M Unit-7 Marketing Management.Pdf

SUBJECT – MANAGEMENT SUBJECT CODE – 17 UNIT – VII

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1 Consumer Behaviour 2 Model of consumer Behaviour 3 Branding Management 4 Industrial Buying Behaviour 5 Supply Chain Management (SCM) 6 Service marketing 7 Customer Relationship Management 8 Retailing 9 Emerging Trends in Marketing 10 International marketing

CHAPTER -1

CONSUMER BEHAVIOUR

Consumer / Buyer: Although it is important for the firm to understand the buyer and accordingly evolve its marketing strategy, the buyer or consumer continues to be an enigma – sometimes, responding the way the marketer wants and on other occasions just refusing to buy the product from the same marketer. For this reason, the buyers’ mind has been termed as a black box. The marketer provides stimuli but he is uncertain of the buyer’s response. This stimulus is a combination of product, brand name, colour, style, packaging, intangible services, merchandising, shelf display, advertising, distribution, publicity, and others.

Further, today’s customer is greatly influenced by the media, especially electronic. Technological developments in the field of information, biotechnology and genetics, and intensive competitions in all products and services are also impacting consumer choices.

Stages in Customer Life Cycle are as follows: (i) Prospects (ii) First time buyer (iii)Repeat buyer (iv) Core buyer (v) Defector

(i) Prospects:  These are all those individuals who have not yet bought the firm’s product / brand. They are being targeted for acquisition.  This stage requires huge investments in awareness creation especially when the product or the firm or brand is new in the market. In the case of consumer products and services, the marketer has to invest in the communication channels which reach the target market. Hence data relating to readership and viewership of the print and electronic media is required for media selection.

(ii) First Time Buyer:  Once the prospect has decided to buy, the customer enters the trail stage. The customer is now evaluating the firm, product and the entire purchase and consumption experience. The firm’s strategy should be to create an experience for the customer to repeat his purchase. It has to continuously reassure the customer that his decision was correct.

 Also, the firm needs to reinforce the customer’s belief in the superiority of the product. In order to achieve the above objectives, the company needs to focus on factors that create an everlasting experience. This includes the experience at product delivery with sales and customer service personnel. Follow up customer care calls with appropriate advertising campaigns can create a satisfied customer.

(iii) Repeat Buyers: These are the customers repeating their purchase. They are satisfied with their first experience and find value in the current offer of the company. At this stage, firm need to keep in mind that these customers are still vulnerable to competitor poaching. Hence it needs to continuously strengthen the product value by removing any dissatisfaction.

(iv) Core Customers: They are the fulcrum of any company as they account for its overall profitability. Hence core customers are very critical and precious. In most companies, they are generally about two or three percent of their total customers. Firms evolve strategies to expand this base and also to keep them happy and satisfied. Core customers are those who do not switch their brand / supplier. They perceive their switching costs to be high as they understand the product and the brand, are familiar with sales and service personnel and know the company better than other customers. Core customers are also those, who despite competition, prefer to remain with the company and the product / brand. They buy not just the core product but also several other products from the company. They also induce other customers.

(v) Defectors: These are customers who have rejected the company’s offerings. Defection occurs across all the above stages of customer life cycle. One needs to analyse the causes of such defection and take steps to correct the situation. Some of the most common causes of defection are: (a) Poor after sales service of the company (b) Rude, discourteous and indifferent sales personnel (c) Lack of personal touch as the company automates all its operations and customer interfaces (d) Delayed or no response to customer complaints

What does the Customer Buy? To most of us, there appears to be an obvious answer to this question – product / service. But this is not a comprehensive description. For, when one examines the different products or services bought by a customer, one can categorise them into two groups, namely:

(a) High involvement products (b) Low involvement products. The differentiation between products and services is created on the basis of the customer involvement level in product selection. This is based on the extent to which the customer perceives the product as representing his or her personality and lifestyle. There are two types of the Products:

[a] High Involvement Products: These have the following characteristics:

(a) High Price:- Generally, these products are priced high in a particular product group. For example, a colour TV is a high involvement product within the entertainment electronics segment, but, perhaps, pocket transistors are not.

(b) Complex Features:- High involvement products have complex features, requiring the customer to spend more time on familiarizing and internalizing them. It is no wonder colour TVs, VCRs, DVD Players, cars, motorcycles, computers, washing machines, or refrigerators come with an easy-to-understand product manual describing the features in simple terms.

(c) Large Differences between Alternatives:- If the customers perceive significant differences between alternatives, then the product is a high involvement one. For example, if the customer perceives major differences between Indian, Japanese, or American cars, then the car purchase decision is a high involvement one. This is because these perceived differences enhance the need to learn about them and evaluate each of the given alternatives against a decision criteria.

(d) High Perceived Risks:- If the customer perceives a high risk in using the product, then he or she may spend considerable time in (i) Evaluating what constitutes risk (ii) How to minimise it, and (iii) How to avoid it. Besides, the customer may even evaluate whether the risk is worth taking. Cosmetics, hair dyes, flying an airplane for the first time, and the like, are all perceived high risk situations. Hence these are high involvement product use situations.

Reflect Self-concept of Buyer:

This is the single most important factor in making a product a high involvement one. Each of us has a self image and we behave in a manner that will help us reinforce this image for others. We buy products and services that reflect this self concept. Choice of cars, houses, clothes, restaurants, perfumes, cosmetics, and jewellery all reflect a customer’s self-concept. Often, customers spend considerable time in selecting a brand in these product groups.

[b] Low Involvement Products:

(a) Does not Reflect Buyer’s Self-concept:- In the first place, these products are more personal to the buyer and they do not reflect his or her self-concept. Toilet soaps and other toiletries are examples of products that are perceived by customer as not expressing his or her image.

(b) Alternatives within the Same Product Class are Similar:- The customer does not perceive much difference between different brands in the same product class.

(c) Frequent Brand Switching Behaviour:- Due to the perceived lack of difference between brands, brand loyalty in these products is low.

(d) Buying Situations:- It is not only that products differ. Even the buying situation differs. Each time the buyer is to take a purchase decision, it may or may not be the same as the previous one. The differentiation between the two buying situations may be caused by the absence of any or all of the following factors. (a) awareness about competing brands in a product group (b) customer has a decision criteria (c) customer is able to evaluate and decide on his choice.

Viewed against these parameters, one may observe that it is not the product that differentiates one buying situation from another; rather it is the time that the buyer spends in learning and evaluating the alternatives or finally selecting one of them. Howard and Sheth have described these buying situations as being: (a) Reutilized response behaviour (b) limited problem solving (c) Extensive problem solving

(a) Routinised Response Behaviour or Straight Rebuy:

This buying situation is characterised by the presence of all the above three criteria. In other words, here the customer is aware of his choices and, knows what he is looking for as the decision is based on experience of either self or others. Generally, the customer spends little or no time in choosing an alternative. Brand loyalty is relatively high here.

(b) Limited Problem Solving or Modified Rebuy: This is a buying situation with a difference. This could be, for example, introduction of a new brand or product often requiring a change in the customer’s decision criteria.

(c) Extensive Problem Solving or New Task: This is a buying situation perceived to be high on risk. This situation requires extensive learning on the part of the customer. The reason for this is that here, the customer is not aware of available alternatives, has no decision criteria, and hence is unable to evaluate different brands. This could be caused by relocation of the customer to a new and unknown environment, or by the introduction of a technologically superior product.

Factors of Buyer Motivations:

1. Economic Factors: The well known economist, Adam Smith, provided the earliest understanding of the rationale of buyer behaviour. According him “a human being is a rational individual. He or she evaluates various alternatives and will buy or select alternatives where the marginal utility is more than the marginal price he or she paid for it.

2. Psychological Factors: To get a better understanding of consumer behaviour, we need to examine three major psychological factors. These are: (1) Motivation (2) Perception (3) Learning (4) Emotions (5) Memory (6) Beliefs and Attitude

(1) Motivation: Freud, Maslow, Herzberg Some needs are biogenic, they arise from physiological states of tension such as hunger, thirst, or discomfort. Other needs are psychogenic; they arise from psychological

states of tension such as the need for recognition, esteem, or belonging. A need becomes a motive when it is aroused to a sufficient level of intensity to drive us to act. Motivation has both direction-we select one goal over another-and intensity-we pursue the goal with more or less vigor. Three of the best-known theories of human motivation-those of Sigmund Freud, Abraham Maslow, and Frederick Herzberg.

(a) Freud's Theory Sigmund Freud assumed the psychological forces shaping people's behavior are largely unconscious, and that a person cannot fully understand his or her own motivations. Someone who examines specific brands will react not only to their stated capabilities, but also to other, less conscious cues such as shape, size, weight, material, color, and brand name. A technique called laddering lets us trace a person's motivations from the stated instrumental ones to the more terminal ones. Then the marketer can decide at what level to develop the message and appeal.

(b) Maslow's Theory Abraham Maslow sought to explain why people are driven by particular needs at particular times. His answer is that human needs are arranged in a hierarchy from most to least pressing-physiological needs, safety needs, social needs, esteem needs, and self-actualization needs. People will try to satisfy their most important need first and then try to satisfy the next most important.

(c) Herzberg's Theory Frederick Herzberg developed a two-factor theory that distinguishes dissatisfiers (factor that cause dissatisfaction) from satisfiers (factor that cause satisfaction). The absence of dissatisfiers is not enough to motivate a purchase; satisfies must be present. For example, a computer that does not come with a warranty would be a dissatisfier. Yet the presence of a product warranty would not act as a satisfier or motivator of a purchase, because it is not a source of intrinsic satisfaction. Ease of use would be a satisfier.

2. Perception A motivated person is ready to act-how is influenced by his or her perception of the situation. In marketing perceptions are more important than reality, because perceptions affect consumers actual behavior. Perception is the process by which we select, organize, and interpret information inputs to create a meaningful picture of the world. It depends not only on physical stimuli, but also on the stimuli's relationship to the surrounding environment and on conditions within each of us.

People emerge with different perceptions of the same object because of three perceptual processes: selective attention, selective distortion, and selective retention.

(a) Selective Attention. Attention is the allocation of processing capacity to some stimulus. Voluntary attention is something purposeful; involuntary attention is grabbed by someone or something. Selective attention means that marketers must work hard to attract consumers' notice. The real challenge is to explain which stimuli people will notice.

(b) Selective Distortion. Even noticed stimuli don't always come across in the way the our preconceptions. Consumers will often distort information to be consistent with prior brand and product beliefs and expectations.

(c) Selective Retention. Most of us don't remember much of the information to which we're exposed, but we do retain information that supports our attitudes and beliefs. Because of selective retention, we're likely to remember good points about a product we like and forget goods points about competing products. (d) Subliminal Perception. Marketers embed covert, subliminal messages in ads or packaging. Consumers are not consciously aware of them yet they affect behavior. Although it's clear that mental processes include many subtle subconscious effects, no evidence supports the notion that marketers can systematically control consumers at that level, especially enough to change moderately important or strongly held beliefs.

3. Learning When we act, we learn. Learning induces changes in our behavior arising from experience. Most human behavior is learned, although much learning is incidental. Learning theorists believe learning is produced through the interplay of drives, stimuli, cues, responses, and reinforcement. Two popular approaches to learning are classical conditioning and operant (instrumental) conditioning. A drive is a strong internal stimulus impelling action. Cues are minor stimuli that determine when, where, and how a person responds. Discrimination means we have learned to recognize differences in sets of similar stimuli and can adjust our responses accordingly. The hedonic bias occurs when people have a general tendency to attribute success to themselves and failure to external causes.

4. Emotions Consumer response is not all cognitive and rational; much may be emotional and invoke different kinds of feelings. A brand or product may make a consumer feel proud, excited, or confident. An ad may create feelings of amusement, disgust, or wonder.

5. Memory Cognitive psychologists distinguish between short-term memory (STM)-a temporary and limited repository of information-and long-term memory (LTM)-a more permanent, essentially unlimited repository. All the information and experiences we encounter as we go through life can end up in our long-term memory. Memory encoding describes how and where information gets into memory. The strength of the resulting association depends on how much we process the information at encoding and in what way. Memory retrieval is the way information gets out of memory.

6. Beliefs and Attitudes Through doing and learning, people acquire beliefs and attitudes. These in turn influence their buying behavior.  A belief is a descriptive though that a person holds about something. These beliefs make up product and brand images, and people act on their images. If some beliefs are wrong and inhibit purchase, the manufacturer will want to launch a campaign to correct these beliefs.  An Attitude is a person's enduring favorable or unfavorable evaluations, emotional feelings, and action tendencies toward some object or idea. Attitudes lead people to behave in a fairly consistent way toward similar objects. People do not have to interpret and react to every object in a fresh way. Attitudes economize on energy and thought. Thus a company would be well advised to fit its product into existing attitudes rather than to try to change people's attitudes.

Influencing Consumer’s Behaviour A consumer’s buying behaviour is influenced by cultural, social, personal, and psychological factors. Cultural factors exert the broadest and deepest influence.

1. Cultural Factors:  Culture, subculture, and social class are particularly important in buying behaviour. Culture is the fundamental determinant of a person’s wants and behaviour. The growing child acquires a set of values, perceptions, preferences, and behaviours through his or her family and other key institutions.  Each culture consists of smaller subcultures that provide more specific identification and socialisation for their members. Subcultures include nationalities, religions, racial groups, and geographic regions. When subcultures grow large and affluent enough, companies often design specialised marketing programmes to serve them. Such programmes are known as diversity marketing.

2. Social Factors:  Social classes reflect not only income, but other indicators such as occupation, education, and area of residence. Social classes differ in dress, speech patterns, recreational preferences, and many other characteristics.  Social classes show distinct product and brand preferences in many areas, including clothing, home furnishings, leisure activities, and automobiles.

(a) Reference Groups: A person’s reference groups consist of all the groups that have a direct (face to face) or indirect influence on the person’s attitudes or behaviour. Groups having a direct influence on a person are called membership groups. Some membership groups are primary groups, such as family, friends, neighbours, and co-workers, with whom the person interacts fairly continuously and informally. People also belong to secondary groups, such as religious, professional, and trade-union groups, which tend to be more formal and require less continuous interaction.  People are significantly influenced by their reference groups in at least three ways. Reference groups expose an individual to new behaviours and lifestyles, and influence attitudes and self-concept; they create pressures for conformity that may affect actual product and brand choices. People are also influenced by groups to which they do not belong. Aspirational groups are those a person hopes to join; dissociative groups are those who values or behaviour an individual rejects.  Marketers try to identify target customers’ reference groups. However, level of reference group influence varies among products and brands. Reference groups appear to strongly influence both product and brand choice only in the case of automobiles and colour televisions; brand choice mainly in such items as furniture and clothing; and product choice mainly in such items as beer and cigarettes.

(b) Family:  The family is the most important consumer-buying organisation in society, and family members constitute the most influential primary reference group. The family has been researched extensively. We can distinguish between two families in the buyer’s life. The family of orientation consists of parents and siblings. From parents a person acquires an orientation toward religion, politics, and economics and a sense of personal ambition, self-worth, and love.” Even if the buyer no longer interacts very much with his or her parents, their influence on the buyer’s behaviour can be significant. In countries where parents live with grown children, their influence can be substantial. A more direct influence on everyday buying behaviour is the family of procreation – namely, one’s spouse and children.

(c) Roles and Statuses: A person participates in many groups – family, clubs, organisations. The person’s position in each group can be defined in terms of role and status. A role consists of the activities a person is expected to perform. Each role carries a status. A Supreme Court justice has more status than a sales manager, and a sales manager has more status than an office clerk. People choose products that communicate their role and status in society. Company president s often drive Mercedes, wear expensive suits, and drink Chivas Regal scotch. Marketers must be aware of the status-symbol potential of products and brands.

3. Personal Factors: A buyer’s decisions are also influenced by personal characteristics. These include the buyer’s age and stage in the life cycle, occupation, economic circumstances, lifestyle, and personality and self-concept. a) Age and Stage in the Life Cycle:- People buy different goods and services over a lifetime. They eat baby food in the early years, most foods in the growing and mature years, and special diets in the later years. Taste in clothes, furniture, and recreation is also age related.

 Occupation and Economic Circumstances:- Occupation also influences consumption patterns. Marketers try to identify the occupational groups that have above average interest in their products and services. A company can even tailor its products for certain occupational groups.  Product choice is greatly affected by economic circumstances, spendable income (level, stability, and time patter), savings and assets (including the percentage that is liquid), debts, borrowing power, and attitudes toward spending and saving. Marketers of income- sensitive goods continuously monitor trends in personal income, savings, and interest rates. If economic indicators point to a recessional, marketers can take steps to redesign, reposition, and reprice their products so they continue to offer value to target customers. b) Lifestyle:- People from the same subculture, social class, and occupation may lead quite different lifestyles. A lifestyle is a person’s pattern of living in the world as expressed in activities, interest, and opinion. Lifestyle portrays the “whole person “interacting with his or her environment. Marketers search for relationships between their products and lifestyle groups. c) Personality and Self-Concept:- Each person has personality characteristics that influence his or her buying behaviour. By personality, we mean a set of distinguishing

human psychological traits that lead to relatively consistent and enduring responses to environmental stimuli. Personality is often described in terms of such traits as self- confidence, dominance, autonomy, deference, sociability, defensiveness, and adaptability. Personality can be useful variable in analysing consumer brand choices. The idea is that brands also have personalities, and that consumers are likely to choose brands whose personalities match their own. We define brand personality as the specific mix of human traits that may be attributed to a particular brand.

Roles in Consumer Decision Making Often, we find that in a consumer decision process, several individuals get involved. Each of them plays an influencing role. AT times, more than one role may be played by one individual. These roles are:

(a) Initiator: This is a person who sows the seed in a customer’s mind to buy a product. The person may be a part of the customer’s family like a child, spouse, or parents. Alternatively, the person may be a friend, a relative, a colleague, or even the sales person.

(b) Influencer: This is a person, within or outside, the immediate family of the customer who influences the decision process. The individual perceived as an influencer is also perceived as an expert. In consumer durables sale, the dealer plays an influencing role.

(c) Decider: This is the person who actually takes the decision. In a joint family, often it is the head of the family or the elders in the family, who take a decision. But in nuclear and single families and with the increase in the literacy among women and number of working couples, one finds that more often than not, decisions are joint. Husband, wife, and even the entire family taking the decision, particularly on major purchases, is quite common in urban and metro areas. The decider(s) consider both economic and non-economic parameters before selecting a brand.

(d) Buyer: This is the person who actually buys the product. This could be the decider himself or herself, or the initiator.

(e) User: This is the person(s) who actually consumes the product. This could be the entire family or just one person within the customer’s family.

It is important to note that the people who play these roles seek different values in the product or service. The perception of the value is to a large extent influenced by their prior experience or that of the experience of others, media reports, and the marketing cues created by the firm. These values, which may also be referred to as market value, are the potential of a product or service to satisfy customers’ needs and wants.

Consumer Decision Making Process

1. Need Recognition of Problem Identification:  The buying process starts when the buyer recognises a problem or need. The need can be triggered by internal or external stimuli. With an internal stimulus, one of the person’s normal needs – hunger, thirst, sex, - rises to a threshold level and becomes a drive; or a need can be aroused by an external stimulus.  Thus, problem identification is important. As long as a customer does not perceive a problem, or his or her need is overt, no purchase proposition can ever be made. Marketers create stimulus to make this need overt.

2. Information Search:  An aroused consumer will be inclined to search for more information. We can distinguish between two levels of arousal. The milder search state is called heightened attention. At this level a person simply becomes more receptive to information about a product.  At the next level, the person may enter an active information search: looking for reading material, phoning friends, and visiting stores to learn about the product. Of key interest to the marketer are the major information sources to which the consumer will turn and the relative influence each will have on the subsequent purchase decision.

Consumer information sources fall into four groups:  Personal sources: Family, friends, neighbours, acquaintances  Commercial sources: Advertising, salespersons, dealers, packaging, displays  Public sources: Mass media, consumer-rating organisations  Experiential sources: Handling, examining, using the product.

In the development of decision criteria, a customer consults his or her friends, relatives and others whom he or she perceives to be experts in the knowledge about the product. In a way, the customer considers them as opinion leaders. The customer may even read specialised printed material, like journals or magazines on a particular product.

3. Search of Alternatives: In this stage, we see that the customer is actively engaged in a search for alternatives and has used the media or other social channels to collect all the relevant information.

4. Evaluation of alternatives: There is no single process used by all consumers or by one consumer in all buying situations. There are several decision evaluation processes, the most current models of

which see the process as cognitively oriented. That is, they see the consumer as forming judgements largely on a conscious and rational basis. Some basic concepts will help us understand consumer evaluation processes: First, the consumer is trying to satisfy a need. Second, the consumer is looking for certain benefits from the product solution. Third, the consumer sees each product as a bundle of attributes with varying abilities for delivering the benefits sought to satisfy this need.

5. Purchase Decision: In the evaluation stage, the consumer forms preferences among the brands in the choice set. The consumer may also form an intention to buy the most preferred brand. However, two factors can intervene between the purchase intention and the purchase decision. The first factor is the attitudes of others. The extent to which another person’s attitude reduces one’s preferred alternative depends on two things: 1. The intensity of the other person’s negative attitude toward the consumer’s preferred alternative and 2. The consumer’s motivation to comply with the other person’s wishes.

The second factor is unanticipated situations factors that may erupt to change the purchase intention.

6. Post Purchase Behaviour: After purchasing the product, the consumer will experience some level of satisfaction or dissatisfaction. The marketer’s job does not end when the product is bought. Marketers must monitor post-purchase satisfaction, post-purchase actions, and post-purchase product uses.

(a) Post Purchase Satisfaction: The buyer’s satisfaction is a function of the closeness between the buyer’s expectations and the product’s perceived performance. If performance falls short of expectations, the customer is disappointed; if it meets expectations, the customer is satisfied; if it exceeds expectations, the customer is delighted. These feelings make a difference in whether the customer buys the product again and talks favourably or unfaviourably about it to others.

(b) Post-Purchase Actions:  Satisfaction or dissatisfaction with the product will influence a consumer’s subsequent behaviour. If the consumer is satisfied, he or she will exhibit a higher probability of purchasing the product again.

 Dissatisfied consumers may abandon or return the product. They may seek information that confirms its high value. They may take public action by complaining to the company, going to a lawyer, or complaining to other groups (such as business, private, or government agencies). Private actions include making a decision to stop buying the product (exit option) or warning friends (voice option). In all these cases, the seller has done a poor job of satisfying the customer.