Chapter 4 – Consumer behaviour

What is consumer Behaviour?

 The aim of marketing is to affect how customers think and act
 Consumer behaviour is the buying behaviour of final consumers – people that buy goods and
services for personal consumption.
 All of these final consumers combine to make up the consumer market.
 For Example: The American consumer market consists of more than 313 million people who
consume more than $14 trillion worth of goods and services each year, making it one of the
most attractive consumer markets in the world
 To affect the what’s, when’s, and how’s of buyer behaviour, marketers must first understand
the whys.
 As pointed out by Kotler and Armstrong (2012, p.161), consumer purchases are influenced
by forces such as: Cultural, social, individual, psychological

Model of consumer Behaviour

 Companies research consumer buying decisions to answer questions about:
o What the consumers buy?
o Where they buy?
o How and how much they buy?
o When they buy?
 Key question that marketers ask: How do consumers respond to various marketing efforts
the company might use?
 Academic research lead to the stimulus-response model of buying behaviour.
 Marketing stimuli consist of the four Ps: product, price, place, and promotion
 Other stimuli include major forces and events in the buyer’s environment: economic,
technological, political, and cultural
 All these inputs enter the buyer’s black box
 These inputs are turned into a set of observable buyer responses: product choice, brand
choice, dealer choice, purchase timing, and purchase amount
 The marketer wants to understand how the stimuli are changed into responses inside the
consumer’s black box
 The consumer’s black box has two parts :
o Buyer’s characteristics influence how he or she perceives and reacts to the stimuli
o Buyer’s decision process itself affects the buyer’s behavior

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Characteristics affecting Consumer behaviour
 Four major factors that influence consumer buyer behaviour according to Kotler and
Armstrong :
o Cultural: the set of basic values, perceptions, wants and behaviours learned by an
individual from being a member of society
o Social: the influences of social factors such as the consumer’s relation to small
groups, family and social roles
o Individual: the characteristics of the individual such as the consumer’s age,
economic situation and occupation
o Psychological: the motivation, perception and beliefs and attitudes1 of the
consumer.

 Cultural Factors
o Consumer behaviour is deeply influenced by cultural factors such as: buyer culture,
subculture, and social class.
o Culture
 Basically, culture is the part of every society and is the important cause of
person wants and behaviour. The influence of culture on buying behaviour
varies from country to country therefore marketers have to be very careful
in analysing the culture of different groups, regions or even countries.
 Marketers are always trying to spot cultural shifts in order to imagine new
products that might be wanted
 For example: cultural shift towards greater concern about health and fitness
has created a huge industry for health and fitness services, exercise
equipment and clothing, more-natural foods, and a variety of diets shift
toward informality has resulted in more demand for casual clothing and
simpler home furnishings
 Cross- Cultural Marketing – It is the practice of including ethnic themes and
cross cultural perspectives.
 For example McDonalds, take cues from African Americans, Hispanics and
Asians to develop menus and advertising in hopes of encouraging
mainstream consumers to buy smoothies and snack wraps.

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 o Subculture
 Each culture contains different subcultures such as religions, nationalities,
geographic regions, racial groups etc. Marketers can use these groups by
segmenting the market into various small portions. For example marketers
can design products according to the needs of a particular geographic group.
o Social Class
 Every society possesses some form of social class which is important to the
marketers because the buying behaviour of people in a given social class is
similar. In this way marketing activities could be tailored according to
different social classes. Here we should note that social class is not only
determined by income but there are various other factors as well such as:
wealth, education, occupation etc.
 Social Factors
o Social factors also impact the buying behaviour of consumers. The important social
factors are: reference groups, family, role and status.
o Reference Groups and social media
 Reference groups have potential in forming a person attitude or behaviour.
The impact of reference groups varies across products and brands.
 For example if the product is visible such as dress, shoes, car etc then the
influence of reference groups will be high. Reference groups also include
opinion leader (a person who influences others because of his special skill,
knowledge or other characteristics).
 Word-Of-Mouth influence - The impact of the personal words and
recommendations of trusted friends, associates, and other consumers on
buying behaviour
 Online social networks - Online social communities—blogs, social
networking Web sites, and other online communities—where people
socialize or exchange information and opinions.
 For example: Facebook, Twitter, reddit, Gizmodo and so forth.
 For Example: Red Bull has an astounding 8.4 million friends on Facebook;
Twitter and Facebook are the primary ways to communicate with college
students.
o Family
 Buyer behaviour is strongly influenced by the member of a family.
 Therefore marketers are trying to find the roles and influence of the
husband, wife and children.
 If the buying decision of a particular product is influenced by wife then the
marketers will try to target the women in their advertisement.
 Here we should note that buying roles change with change in consumer
lifestyles.
o Roles and Status
 Each person possesses different roles and status in the society depending
upon the groups, clubs, family, organization etc. to which he belongs.
 For example a woman is working in an organization as finance manager.
Now she is playing two roles, one of finance manager and other of mother.
Therefore her buying decisions will be influenced by her role and status.

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 Personal Factors
o Personal factors can also affect the consumer behaviour. Some of the important
personal factors that influence the buying behaviour are: lifestyle, economic
situation, occupation, age, personality and self concept.
o Age and life-cycle
 Age and life-cycle have potential impact on the consumer buying behaviour.
It is obvious that the consumers change the purchase of goods and services
with the passage of time. Family life-cycle consists of different stages such
young singles, married couples, unmarried couples etc which help marketers
to develop appropriate products for each stage.
 For example: consumer information giant Acxiom’s Personicx life-stage
segmentation system places US households into one of 20 consumer
segments and 21 life-stage groups, based on specific consumer behaviour
and demographic characteristics
o Occupation
 The occupation of a person has significant impact on his buying behaviour.
 For example a marketing manager of an organization will try to purchase
business suits, whereas a low level worker in the same organization will
purchase rugged work clothes.
o Economic Situation
 Consumer economic situation has great influence on his buying behaviour. If
the income and savings of a customer is high then he will purchase more
expensive products. On the other hand, a person with low income and
savings will purchase inexpensive products.
 For example, if economic indicators point towards a recession, marketers
tend to take steps to redesign, reposition and reprice their products.
 Some marketers target consumers who have lots of money and resources,
charging prices to match
 For example, Rolex positions its luxury watches whilst Timex makes
more affordable watches
o Lifestyle
 Lifestyle of customers is another import factor affecting the consumer
buying behaviour. Lifestyle refers to the way a person lives in a society and is
expressed by the things in his/her surroundings. It is determined by
customer interests, opinions, activities etc and shapes his whole pattern of
acting and interacting in the world.
o Personality
 Personality changes from person to person, time to time and place to place.
Therefore it can greatly influence the buying behaviour of customers.
 Actually, Personality is not what one wears; rather it is the totality of
behaviour of a man in different circumstances.
 It has different characteristics such as: dominance, aggressiveness, self-
confidence etc which can be useful to determine the consumer behaviour
for particular product or service.
 For example, coffee marketers have discovered that heavy coffee drinkers
tend to be high on sociability. Thus, to attract customers, Starbucks and

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 other coffeehouses create environments in which people can relax and
socialize over a cup of steaming coffee.
 Psychological Factors
o There are four important psychological factors affecting the consumer buying
behaviour. These are: perception, motivation, learning, beliefs and attitudes.
o Motivation
 The level of motivation also affects the buying behaviour of customers.
Every person has different needs such as physiological needs, biological
needs, social needs etc. The nature of the needs is that, some of them are
more pressing while others are least pressing. Therefore a need becomes a
motive when it is more pressing to direct the person to seek satisfaction.
 Freud’s theory of motivation
 Fraud assumes that people are largely unconscious about the real
psychological forces shaping their behaviour.
 Freud suggests that a person does not fully understand his or her
motivation.
 His theory suggests that a person’s buying decisions are affected by
subconscious motives that even the buyer may not fully understand.
 For example: man buys BMW because he says he likes the feeling of
wind in his hair
 deeper down he feels the need to impress others with his success
 Even deeper down he might have bought the car to feel young and
independent again...
 Maslow’s theory of motivation
 Maslow sought to explain why people are driven by particular needs
at particular times.
 Human needs are arranged in a hierarchy, from the most pressing to
the least pressing.
 A person will try to satisfy the most important need first. When that
important need is satisfied, it will stop being a motivator and the
person will try to satisfy the next most important need.
 Maslow's theory of motivation states that when a lower need is
satisfied, the next highest becomes dominant and the individual's
attention is turned to satisfying this higher need.
 Maslow’s pyramid consists of 5 stages, Physiological needs, safety
needs, social needs, esteem needs and self-actualization.
o Perception
 Selecting, organizing and interpreting information in a way to produce a
meaningful experience of the world is called perception.
 There are three different perceptual processes which are selective attention,
selective distortion and selective retention.
 In case of selective attention, marketers try to attract the customer
attention. Whereas, in case of selective distortion, customers try to interpret
the information in a way that will support what the customers already
believe. Similarly, in case of selective retention, marketers try to retain
information that supports their beliefs.
 For example, one analyst estimates that people are exposed to about 3,000
to 5,000 ads every day.

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 o Learning
 Learning describes changes in an individual’s behaviour arising from
experience.
 Learning occurs through drives
 A drive is a strong internal stimulus that calls for action.
 A drive becomes a motive when it is directed towards a particular stimuli
object
 For example, a person’s drive for self-actualization might motivate him or
her to look into buying a digital camera.
 Cues are minor stimuli that determine when, where and how the person
responds.
 For example: Suppose the consumer buys a Nikon camera. If the experience
is rewarding, the consumer will probably use the camera more and more,
and his or her response will be reinforced. Then the next time he or she
shops for a camera, or for a binoculars or some similar product, the
probability is great that he she will buy a Nikon product.
o Beliefs and Attitudes
 Customer possesses specific beliefs and attitude towards various products.
 Since such beliefs and attitudes make up brand image and affect consumer
buying behaviour therefore marketers are interested in them.
 Marketers can change the beliefs and attitudes of customers by launching
special campaigns in this regard.
 For example: The camera buyer may hold attitudes such as “Buy the best”,
“The Japanese make the best electronics products in the world” and
“Creativity and self-expression are among the most important things in life”.
If so, the Nikon camera would fit well into the consumer’s existing attitudes.
 Attitudes are difficult to change.
 A marketer must always try and fit a product into an existing attitude rather
than try to change attitudes.

How do economists explain consumer behaviour?

 According to the economists consumer behaviour is:
1. First, they will examine consumer preferences i.e. what a consumer will theoretically
prefer ignoring prices and income.
2. Secondly, consumers face budget constraints that restrict quantity of goods and
services that can be consumed.
3. The third step is to put consumer preferences and budget constraints together to
determine choices. Economists assume that people maximise their satisfaction by
combining a set of goods and services.
 This is represented using indifference curves and budget lines.
 An indifference curve represents combinations of two goods that provide equal levels of
satisfaction and utility for the consumer
 Budget lines map the maximum amount of consumption possible based on the price and
quantities of each product produced

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  An indifference curve represents combinations of two goods that provide equal levels of
satisfaction and utility for the consumer
 Even if there is a change in the quantity of each John will still be satisfied and indifferent to
this change as long as the change remains on the indifferent curve.
 If the change does not remain on the indifference curve he will not be satisfied.
 The indifference curve tells us that John is just as happy to consume 2 films and 6 six-packs a
month at point C as to consume the combination of films and cola at point G or at any other
point along the curve.
 John’s satisfaction levels will increase with any combination above the indifference curve. If
the combination is below the indifference curve John’s satisfaction levels will be decreased.
 He prefers any combination on the indifference curve to any combination in the area below
the indifference curve.
 Indifference curve are important for analyzing consumer behaviour because consumers
combine goods to maximize their satisfaction
 The economic assumptions about consumer preferences that can be concluded from this
approach are:
o Individuals are able to make choices and rank their preferences for different goods
and services.
o Individuals are rational in the choices they make.
o More is preferred to less.
o Additional units consumed provide less additional satisfaction relative to the units
consumed.

The key assumptions to psychology of consumer

 Assume the consumer has a choice between two goods, good X (Films) and good Y (Cola).
The more and more of good X is consumed, we would expect that the consumer would
prefer to give up fewer and fewer units of a good Y to get additional amounts of good X.
 This assumption is what gives the indifference curve a bowl-like shape. The assumption is
known as the principle of diminishing marginal rate of substitution.
 Marketers are interested in two things:
1. Why consumer choices differ across consuming agents (e.g. two people or average
consumption patterns of two segments or even two segments)
2. Changes in the consumption behaviour of the same consumer over time (a person or
groups of persons with similar consumption patterns)
 Economists argue that the reason why these consumption patterns may differ is based on
two things:
1. Preferences (tastes)
2. Constraints (budget, physical, geographical, and social)
 Based on these two assumptions, economists argue that models where constraints differ are
more interesting cases since these are more likely to be measurable by a researcher and
subject to observable change.

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  Two ways of representing tastes and preferences:
o Model 1
 Consumer behaviour is some function of tastes and constraints. In this
model both are
o Model 2
 Consumer behaviour is some function of tastes and constraints. In this
model only constraints are variable.
 Economists think that they can explain consumer behaviour in terms of model 2; i.e. looking
at constraints such as prices and income.
 Economists translate non-economic constraints into costs.
 This has important implications for marketing.
 Two famous economists, Gary Becker and George Stigler, have even argued that ‘tastes
neither change capriciously nor differ importantly between people’.

Explanation of custom and tradition

 We observe stable behaviour that we attribute with cultural factors:

o Why do the Maltese eat more rabbit and the English bangers and mash?
o What explains this and other national differences?
 The answer…
o The economic answer to stable patterns of behaviour relies on the cost (price) of
decision-making.
o Decision-making is costly because to make a decision one requires information, and
the information must be analysed.
o The price of a product has to incorporate the cost of search as well as the market
price.
o This is why a new medicinal is normally very expensive when it is first launched in
the market.
o When a temporary change in price or income takes place in the environment, it
generally may not pay to disinvest in the knowledge or skills that one has acquired.
o As a result behaviour will appear stable in the face of temporary change.
o It will reinforce the popular perception that culture is the causal factor.
 So…is it a result of tradition or some other constraint?
o It could be argued that in France people have more information about the quality of
wine than beer.
o The French will not switch to beer without:
 A huge increase in information (huge advertising campaigns)
 A large drop in the market price of beer to counteract the information
search costs.
o Information search can be costly in terms of time or the purchase of some market
research.
 Permanent or long-lasting changes in the environment
o The shift to a market economy in the former Soviet Union.
o Typically, one observes a heterogeneous response.
o The younger generation usually responds to these changes to a greater extent than
older persons.

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 o Why is this? Young persons are more readily seduced away from old customs by the
glitter of the Western environment.
o The reason has nothing to do with the taste differences between old and young.
o It has to do with the cost to older persons of disinvesting in the knowledge of how to
do things under the older environment.

o This is not a matter of less flexibility by the older generation.

o Young persons have a greater incentive to invest in new knowledge and new skills.
o The older ones have less returns from the investment in certain patterns of
behaviour.
 Application of this theory
o Discounts to senior citizens for bus travel or cinema.
o If preferences really differed, there would be no need to lower the prices of cinema
tickets to the over 65 years.
o If preferences really differed, one would produce films that target this market or
engage in publicity campaigns aimed at changing their attitudes.
o The price cut across the board is targeted to a consumer group that is less likely to
step out of the house.
o This economic view of consumer behaviour has very powerful implications.
o It says that we are the same that is, we are a homogenous group.
o What differs is the incentive we have to behave in a certain way or consume a
certain good.
o Can you think of some more examples?
o Why to youngsters prefer advanced technology?
o Why does a younger man prefer a high-paid job and an older man prefer job
satisfaction?

Prospect Theory
 Prospect theory (Kahneman and Tversky) is a critique of the utility theory which offers
insights into the buyer behaviour decison making under conditions of risk.
 According to utility theory, two choices with the same expected utility will be given the
same preference by rational decision-makers.
 When they are faced with a choice the consumer will prefer the option that offers the
highest expected utility.
 Prospect theory is a theory that people value gains and losses differently and base their
decisions on perceived gains rather than perceived losses (loss aversion)
 If people are given two equal choices, one expressed in terms of possible gains and the other
of possible losses people will choose the former.
 Why do consumers deviate from rational economic behaviour? The answer may lie in how
people value prospects.
 According to Gourville (2006), four characteristics that define human behaviour have been
identified:
1. The first characteristic is individuals’ reliance on perceived value rather than objective or
actual value.
2. Secondly, when considering the value of a purchase, people use a reference point and
that will often be something that they own already. This means that we may assess
whether or not the price of a new smartphone is attractive, depending on what we paid

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 for our current model and the prices that we have recently seen in advertising and
stores.
3. Thirdly, where value exceeds this reference point it is considered to be a gain and where
it falls short it is considered to be a loss.
4. Finally, when people consider possible gains or losses, they are likely to attach more
weight to the possible loss. People have loss aversion and prefer not to take bets that
have an equal probability of a loss or gain of an equal amount of money.
 For example: It was suggested that the price difference between using cash or using credit
cards should be shown by shops as a cash discount for using cash, rather than as a surcharge
for the use of credit cards.
 The difference in labels was important because it established a different reference point in
customers’ minds. Losses seem bigger to people (than gains of the same size). As a result
people are less willing to accept a surcharge, than give up a discount of the same value.
 The concept of loss aversion also means that people tend to value things that they already
own more than those that they do not have.
 To put it in even more explicit terms, people put more value on goods that they own, than
they would put on the same goods were they to have to purchase them. This is referred to
as the endowment effect.
 In marketing the examples of this affect being used are where firms who process
photographs will process those that have not been exposed correctly and will offer
customers the chance to have a refund. Many customers do not choose to take up this offer
– due to the endowment effect, customers prefer keeping the photograph that they have
already, rather than the possibility of another one in the future.
 Another application is the offer to customers of a trial period for a product, with the option
for the customer to get their money back if they are not happy with it.
 As Thaler (1980) explains, in this instance the marketer is taking advantage of two decision
points facing the customer.
1. In the first decision point customers assess the costs to themselves in terms of the
transactions costs of buying the goods and the amount of time and effort that will
be spent in taking the goods back to the shop if they are not satisfied with them.
Where people attach little value to these transaction costs, they will go ahead and
make the purchase.
2. The second decision point comes two weeks later when the customer has to make
the decision as to whether or not to return the goods to the shop. If the customer
has been making use of the product and has adapted to it, they will view the cost of
keeping the good as an opportunity cost and will likely keep it.

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Social-Psychological approach
 Assumptions in economics about consumer behaviour:
o That consumers have fixed preferences
o That consumers are self-interested in that they feel better or worse off depending
on what they do rather than on the outcomes of others
 The trick for the firm is merely to supply the consumers with what they want
 Socio-psychological view assumptions about consumer behaviour:
o Consumers are not exclusively self-interested
 The utility function encompasses other consumer goods
 And that preferences may change over time such that the firm might induce
purchases by ‘socialising’ consumers
 In the socio-psychological view the firm tries to influence preferences in order to achieve the
goal of increasing sales
 In the economic view, the goal is achieved through price cuts.
 The achievement of goals to increase sales
o Economic view:
 The goal is normally achieved through price cuts
 This view explains the behaviour through extrinsic motives (price, costs)
[assumed by economists]
o Socio-psychological view:
 The goal is normally achieved by influencing preferences
 This view explains the behaviour through intrinsic motives (preferences,
motives) [assumed by social psychologists]

The socialization process

 There are three basic feedback loops that social psychologists use to explain human
behaviour:
o Basic feedback loop
o Dissonance theory feedback loop
o Influence of social pressures on the feedback loop
 Diagrams for these models were developed by James Montgomery of the University of
Wisconsin.
 The self-concept or personality is about understanding of who and what we are.
 Among the forms that it can take are the ‘actual self’ and the ‘ideal self’.
 The actual self represents our perceived reality of ourselves (that is, who and what I think I
am now)
 The ideal self represents our construction of what we would like to be or to become.
 Consumers achieve self-congruence by consuming a brand with a personality that we
consider to represent either the actual or ideal self.
 Actual self-congruence reflects the consumer’s perception of the fit between the actual self
and the brand’s personality,
 Ideal self-congruence is the perceived fit of the brand personality with the consumer’s ideal
self.
 An actually self-congruent brand reflects who the consumer actually is (‘this brand’s
personality is like who I really am’),

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 An ideally self-congruent brand reflects who the consumer would like to be (‘this brand’s
personality is like who I would like to be’).
 This concept is important in marketing because as Malar et al. argue the self-concept can
influence brand attachment. The latter concept is explained in the following way:
o In psychology, attachment is an emotion-laden bond between a person and a
specific object …. In a marketing context, people can also build and maintain
emotionally charged relationships with brands … Thus, emotional brand attachment
reflects the bond that connects a consumer with a specific brand and involves
feelings toward the brand. These feelings include affection, passion, and connection
…, which represent ‘hot’ affect from the brand’s linkage to the self …..
 The basic feedback loop

o (the numbers refer to the causal ordering)

o Where a person has a well-defined self-concept or personality, makes choices and
undertakes actions based on this set of psychological characteristics
o Self-concept or personality refers to the distinguishing personal psychological
characteristics that lead to relatively consistent and lasting predictions of an
individual’s responses to their environment
o Attributions are the causal explanations people use to explain behaviour either of
themselves or of others.
o The attributions are the reinforcing part of the feedback process which can be both
external and internal.
 External means they are made by a third person observing some action.
 Internal means they are made by the person undertaking the action.
 Meaning that they are either made by a third person observing
some action or by the person undertaking the action.
o For example, if a person is aggressively competitive, is it because of the kind of
person s/he is, or is the person reacting to situational pressures? If a student fails
the exam, is it because of low ability, or is the test unfair?
o The questions concern causes of observed behaviour.
o The answers given by the person and external observers can serve to reinforce or
change the self-concept.
o Let’s take an example related to consumer behaviour.
o I am constantly observed buying Starbucks coffee, when there are more coffee
choices available.
o THEN I am more than likely buying Starbucks because I am a ‘Starbucks lover’.

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 o HOWEVER, if the nearest competing coffee chain is an hour away, then there are
two possible attributions:
 I like Starbucks, OR
 I actually prefer another coffee but can’t be bothered to drive an hour to get
it
 Dissonance theory feedback loop
o Where people take actions and only later construct reasons for their actions.

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 o Here the personality or self-concept is solidified after the action is taken.
o Individuals often attempt to justify past effort/actions, effectively changing their
current self-concept.
o This internal justification occurs especially when there is no fixed external
justification.
o Consumers often face this kind of dissonance after making a high-involvement
purchase decision, where there are no a priori differences in the brands.
o After the purchase is made, consumers might experience post purchase dissonance
(after-sale discomfort)
o This occurs when they notice certain disadvantages of the purchased carpet brand
or hear favourable things about brands not purchased
o To counter such dissonance, the marketer’s after-sale communications should
provide evidence and support to help consumers feel good about their brand
choices
 Influence of social pressures on the feedback loop
o Cultural and social forces can play a big role on the individual’s personality and
actions.

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o This is where the self-concept is actually the result of social roles or norms

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 o Here social factors are very important determinants in individual actions which
ultimately shape behaviour and personality.
o For example of French wine drinkers and German beer drinkers.
o In each society there are social pressures that induce actions, usually early in life,
which solidify later on through the life course.
o These social pressures become personality traits and preferences that are hard to
dislodge.
o This is perhaps why marketers spend such an inordinate amount of time and energy
trying to target advertisements to the young rather than to the old because the self-
concept of the old is already set while those of the young can still be influenced

The role of social networks

 Through blogs, social networking Web sites, and other online communities people socialize,
exchange information and opinions.
 By seeing someone on a social network that gives feedback on a product the individual
might get influenced.
 ‘Social influence can occur through the transmission of information that reduces uncertainty
and search effort, through normative and social pressure, or as a result of network
externalities.’ (Nitzan and Libai,)
 Some of the mechanisms of social effects are as follows:
1. Tie strength,
2. Homophily (social similarity) and
3. Degree of centrality
 Tie Strength
o Tie strength refers to the idea that consumers may be more affected by people with
whom (they perceive) they have closer relationships.
o Relationships may range from strong, primary ones, such as a spouse or close friend,
to weak, secondary relationships, such as seldom contacted acquaintances.
 Homophily (social similarity)
o Similarity (in terms of beliefs, education and occupation) between consumers and
others is referred to as homophily
o Customers are more likely to trust the opinions of people whose preferences they
share and, conversely, people who recommend products are more likely to share
their opinions with people who are similar to them.

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 o The measure of homophily reflects the level of similarity between two people who
take part in a social tie
 Degree of centrality
o Degree centrality refers to someone’s degree of connectivity, which is the number of
other people directly related to the focal individual
o Highly connected customers are typically considered to have the opportunity to
affect others’ behaviour.
o People with numerous connections might also be more strongly affected by the
behaviour of others.
o However, people with numerous connections may devote less attention to each
connection due to limited time that one has. Therefore with more connections,
might actually have a weaker effect on the decisions of others.
 Possessions and behaviours act as a signal of identity to indicate membership of a social
group. This has implications for the interaction between consumers.
 There can be two groups of people who seek to do this: people who really are members of
such a group and those who aspire to be.
 In addition, consumers have the choice of either using explicit signals or subtle signals
 Explicit signals make the consumption more clear for example, the visibility of a brand
name.
 However explicit signals have their downsides:
o People sometimes adopt products or brands associated with other groups, however,
in an attempt to gain the signal value associated with them. People often aspire to
be like particular outgroups (social groups with whom one does not identify); this
would apply to teenagers who come from educated and professional, middle-class,
backgrounds, but who buy clothes and accessories associated with young people
who are from more deprived backgrounds.
 Subtle signals are harder to recognize but still observable to insiders who have the
necessary connoisseurship to decode their meaning. Such insider knowledge allows group
members to recognise even inconspicuous ingroup markers that outsiders might miss.
 So, if outsiders or mainstream individuals use explicit signals, insiders may avoid such
symbols so that they do not look like outsiders trying to imitate.
 By choosing subtle signals instead, insiders can differentiate themselves, facilitating the
expression of identity and desired interactions with similar others. Selecting subtle signals
may even be a deliberate strategy to restrict imitation by outsiders by making in-group
tastes hard to copy.

The Cognitive versus Behavioural approach to consumer decision-making

 Now we will look at the psychological model (as opposed to the social-psychological
approach seen before) of consumer decision-making
 It involves two concepts :
o the environment
o the cognitive process
 Psychological explanations of consumer behaviour, which emphasize environmental factors,
are called behavioural or habitual explanations
 Theories that emphasize internal mental processes are called cognitive explanations.
 Comparison of Cognitive and Behavioural approaches

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 In the previous Table, the behavioural approach is quite close to the strict economic
interpretation with its emphasis on external factors (constraints)
 The cognitive approach has a closer resemblance with a new branch of economics that is
called quasi-rational economics
 The cognitive approach attempts to integrate the ways in which consumers’ process
information into economic models, which attempts to integrate the ways in which
consumers’ process information into economic models.
1. Notice the resemblance between the behavioural approach and the constraints-
based approach of economists like Becker and Stigler
2. Second, in this division we can see that the behavioural approach is akin to saying
that ‘actions speak louder than words’.
3. Third, one can think of situations, experiments and examples of consumer behaviour
that confirm both views.
 So how do we arrive at a way of making these concepts measurable in order to better
understand how to implement marketing strategy?
 The psychological model after all is aimed at explaining consumer behaviour (brand loyalty,
choices, etc.).
 Cognitive approaches emphasize how people store, process and use information and how
they create beliefs and form attitudes and values.
 Behavioural approaches really look at observable associations between behaviours and their
environmental stimuli.
 According to Dimofte (2010) many constructs are assumed to represent stable mental
representations (or in the case of attitudes, consistent evaluations) that are stored in
memory.
 However, another view is that when both the initial and a newly formed attitude towards
the same object are stored in memory, a dual attitude can result. This can apply particularly
where people are consuming goods they would not admit to in public.
 In this example,
o explicit attitudes may involve an individual’s conscious acknowledgment that
engaging in an ‘unhealthy’ behaviour is bad,
o whereas implicit attitudes point to a more positive underlying assessment.
 For example, a KFC customer, who has recently received health promotion information
about the health risks of consuming fast food (for example, increased obesity levels or risk of
heart disease), may increase their negative explicit attitudes toward the brand and how
much they buy from the chain. However, it is also possible that the individual will continue

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 to demonstrate a positive attitude towards the brand and perhaps still have a yearning as
they go past a KFC restaurant and smell the enticing smells wafting from within. So while a
communications campaign may encourage a consumer’s explicit, conscious attitudes
towards a brand to become more negative, as in this example, implicit or non-conscious
attitudes may yet retain their pre-existing brand associations. This duality challenges the
view that people hold only one set of attitudes at a time.

Mechanisms of behavioural/habitual explanation

 The classic work in this field was Pavlov and his explanation of salivation in his pet dog
 Salivation is an innate response to the smell of food
 Pavlov rang a bell every time the dog was fed the food
 Over time the dog came to associate the bell with the smell of food – so when Pavlov
stopped pairing the bell with the food, the dog still salivated
 The bell became what is called a discriminative stimulus in the environment
 The above is an example of classical conditioning
 Classical conditioning is defined as a process by which a previously neutral stimulus (the
bell), by being paired with an unconscious stimulus (food) comes to elicit a response
(salivation) very similar to the response originally elicited by the unconditioned stimulus
 Operant conditioning differs from classical conditioning because the operant behaviours are
elicited because of stimuli elicited after the behaviour has taken place
 Marketers use this operant conditioning in designing fixed ratio schemes :
o a pizza chain gives a free pizza after 10 purchases
o a coffee shop stamps a card each time you come in and then the tenth time you get
a free coffee

Applications of behavioural and cognitive principles in marketing

 Cho gives the following succinct explanation of risk from a consumer context:
 Individuals tend to define a decision situation as risky when they have a lot to lose if they
make a poor decision, in particular if this loss will have a considerable impact on their
financial situations.

Buyer Decision Process

 Let us first develop a standard model of consumer decision stages
 To reach a buying decision, a consumer passes often though five distinct stages, especially
where high involvement purchases is concerned
 These stages are represented in figure 1

 The figure suggests that consumers pass through all five stages with every purchase
 Consumers do not necessarily pass through every stage of this process and are more likely to
skip several of the stages in a routine response purchase, especially in low involvement
products

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  For Example: A woman buying her regular brand of toothpaste would recognize the need
and go right to the purchase decision skipping information search and evaluation
 However, we use the model in Figure 1 because it shows all the considerations that arise
when a consumer faces a new and complex purchase situation
Need Recognition
 The first stage of the buying decision process, in which the consumer recognizes a problem
or need
 The need can be triggered by internal stimuli when one of the person’s normal needs –
hunger, thirst, sex- rises to a level high enough to become a drive
 A need can also be triggered by external stimuli
 For example, an advertisement or a discussion with a friend might get you thinking about
buying a new car
 At this stage, the marketer should research consumers to find out:
o What kinds of needs or problems arise
o What brought them about
o How they led the consumer to this particular product
Information Search
 Cho and Lee explain the motivation behind information search in the following way:
o high perceived risk puts consumers in a distressed and anxious state, which in turn
motivates them to engage in problem-solving activities to resolve it; consumers
employ information search as a problem-solving strategy to reduce perceived risk.
 This is one of two possible ways of dealing with such risk. One is to reduce uncertainty
through information search and the other is to reduce vulnerability by lowering the amount
at stake.
 Huang et al. state that one way of distinguishing between different aspects of information
acquisition by consumers is to consider the difference between ‘search’ and ‘experience’.
o Search refers to the assessment of product quality without the customer interacting
with the product
o Experience refers to situations where product quality can best be assessed by
actually using the product.
 The impact of the internet on consumer information search can be considered in terms of
search and experience.
 For example, a well-designed website that sells cameras can provide much richer
information about the cameras, such as consumer feedback, expert feedback and so forth,
then a retail shop. Also, Comparisons between brands can be facilitated through the use of
comparative tables in online reviews.
 For Example: A user that bought the product can make a video upload it on YouTube and
the potential buyers of that product can actually see the product working.
 Different people will give different reviews and therefore the buyer needs to:
1. Synthesize information from different sources
2. Consumers can evaluate product attributes at a more abstract level (for example,
one source of information may refer to one measure of picture quality for a camera
and another source may use another measure)
3. Restructure information from different sources in order to make it comparable. For
example, reviews of products could be made more comparable by identifying what
they have to say about specific attributes.
 However, the sellers may suffer the free-rider problem where buyers will use their website
only for information purposes and through search engines will search for lower prices.

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  Through searching multiple websites the buyer can gain better knowledge before buying the
product.
 One of the reasons for a pre-purchase search is to reduce the perceived risk associated with
purchasing a product online
 A characteristic of search attributes is that information provided by sellers is usually trusted
because buyers consider this information as unbiased and true.
 In contrast, this level of trust may not hold information about experience attributes because
that is subjective and based on individual judgment and the heterogeneous tastes of
consumers.
 For this reason, a buyer is more inclined to buy experience goods from a trusted seller, and
in many cases, this trusted seller will be the website that provides the buyer with the most
extensive product information.
 From the preceding discussion we can see that the effect of the above mechanisms is likely
to be greater for consumers searching for experience goods.
 Information about search attributes can be effectively delivered in a simple manner because
such information is more likely to be factual and basic.
 So buyers of search products will be less likely to spend time viewing multimedia content or
reading lengthy reviews; instead they may simply gather what limited information they need
from shopping bots (price comparison websites).
 In contrast, consumers of experience goods are likely to spend more time at high-quality
websites.

Evaluation of Alternatives
 How consumers go about evaluating purchase alternatives depends on the individual
consumer and the specific buying situation
 How consumers go about evaluating purchase alternatives depends on the individual
consumer and the specific buying situation
 In some cases, consumers use careful calculations and logical thinking
 At other times, the same consumers do little or no evaluating
 Instead they buy on impulse and rely on intuition
 In a study by Choi et al. that manipulated NFCC (need for cognitive closure), the authors
found that a higher NFCC was associated with an preference for using the faster "attribute-
based search" which involves examining all available alternatives on one attribute and then
moving on to the next attribute. Individuals with a lower NFCC, in contrast, used the
"alternative-based search", such that they examine all attributes of one alternative, then
move on to the next alternative.

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Purchase Decision
 The buyer’s decision about which brand to purchase
 In the evaluation stage, the consumer ranks brands and forms purchase intentions
 Generally, the consumer’s purchase decision will be to buy the most preferred brand
 But two factors can come between the purchase intention and the purchase decision
 The first factor is the attitudes of others
 If someone important to you thinks that you should buy the lowest-priced car, then the
chances of your buying a more expensive car are reduced
 The second factor is unexpected situational factors
 The consumer may form a purchase intention based on factors such as expected income,
expected price, and expected product benefits
 Unexpected events may change the purchase intention
 For example, the economy might take a turn for the worse, a close competitor might drop its
price, or a friend might report being disappointed in your preferred car
 Thus, preferences and even purchase intentions do not always result in actual purchase
choice

Postpurchase behavior
 Postpurchase behaviour is the last stage of the buyer decision process where customers take

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 further action after the purchase is done depending on the satisfaction or dissatisfaction of
the product bought.
 The marketer’s job does not end when the product is bought
 What determines whether the buyer is satisfied or dissatisfied with a purchase?
 The answer lies in the relationship between the consumer’s expectations and the product’s
perceived performance
 If the product falls short of expectations, the consumer is disappointed
 If it meets expectations, the consumer is satisfied
 If it exceeds expectations, the consumer is delighted
 The larger the gap between expectations and performance, the greater the consumer’s
dissatisfaction
 This suggests that sellers should promise only what their brands can deliver so that buyers
are satisfied
 Some sellers might even understate product performance levels to boost later consumer
satisfaction
 After the purchase, consumers are satisfied with the benefits of the chosen brand and are
glad to avoid the drawbacks of the brands not bought
 However, every purchase involves compromise
 Consumers feel uneasy about acquiring the drawbacks of the chosen brand and about losing
the benefits of the brands not purchased
 Thus, consumers feel at least some post-purchase dissonance for every purchase
 Why is it so important to satisfy the customer? Customer satisfaction is a key to building
profitable relationships with consumers -- to keeping and growing consumers and reaping
their customer lifetime value.
 Satisfied customers will:
o Buy a product again,
o Talk favorably to others about the product,
o Pay less attention to competing brands and advertising, and
o Buy other products from the company.
 Marketers aims that customers are delighted with the product that they bought
 A dissatisfied consumer responds differently. Bad word of mouth often travels farther and
faster than good word of mouth. It can quickly damage consumer attitudes about a
company and its products.
 But companies cannot simply wait for dissatisfied customers to volunteer their complaints.
Most unhappy customers never tell the company about their problems.
 Therefore, a company should measure customer satisfaction regularly. It should set up
systems that encourage customers to complain. In this way, the company can learn how well
it is doing and how it can improve.
 By studying the overall buyer decision process, marketers may be able to find ways to help
consumers move through it.
 For Example: if consumers are not buying a new product because they do not perceive a
need for it, marketing might launch advertising messages that trigger the need and show
how the product solves customers’ problems.
 If customers know about the product but are not buying because they hold unfavorable
attitudes towards it, marketers must find ways to change either the product or consumer
perceptions.

The Buyer Decision Process for New Products

 We now look at how buyers approach the purchase of new products.

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  A new product is a good, service, or idea that is perceived by some potential customers as
new.
 It may have been around for a while, but our interest is in how consumers learn about
products for the first time and make decisions on whether to adopt them.
 We define the adoption process as the men tal process through which an individual passes
from first learning about an innovation to final adoption.
 Adoption is the decision by an individual to become a regular user of the product.

Types of buying behaviour

 Buying behaviour differs greatly for different types of products and services
 Consumer decision-making varies with the type of buying decision. There are great
differences between buying toothpaste, a tennis racket, a personal computer, and a new
car.
 The more expensive the good is the more information is required by the consumer.

 According to Celsi and Olson (1988, p.211), ‘a consumer’s level of involvement with an
object, situation, or action is determined by the degree to which s/he perceives that concept
to be personally relevant’.

 High involvement:- the term means when the consumer is highly involved while buying a
product. Generally this situation happens in case of expensive or luxuries goods. Like while
buying a diamond necklace a consumer is highly involved.
 Low involvement:- this term means when the consumer is not highly involved while buying
a product. It happens in case of low price goods. Like while buying toothpaste a consumer is
not highly involved.
 Significant differences between brands:- it means when there are significant differences
between brands.
 Few differences between brands:- it means when there are very little differences between
brands.
 Complex Buying Behaviour
o When the consumer is highly involved in the buying and there is significant
differences between brands then it is called complex buying behaviour.
o The consumer must collect proper information about the product features and the
marketer must provide detailed information regarding the product attributes.
o For Example: Consumer while buying a motor cycle is highly involved in the purchase
and has the knowledge about significant differences between brands.
o Markerters need to differentiate their brand’s features, by describing the brand’s
benefits using various media

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 o Marketers must motivate store salespeople and the buyer’s acquaintances to
influence the final brand choice
o This type of behaviour is cognitive in nature
 Dissonance-Reducing Behaviour
o Here the consumer is highly involved in the purchase that is risky, expensive or done
infrequently, but there are few differences between brands.
o For Example: when a consumer buys floor tiles, s/he buys them quickly as there are
few differences between brands.
o Consumers may shop around for the best price but buy relatively quickly
o Consumers often can be affected by environmental (behavioural) factors such as
convenience
o After the purchase, however, the consumer might experience post-purchase
dissonance because s/he might believe that there is something better in the market
o To counter such dissonance, the marketer’s after-sale communications should
provide evidence and support to help consumers feel good about their brand
choices
o This type of behaviour represents a mix of cognitive and behavioural factors.
 Habitual Buying Behaviour
o In this case there is low involvement of the consumer and there are few differences
between brands. The consumer buys the product quickly. For eg. Toothpaste.
o They simply go to the store and reach for a brand
o If they keep reaching for the same brand
o It is out of habit rather than strong brand loyalty
o Consumers appear to have low involvement with most low-cost, frequently
purchased products.
o Consumers do not search extensively for information about the brands, evaluate
brand characteristics, and make weighty decisions about which brands to buy
o Instead, they passively receive information as they watch television or read
magazines
o Advertising repetition creates brand familiarity rather than brand conviction
o Consumers do not form strong attitudes toward a brand
o They select the brand because it is familiar
o Because they are not highly involved with the product, consumers may not evaluate
the choice even after purchase
o Because buyers are not highly committed to any brands, marketers of low-
involvement products with few brand differences often use price and sales
promotions to stimulate product trial
o This is almost pure behavioural decision-making
 Variety Seeking Buying Behaviour
o in this case consumer involvement is low while buying the product but there are
significant differences between brands.
o Consumers generally buy different products not due to dissatisfaction from the
earlier product but due to seek variety.
o Like every time they buy different washing detergent just for variety without much
evaluation, then evaluate that brand during consumption
o So it is the duty of the marketer to encourage the consumer to buy the product by
offering them discounts, free samples and by advertising the product a lot.

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 o

Cognitive vs Behavioural approaches

o Why does so much advertising contain so little information about a product?
o Clearly such advertising is not about information dissemination
o It is about creating discriminative stimuli rather than giving information to
customers about the product
o This type of behaviour modification is commonly done by advertising the brand and
pairing it with something else that consumers regard as positive :
 beer with nice music
 toilet paper with a pleasant landscape
o Over time consumers come to associate these positive elements with the product
o Certain advertising media are better at this than others
o Film, television and the Internet are all multi-sensual media
o They are better because they appeal to more than one sense at a time (this is how
you get pairing)
o It is much harder to pair when it appeals to only one or two senses
o The concepts of setting and involvement displayed in Table 4.3 may help us
understand when the two views are most appropriate

o Setting refers to the environmental control available to a consumer in a given

purchasing decision
o When a consumer is inside a supermarket we say that this setting is closed :
 Supermarket has almost complete control of the environment – from the
music, temperature, arrangement and size of the store
o In an open setting, consumers have more control of the variables :
 such as when making investment choices on a Sunday afternoon in the
kitchen
o Involvement refers to the state of awareness that motivates consumers to seek out,
attend to, and think about product information prior to purchase
o When involvement is low, advertising tends to be highly persuasive
o Combining both setting and involvement, we gain an appreciation for what kind of
psychological approach is most effective in advertising
o Open situations with high involvement rely more on cognitive features of advertising
techniques (information and comparison shopping)

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o In low-involvement situations with open setting, the advertising relies on persuasive
adverts with some cognitive element (e.g. ads with clever situations that offer
comedy and intellect)

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