GCEM Consumer Behaviour 14MBA MM301 Mr. SRINIVAS S, Assistant Professor, Department of MBA 2016 GOPALAN COLLEGE OF ENGINEERING AND MANAGEMENT Mr.Srinivas.S, Asst Professor CONSUMER BEHAVIOUR (14MBAMM301) Module 01 Introduction to the study of Consumer Behaviour Meaning and Definition of CB Consumer behaviour is a rapidly growing application-oriented discipline of study. The recent advancement in the technological and digital communication are also influencing consumer behaviour. This study is not just restricted to how a person buys a product but it is dynamic, complex and multi- dimensional process and reflects the totality of consumers' decisions with respect to acquisition, consumption or use and disposal activities. Consumer behaviour can be defined as "The behavior that consumers display in searching for, purchasing, using, evaluating, and disposing of products and services that they expect will satisfy their needs" (Leon G. Schiffman and Leslie Lazar Kanuk, "Consumer Behaviour" 2007) Consumer behaviour focuses on how individuals make decisions to spend their available resources (time, money, effort) on consumption related items. That includes what they buy, why they buy it, where they buy it, how often they buy it, how often they use it, how they evaluate it after the purchase, the impact of such evaluations on future purchases and how they dispose of it. So in Consumer Behaviour we not only learn what is the behaviour of the consumer when he buys it but also before the consumption, during the consumption and after the consumption. Difference between Consumer and customer: A consumer is anyone who typically engages in any one or all of the activities mentioned in the definition. Traditionally, consumers have been defined very strictly in terms of economic goods and services wherein a monetary exchange is involved. This concept, over a period of time, has been broadened. Some scholars also include goods and services where a monetary transaction is not involved and thus the users of the services of voluntary organizations are also thought of as consumers. This means that organizations such as UNICEF, CRY, or political groups can view their public as "consumers". The Marketing Concept In marketing concept the firms analyze the needs of their customers and then make decisions to satisfy those needs, better than the competition. To better understand the marketing concept, it is worthwhile to put it in perspective by reviewing other concepts that once were predominant. While these alternative concepts prevailed during different historical time frames, they are not restricted to those periods and are still practiced by some firms today. Department of Management Studies, GCEM 1 Mr.Srinivas.S, Asst Professor CONSUMER BEHAVIOUR (14MBAMM301) The Production Concept: The term production concept was coined by Henry Ford who made the auto-mobile which was till then only affordable for the rich people for even a common man to purchase. *Assumes that consumers are interested primarily in product availability at low prices Marketing objectives: * Cheap, efficient production * Intensive distribution * Market expansion The production concept was the idea that a firm should focus on those products that it could produce most efficiently and that the creation of a supply of low-cost products would in and of itself create the demand for the products. Virtually everything that could be produced was sold easily by a sales team whose job it was simply to execute transactions at a price determined by the cost of production. The production concept prevailed into the late 1920's. The Product Concept: Assumes that consumers will buy the product that offers them the highest quality, the best performance, and the most features Marketing objectives: * Quality improvement * Addition of features Tendency toward Marketing Myopia The Sales Concept: Assumes that consumers are unlikely to buy a product unless they are aggressively persuaded to do so Marketing objectives: * Sell, sell, sell Lack of concern for customer needs and satisfaction By the early 1930's however, mass production had become commonplace, competition had increased, and there was little unfulfilled demand. Around this time, firms began to practice the sales concept (or selling concept), under which companies not only would produce the products, but also would try to convince customers to buy them through advertising and personal selling. Before producing a product, the key questions were: * Can we sell the product? * Can we charge enough for it? The sales concept paid little attention to whether the product actually was needed; the goal simply was to beat the competition to the sale with little regard to customer satisfaction. Marketing was a function that was performed after the product was developed and produced, and many people came to associate marketing with hard selling. Even today, many people use the word "marketing" when they really mean sales. The Marketing Concept: Assumes that to be successful, a company must determine the needs and wants of specific target markets and deliver the desired satisfactions better than the competition Marketing objectives: * Make what you can sell * Focus on buyer’s needs After World War II, the variety of products increased and hard selling no longer could be relied upon to generate sales. With increased discretionary income, customers could afford to be selective and buy only Department of Management Studies, GCEM 2 Mr.Srinivas.S, Asst Professor CONSUMER BEHAVIOUR (14MBAMM301) those products that precisely met their changing needs, and these needs were not immediately obvious. The key questions became: * What do customers want? * Can we develop it while they still want it? * How can we keep our customers satisfied? In response to these discerning customers, firms began to adopt the marketing concept, which involves: * Focusing on customer needs before developing the product * Aligning all functions of the company to focus on those needs * Realizing a profit by successfully satisfying customer needs over the long-term When firms first began to adopt the marketing concept, they typically set up separate marketing departments whose objective it was to satisfy customer needs. Often these departments were sales departments with expanded responsibilities. While this expanded sales department structure can be found in some companies today, many firms have structured themselves into marketing organizations having a company-wide customer focus. Since the entire organization exists to satisfy customer needs, nobody can neglect a customer issue by declaring it a "marketing problem" - everybody must be concerned with customer satisfaction. The marketing concept relies upon marketing research to define market segments, their size, and their needs. To satisfy those needs, the marketing team makes decisions about the controllable parameters of the marketing mix. MARKET SEGMENTATION Definition: - market segmentation is defined as dividing a market into distinct groups of buyers who might require separate products of marketing mix. A market segment is a buyer group having similar wants. Market segmentation is dividing homogenous market into different heterogeneous market based on customer’s needs and wants. Bases for market segmentation • Geographic segmentation – dividing the market into different geographical units such as nations, states, regions, countries, and cities. The company can operates in one or a few areas, or operate in all but pay attention to local variations. • Demographic segmentation – the market is divided into groups on the basis of variables such as age, family size, family life cycle, gender, income, occupation, education, religion, race, generation, social class and nationality. The consumer needs, wants, and usage rates and product and brand preferences are often associated with demographic variables. • Psychographic segmentation – the market is divided into different groups on the basis of psychological/personality traits, lifestyle or values. The people within the same demographic group can exhibit very different psychographic profiles. • Behavioral segmentation – buyers are divided into groups on the basis of their knowledge of, attitude toward, use of, or response to a product. Behavioral variables are occasions, benefits, user status, usage rate, loyalty status, buyer readiness stage, and attitude. o Occasions – day, week, month and year. o User status – nonusers, ex-users, potential users, first time users and regular users. o Usage rate – light, medium, heavy product users o Buyer –readiness stage – unaware of the product, aware of the product, informed about the product, interested about the product, desire about the product, intended to buy the product. o Loyalty stage – hard-core loyal, split loyal, shifting loyal, switchers. Department of Management Studies, GCEM 3 Mr.Srinivas.S, Asst Professor CONSUMER BEHAVIOUR (14MBAMM301) Market coverage alternatives: - market strategies options pass through following 3 stages Mass marketing: - the seller mass producers, distributes and promotes one product to all the buyers. The idea is that it would lead to lowest costs and create largest potential market. Product differentiated marketing: - in this stage seller produces more products that exhibit different features, styles, quality and sizes and so on to offer variety to buyers rather than appeal to different market segments. Target marketing: - in this, seller distinguishes between segments, selects one or more of these segments