Consumer Behavior

Types of consumer behaviour models

Consumer Behavior and Marketing ActionPerhaps the most useful set of categories is that of low, medium or high level models. In this case the level refers to the level of complexity – so a low level model would be a relatively simple representation of the phenomenon while a high level model of the same event would be much more complex and detailed and
include more variables.

Simple models

  • Black Box models
  • Personal variable models
  • Personal Variable/Post Purchase Satisfaction model

Comprehensive models

Black Box Models of Consumer Behaviour (Soloman, Bamossy & Askegaard, 1999)

  • Black box models focus solely on inputs and outputs 
  • Do not consider internal variables. 
  • They suggest that a given stimulus will prompt a particular response, within this processing centre;memory, goals and expectations are considered.

Simple black box models are based on identifiable observable and measurable variables, however they are unable to predict or explain behaviour.


Understanding the Consumer: A European PerspectiveNicosia Model (Dubois 2000)

The model is split into four key fields:

  1. The source of a message to the consumers attitude
  2. The search for and evaluation of alternatives 
  3. The act of purchase 
  4. Storage and the use of the purchased product.

The model attempted to demonstrate how the company influences the consumer through its promotional and advertising activities. However, criticisms have been raised about this model, include its descriptive content, its brevity, that it has never been fully tested and is now considered historical.

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The Four Models of Consumer Behavior

Consumer Behavior For Dummies1. Economic model: Economic model of consumer behaviour is one-dimensional. This means that buying decisions of a person are governed by the concept of utility. Being a rational man he will make his purchase decisions with the intention of maximizing the utility/benefits.

Economic model is based on certain predictions of buying behaviour
(a) price effect-lesser the price of the product, more will be the quantity purchased
(b) Lesser the price of the substitute product, lesser will be the quantity of the original product bought (substitution effect)

(c) More the purchasing power, more will be the quantity purchased (income effect).

2. Learning model: Classical psychologists have been interested in the formation and satisfaction of needs and tastes. They argued that living beings were influenced by both innate needs such as the primary needs of hunger, thirst, sex, shelter and learned needs like fear & guilt. A drive or internal stimulus which when directed towards a drive-reducing object becomes a motive. The various products or service will act as a stimulus to satisfy drives.

For example, if you are a hungry you will be driven towards food, which after consumption will reduce the
drive and provide and provide satisfaction.

Consumer Spatial Behavior: A Model of Purchasing Decisions over Space and Time
3. Psychoanalytical model: This model is based on the work of psychologists who were concerned with personality. They were of the view that human needs and motives operated at the conscious as well as subconscious levels. Sigmund Freud developed this theory.

According to him human behaviour or personality for that matter is the outcome of three components, viz.,
(a) ‘id’ which is the source of all psychic energy which drives us as action
(b) ‘super ego’ which is the internal representation of what is approved by the society
(c) ‘ego’ which is the conscious directing ‘id’ impulses to find gratification in a socially acceptable manner.

Thus we can say that human behaviour is directed by a complex set of deep-seated motives. This means that buyers will be influenced by symbolic factors in buying a product. Motivational research has been involved in investing motives of consumer behaviour so as to develop suitable marketing implications accordingly. Marketers have been using this approach to generate ideas for developing product-design, features, advertising and other promotional techniques.

Economics and Consumer Behavior
4. The sociological model: According to this model the individual buyer is a part of the institution called society. Since he is living in a society, gets influenced by it and in turn also influences it in its path of development. He is playing many roles as a part of various formal and informal associations or organisations i.e., as a family member, as an employee of a firm, as a member of a professional forum and as an active member of an informal cultural organization.

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The Howard Sheth Model of Buying Behaviour

The Howard Sheth Model of Buying Behaviour serves two purposes:

Customer Behavior: Consumer Behavior and Beyond
1. It indicates how complex the whole question of consumer behaviour is.
2. It provides the framework for including various concepts like learning, perception, attitudes, etc., which play a role in influencing consumer behaviour.

Inputs: In the Howard Sheth theory, the most significant stimulus affecting the buying behaviour are the information cues about the characteristics of the product. These cues may be significant if it comes to the buyer from the product itself when he is involved in a shopping activity. A similar set of cues, which are symbolic in nature, may also act as information sources. Both these significative and symbolic information cues represent the firms marketing efforts. The broad or product characteristics acting as information cues are quality, price, distinctiveness, service and availability.
There are impersonal sources like mass media communications and advertising, over which the firm has no control. However, the information sources also include sales and service personnel who can add and help the marketing efforts of the firm. The third source is social information cues which could affect buying behaviour towards the product or brand and these include family, friends or other members of the group with whom buyer comes into contact or to which he aspires to be in. The social source is personal and the company marketer has no control over this source.

Consumer Behavior For DummiesPerceptual Constructs: This refers to all the complex states or psychological processes (perception) and how the individual deals with the information cues received from various sources. It can be seen that all information available is not attended to (attention) and may not always be crystal clear in its meanings
(ambiguity). Although the individual may be engaged in an overt search for information, sometimes he/she may be bombarded with unwanted information. Moreover, any information cues to which the individual may attend may be distorted (perceptual bias) as result of his own frame of reference.

Learning Constructs: The second set of hypothetical constructs in the Howard Sheth model of buying behaviour are more complex and numerous. ‘Motives’ refers to the goals the individual attempts to achieve
through his/her buying behaviour. These goals are derived from the various drives (needs), which may be acting as a cue for his/her motive.

More closely related to the buyers intention in his attitude towards the product/brand. Whether he/she formed a positive attitude towards the product/brand. Other learning constructs include ‘brand comprehension’ i.e.,
knowledge/awareness about the brand characteristic features that forms the basis for the buyers evoked set of alternatives; choice criteria, and the confidence the individual has about his/ her brand comprehension, attitudes, or intentions. Finally, the Howard Sheth model includes a construct, ‘satisfaction’. This refers to ‘feedback’ mechanism, i.e., the post purchase and post use evaluation of the output of the process.

Why We Buy: The Science of Shopping--Updated and Revised for the Internet, the Global Consumer, and Beyond
Output: The purchase decision is the output. If after using the product, the consumer is satisfied with it, this will reinforce his positive attitude and purchase intent about the product and brand. Also, the positive attitude makes the consumer more attentive to the product/brand’s stimuli and further increases his brand comprehension.

If the consumer is dissatisfied with experience of using the product/brand, it will trigger off a reaction of negative attitude, low attention to the product stimuli. Poor brand comprehension and negative intention to purchase.

Exogenous or external Variables: Howard Sheth model theory also includes a number of variables, which are not explained but have a bearing on some or all of the constructs discussed above and indirectly
influences the output or consumer response.

1. Social and organizational setting: Man is basically a social animal. Because of his interactions with various groups and society, they look to each other for guidance regarding what to buy, how to buy/dress, etc.
Consumer Behavior : Buying, Having, and Being
2. Social class: In order to conform to the norms of the social class to which he/she belongs, the individual will be engaged in a behaviour, which will be acceptable to the social class to which it belongs.

3. Culture: refers to the shared, somewhat consistent pattern of behaviour of a group of people. Each culture has a set of beliefs, values, etc. So the pattern of buyer behaviour will be based on a pattern of behaviour shared in a specific subset of a larger culture-a subculture trait.

4. Purchasing power/ Financial status: The money/income available for purchasing goods and services during some specific time period also plays a role in influencing the consumption pattern and thereby his buying behaviour.

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Engel-Kollat-Blackwell Model

Consumer BehaviorVariables grouped into categories
 
a) Stimulus inputs 
b) information processing 
c) decision process and 
d) variables influencing the decision process
Strength of model

  • Deals with low-involvement situations. It is suggested that in low involvement situation the degree to which the various stages in the model are undertaken decreases
Problems with model
  • No way of testing e.g. If had idea of personality characteristics how could they be applied or measured in relation to predicting buyer behaviour
  • Lack of specificity i.e. variables are named in superficially plausible way but not specified in any operational detail

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4 Components of Engel-Kollat-Blackwell model

Consumer BehaviourThe Engel-Kollat-Blackwell model consist of four components:

i. Information processing: this component comprises the consumer’s selective exposure, attention, comprehension and retention of stimuli relating to a product or brand received from marketing and non-marketing sources. As a marketer, the first step is to ensure that a consumer is exposed to your message or stimuli, pays attention to it, understands what it is all about and also remembers it.

ii. Central Control Unit: The stimuli thus received and retained are processed in the central control unit. The stimuli is processed and interpreted with the help of four psychological filter:

  • Stored information and past experience about the product/brand which serves as a memory for comparing different alternatives;
  • Evaluative criteria which the consumer uses in judging the alternatives;
  • General and specific attitudes which influence the purchase decision;
  • Basic personality traits, which influence how the consumer is likely to respond to various alternatives.

Markov Decision Processes with Their Applicationsiii. Decision process: The decision process component of the model consist of:

  • Problem recognition
  • Internal search and evaluation
  • External search and evaluation
  • Purchase processes
  • Decision outcomes

If the purchase decision is such that it requires extensive problem solving, the consumer would go through all the above five stages. In case of limited problem solving or routinised response behaviour, some of the intervening stages may be skipped and the consumer may directly reach the purchase decision.

iv. Environmental Influences: The environmental factors that may influence the consumer’s purchase decision are income, culture, family, social class and physical situations. Depending on the specific product under consideration, these factors may have a favorable or unfavorable influence on the purchase decision.

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5 Steps of Engel-Kollat-Blackwell model

Contemporary Issues in Marketing and Consumer BehaviourThis model talks of consumer behaviour as a decision making process in the form of 5 steps or activities. The five steps are as:
1. Problem recognition: the consumer will recognise a difference between his or her actual state and what the ideal state should be. This may occur on account of external stimuli.

2. Information search:
Initially the information available with the consumer may be consistent to other beliefs and attitudes held by him or her. While being involved in an information seeking or search stage, the consumer will try to gather more information from various sources. The individual gets exposure of the stimuli which may catch his or her attention, be received and stored or retained in memory. This method of information is selective in nature and the consumer will accept the information, which is conclusive to what is perceived by them.

Consumer Behavior
3. Alternative evaluation: Now the individual will evaluate the alternate brands. The methods used for evaluating the various products will depend on the consumer’s underlying goals, motives and personality. The consumer also has certain predetermined beliefs about the various brands in terms of the characteristics associated with the different brands.

4. Choice:
the consumer’s choice will depend on his or her intention and attitude. The choice will depend on normative compliance and anticipated circumstances. Normative compliance relates to the extent to which the consumer is influenced by other people like friends, family members etc.
5. Outcome: The outcome may either be positive or negative.

Apart from these 5 steps the model also includes a number of other related variables grouped into five categories.

  1. Information input
  2. Information processing
  3. Product-brand evaluation
  4. General motivating influences
  5. Internalized environmental influences

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Customer scenario mapping approach

The Big Book of Customer Service Training Games (Big Book Series)A‘customer scenario’ is the set of steps a customer needs or is willing to take in order to reach their desired outcome. And scenarios are different by context. So a customer who’s in a hurry is going to have a different scenario from a customer who’s got time to spare.

  • It’s also a continuous process. 
  • A particular target segment of people who behave in a particular way – three to six key scenarios are common in terms of how they interact with your firm, – also a few that are the areas of frustration for those customers. 
  • And once you’ve begun to fix those, you work on the next set, and the
    customers keep raising the bar. And once the basics are over they keep coming back and saying ‘If you could do this for me it would be really good’. 
  • It’s a kind of lock-in, but it’s more seduction because you have shown customers that you can take
    care of their basic needs and now they are willing to share with you what they really want.

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The Net and CRM

"E-Book Marketing Exposed" - How To Write, Price And Market Your E-Books For Profits!The following aspects would be useful for e-marketers to formulate their strategies:

1. E-commerce (in B2C) should necessarily focus on value benefits. Value, in this context, could be the additional price discount, which is offered by the e-store. Retailing, the world over, is banking on the aspect of price (Wal-Mart, KMart
and other large retailers). Amazon.com‘s prices are 30 to 40 per cent lower than the prices offered in brick and mortar stores. Hence, there is a need to combine
information oriented non-transactional programmes with the low-price strategies.

2. Excitement in the form of exclusive launches may be required to keep online customers coming back to the
store. Fabmart recently had an exclusive launch on the Net.
The Word of Mouse: New Age of Networked Media
3. Studies show that if customer retention is increased by five per cent, profits go up by 25-30 per cent. An allied finding in research studies is that new customers cost about 20-40 per cent more than that compared to traditional retail outlets but repeat consumers spend twice as much in the  second and third year than what they spend in the first six months (in certain categories). Perhaps, thats why e-stores expand their product categories even at the cost of focus. (Amazon.com deals with categories such as books, music, grocery and gift items and has the infrastructure to deal with 16 million stock keeping units.) Repeat consumers are also known to spread the word of mouse through referrals. CRM, in this context, has to show great care in segmenting customers and offerings, which are customised to these micro-niches. Micro-niches could emerge as a result of diversity in preferences across categories. Yet again, the lifetime value of customers selected for relationships becomes critical, apart from the technological infrastructure required for tracking the preferences of these customers after winning their through interactive ways.

CRM could be a very useful marketing tool if marketers are able to integrate conceptual thinking and sophisticated technology.

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Customer Relationship Management and consumer products

Customer Loyalty Programmes and ClubsLoyalty programmes, which are common in the airline and credit card industries, are continuity programmes. The limitation of these programmes is the dominant presence of transaction-orientation. A typical relationship programme should not be dependent on sheer transactional value. Firms should also have appropriate segments based on customer yield, which essentially point to profitability aspects.
The best form of such loyalty programmes should combine transactional elements with information about the category and about the specific needs of the consumers. Hence, a combination of transactional orientation and one-to-one orientation (not only in terms of price but also in terms of specialised and customised needs) is likely to be effective in seeking and keeping customers.
Frequency marketing programmes and interactive programmes could be focused on specific segments depending on the response of consumers over a period of time.
A prerequisite for CRM, especially in consumer products, is the availability of information on demographics, psychographics and spending patterns.

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Customer Relationship Management and its linkages

Does the level of experience have an effect on CRM programs? Exploratory research findings [An article from: Industrial Marketing Management]Any CRM programme should be associated with the aspects of loyalty and customer satisfaction. 
These two aspects point out that different customer segments/groups would be interested in different dimensions of the offerings made by the marketer. The selection of the target segment (or specific companies in a business-to-business context) is also of utmost importance. This is because profitability of a CRM programme will vary across segments (or companies). It may also be essential for a company to assess the lifetime value of a customer before formulating a CRM programme.

While loyalty and satisfaction are strongly linked to CRM programmes, the specific objective of one may have to be decided by a company before planning it. For example, reducing the cost of distribution may be the objective of a CRM programme. This may involve working out and restructuring ordering patterns, taking into consideration the consumption patterns and inventory levels at the customers end and the production systems at the manufacturers end. 
Loyalty in categories such as fast foods, soaps and confectionery could be driven through innovative CRM
programmes.
Apart from loyalty and satisfaction linkages, communication is a vital aspect of any CRM programme. Communication with regard to sophisticated offerings concerning the product category, the efforts of the company/brand to keep itself updated in terms of the benefits offered, satisfied customers of a CRM programme and specific benefits of a CRM programme may help a marketer keep in touch with a prospective target segment of consumers who may like to be a part of a CRM programme.
The Referral Engine: Teaching Your Business to Market Itself
Guidelines to enable a marketer to identify specific customer groups which may be amenable to CRM
programmes.
  • Business-to-business markets
  • Segmentation criteria
  • Percentage of Customer Profitability
  • Price sensitive (no frill offering)
  • Pre-sale service
  • Annual Maintenance Contract and spares
  • Willingness to try innovative products
Key Account Management and Planning: The Comprehensive Handbook for Managing Your Company's Most Important Strategic AssetA company with a CRM programme is likely to give the customer enhanced priority in terms of attention apart from cost savings over a period of time. The one-to-one marketing programme, which is generally associated with consumer products, could also be effectively applied to business-to business marketing.
The Key Account Management concept, in which customer teams are employed by companies (chemicals and computers may be examples), is a kind of one to-one marketing and when this concept is extended to a
company which has multiple locations (a company marketing machinery to a consumer product company in several locations) the concept becomes National Account Management programmes. Such strategies involve extensive resource allocation to teams and in-depth planning with customer on their specific needs.

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