?
c. How is product used by the customers?
d. How is the customer’s attitude about the product and its advertising?
e. What role does the customer play in his family?

Consumer research should focus to get the answers to the following key questions. A market exists because it fulfills the needs of the consumer. In this connection, a marketer should know the framework for consumer research. Taking this example from a market research of soap:

a. Who constitutes the market? - Parent, Child, Male, Female (Occupants)
b. What does the market need to buy? – Soap : Regular, Medicated, Glycerine, Herbal- of what brand and of which size – (Objects)
c. Who participates in the buying process? Parent, Child, Male, Female (Organisations)
d. How is the product bought? Cash, Credit, Mail-order etc. (Operations)
e. At what duration does the market buy? Monthly, Weekly etc. ( Occasions)
f. Where does the market buy the product? Supermarket, Multi-marketer, Retail store etc. (Outlet)
g. Why does the market buy the product? For Cleansing, Bathing, Fresh feeling etc. (Objectives)

Consumer behaviour is regarded as a dynamic, complex and multidimensional process, and all marketing decisions depend on assumptions. Marketing strategy is the plan which the companies must execute, in order to outperform the competitor and achieve the desired objective. In formulating the marketing strategy, and selling the product efficiently, cost-benefit analysis must be done. There can be multiple benefits of a product, for example, for owning a motor bike one may consider for ease of transportation or status or pleasure or comfort or feeling of ownership. The cost includes not only the amount of money paid for the bike but also the cost of maintenance, gasoline, parking, risk of injury in case of an accident, pollution and frustration such as traffic jams. The customer value is constituted by the difference between this total benefit and total cost. The objective of the formulation of a marketing strategy is to provide superior customer value. The entire process includes market analysis, leading to target market selection and the formulation of strategy which is done by juggling the product, price, promotion and distribution, to offer a total product (a set of entire characteristics). The total product is designed to create an image in the mind of the consumer, who undergoes the process of decision making which further leads to the result in terms of satisfaction or dissatisfaction, which is reflected by the sales and image of the product or brand. Marketing or product promotion is the process of the shaping of consumer behaviour, which leads a consumer to respond in certain ways and he makes a decision, keeping different situations in mind. The decision-making process varies with the value of the product, the involvement of the buyer and the risk that is involved with the product/service. The consumer and his style of living is influenced by a number of factors like his culture, subculture, values, social status, demographic factors, household, reference groups, and also the internal make up of the consumer like consumer’s personality, emotions, motives of buying, perception and education. The marketing activities and efforts of the marketer also influence the consumer. All these factors are responsible for the formation of attitudes and needs of the consumer. Then the process of decision-making starts which consists of the recognition of the problem, search of the information (which is both internal and external) followed by the evaluation and selection procedure, and finally the purchase. After the purchase and use of the product comes the satisfaction and dissatisfaction of the customer with the product. This behaviour of the consumer is known as post-purchase behaviour

Marketing Strategy and Consumer Behaviour

(i) Market Analysis
(a) Consumer
(b) Company
(c) Competition
(d) Condition

(ii) Market Segmentation
(e) Identify product related needs
(f) Group customers with similar need sets
(g) Describe each group
(h) Select target market

(iii) Marketing Strategy
(i) Product
(j) Price
(k) Distribution
(l) Communication
(m) Service

(iv) Decision Process of the Consumer
(n) Problem recognition
(o) Information search—internal, external
(p) Alternative evaluation
(q) Purchase
(r) Use
(s) Evaluation

(v) Outcomes
(t) Customer satisfaction
(u) Sales
(v) Product/Brand image

MARKET ANALYSIS
An understanding of the 4-Cs are required for market analysis which are consumer, conditions, competitor and the company. The main objective of a company is to provide superior customer value. For providing better customer value it is needed learn the needs of the consumer, the offerings of the company, as well as its competitors and the environment- economic, physical, technological, etc. A consumer is one who is engaged in physical activities of evaluation, acquisition, use or disposal of goods or services. A customer is one who actually is involved in purchase of a product or service from a particular organisation or a shop. A customer must be always defined in terms of a specific product or company. However, the term consumer is a quite broad term emphasizing not only the actual buyer or customer, but also its users, i.e. consumers. For example a product is generally purchased by the head of the family and used by the whole family, i.e. a refrigerator or a car. The roles of consumer behaviour are played by different members of the family.

Role Description
Initiator The person who decides that some is need or want which is to be met (e.g.
a son indicating the need for a colour TV).

Influencer The person or persons who intentionally or unintentionally are responsible to influence the decision to buy or endorse the view of the initiator.

Buyer The person who actually purchases a product.

User The person or persons who use or consume the product.

All the roles of consumer behaviour are to be kept in mind but, the emphasis should be given on the buyer whose role is observable and visible.

(a) The Consumer
Researches are made to understand the consumer. Sometimes motivational research
Are done to bring out hidden attitudes, uncover emotions and feelings. Many
Companies try to know about the satisfaction level, future needs and ideas for a new product by sending questionnaires to customers to ask about them. They make changes in the marketing mix and streamline the advertising on the basis of answers received.

(b) The External Analysis (The Company)
The external analysis is done on the basis of the feedbacks from the industry analyst and the marketing researches. The internal analysis is done for the cmpany’s financial conditions, the quantum of the sales, force and other factors within the company.
The study of these factors helps to understand the consumers and their needs.

(c) The Competition
A study of the strengths and weaknesses of the competitors, their strategies, their anticipated actions and their reaction to the company’s moves and plans is made in the analysis of the market,. The company reacts accordingly after collecting this information and changes its marketing mix and the offering is made in such a manner that can outperform the competitor. This is a very difficult and complicated process and it is easy to say than to do. To collect the correct information about the competitors and to anticipate their future actions is the job of the researcher.

(d) The Conditions
The conditions under which the company is operating has also to be considered seriously . The factors to be considered for study are the economy, the physical environment, the government rules and regulations, the technological developments, etc. These are very important factors to effect the consumer needs, i.e. the deterioration of the environment and pollution may cause the use and innovation of other safer products. People are health conscious now and are very much concerned for their safety. Hence, in this case, safer products have a better chance to succeed. It case of recession, the flow of money is restricted greatly. This further leads to the formulation of different marketing strategies.

(e) Market Segmentation
The market is divided into segments which are a part of a larger market whose needs are similar and homogeneous. Such segments that can be identified with similar needs are:

1. Geography
2. Population
3. Urban-Rural
4. Sex
5. Age factor
6. Literacy level
7. Incentive level
8. Linguistic diversity
9. Religion
10. Dress, food
11. Habits and fashion

(f) Need Set
By need set we mean that there are products which satisfy more than one need of the consumer. For example an automobile can fulfill the transportation needs, fun needs, status need, or time saving needs. So the company always tries to identify the need sets which its product can satisfy. Then we try to identify the groups who have identical needs, i.e. some people need economical cars while others may prefer to go for luxury cars.

(g) Demographic and Psychographic Characteristics
These groups are recognized and they are described on the basis of their demographic and psychographic characteristics. The company tries to find out how and when the product was purchased and consumed.

(h) Target Segment
After doing all the above preliminary work is, the target customer group known as the target segment is selected, keeping in consideration how the company can provide superior customer value at a profit. The segment which can be given the best service with the company’s capabilities at a profit is selected. It is always to keep in mind that different target segments need different marketing strategies and, with the change in the environmental conditions the market mix has to be changed accordingly.

Marketing Strategy
Marketing strategies are formulated to provide superior customer value. For formulating market strategies, the 4-ps are to be kept in mind for the target market.

(i) Product
Product is something that is being offered to the consumer which is tangible and which can satisfy a need and has some value.

(j) Price
Price is the amount of money one has to pay to avail the right to use the product.

(k) Distribution (Place)
The goods can be distributed through many channels. These channels could be retailers, wholesalers, agents or by direct selling. Distribution channel plays an important role in bringing the goods to the consumer. They provide, time, place and possession services. Some goods are marketed through the channels or the middleman while others are marketed directly by the company to the actual consumer.

(l) Promotion
Promotion is a way of changing customer’s attitude, so that it becomes favourable for the company’s products. The different means of promotion are advertising, personal selling, sales promotion and publicity.

(m) Service
Service means auxiliary services that enhance the value of the product or the service. For example, while selling a car free services are provided over a certain period of time. Check-ups and maintenance are also covered on the charge of an adequate amount along with the product purchased. These services provide a lot of value to the product or the customer. These services give an advantage to the customer and he becomes free from worrying occasional checkups or risk. The reduced risk gives satisfaction to the customer derives and he is happy for his decision to purchase.

(n) Consumer Decision Process
The decision-making process consists of a many steps through which the consumer undergoes. First of all, a decision is made to find solution of a problem. The problem may be of creating a cool atmosphere in home. For this, information search made to find how the cool atmosphere can be provided, e.g. by an air-conditioner or, by a water-cooler. This leads to the evaluation of alternatives and a cost benefit-analysis is made to decide which product and brand image will be suitable, and can take care of the problem suitably and adequately. Thereafter the purchase is made and the product is used by the consumer. The constant use of the product leads to the satisfaction or dissatisfaction of the consumer, which leads to repeat purchases, or to the rejection of the product. The marketing strategy is successful if consumers can see a need which a company’s product can solve and, offers the best solution to the problem. For a successful strategy, the marketer must lay emphasis on the product/brand image in the consumer’s mind. Position the product according to the customers. Likes and dislikes. The brand which matches the desired image of a target market sells well. Sales are important and sales are likely to occur if the initial consumer analysis was correct and matches the consumer decision process. Satisfaction of the consumer, after the sales have been affected, is important for repeat purchase. It is more profitable to retain existing customers, rather than looking for new ones. The figure below gives an idea of the above discussion.

Case Study
The marketer has to learn about the needs and changing of the consumer behaviour and practice the Marketing Concept. Levi Strauss & Co. were selling jeans to a mass market and did not bother about segmenting the market till their sales went down. The study into consumer behaviour showed their greatest market of the baby boomers had outgrown and their NEEDs had changed. They therefore came out with Khaki or Dockers to different segments and comfortable action stocks for the consumers in the 50 age group. Thus by separating the market and targeting various groups and fulfilling their needs, they not only made up for the lost sales but far exceeded the previous sales. They also targeted the women consumers for jeans and both men and women started wearing jeans in greater numbers. The offering given by the company must be enlarged to suit various segments. For example Maruti Udyog Ltd has come out with many models. Maruti 800, Maruti Van, Zen, Alto, Veagon R, Versa Gypsy, Esteem, Boleno and other models. For successful marketing one should:

1. Find consumer needs of various segments.
2. Position Products (new & existing) to these segments.
3. Develop strategies for these segments. Practice greater selectivity in advertising and personal selling and creating more selective media and distribution outlets.