ANALYSING CONSUMER AND BUSINESS MARKETS

The aim of marketing is to meet and satisfy target customers’

needs and wants better than competitors.

Analysis of consumer behavior is the study of how individuals,

groups, and organizations select, buy, use, and dispose of
goods, services, ideas, or experiences to satisfy their needs and
wants. Gaining a thorough in-depth consumer understanding
helps to make sure that the right products are marketed to the
right consumers in the right way.
Business organisations on the other hand do not only sell; each
buys vast quantities of raw materials, manufactured
components, plant and equipment, suppliers, and business
services.
Much of basic marketing also applies to business marketers.

ANALYSING CONSUMER MARKETS

WHAT INFLUENCES CONSUMER BEHAVIOUR?
A consumer‘s buying behaviour is influenced by cultural, social,
and personal factors. Cultural factors exert the broadest and
deepest influence. [See Fig 6.1 Model of Consumer Behavior]
Cultural Factors
Culture is the fundamental determinant of a persons‘ wants
and behaviours. Each culture consists of smaller subcultures
that provide more specific identification and socialization for
their members.
Subcultures include nationalities, religions, racial groups, and
geographic regions. Multicultural marketing grew out of
careful marketing research that revealed that different ethnic
and demographic niches did not always respond favourably to
mass-market advertising. Virtually all human societies exhibit
social stratification. Social stratification sometimes takes the
form of a caste system where members of different castes are
reared for certain roles and cannot change their caste
membership.
More frequently, it takes the form of social classes, relatively
homogeneous and enduring divisions in a society that are
hierarchically ordered and whose members share similar
values, interests, and behaviour.
One class depiction of social classes defines seven ascending
levels:
1) Lower lowers
2) Upper lowers
3) Working class
4) Middle class
5) Upper middles
6) Lower uppers
7) Upper uppers

Social classes have several characteristics:

Those within a class tend to behave more alike than persons
from two different social classes. Persons are perceived as
occupying inferior or superior positions according to social
class. Social class is indicated by a cluster of variables
(occupation, income, etc.) rather than by any single variable.
Individuals can move up or down the social-class ladder. Social
classes show distinct product and brand preferences in many
areas. Social classes differ in media preferences. There are
language differences among the social classes.
Social Factors
In addition to cultural factors, a consumer‘s behaviour is
influenced by such social factors as reference groups, family,
and social roles and statuses. A person‘s reference groups
consist of all the groups that have a direct (face-to-face) or
indirect influence on his/her attitudes or behaviour. Groups
having a direct influence on a person are called membership
groups. Some memberships groups are primary groups such as
family, friends, neighbors, and co-workers with whom the
person interacts fairly continuously and informally. Some
membership groups are secondary groups such as religious or
professional groups that tend to be more formal.
People are significantly influenced by their reference groups in
at least three ways:
Reference groups expose an individual to new behaviours and
lifestyles, influencing 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 whose values or behaviour an
individual rejects.
The buyer evaluates these elements together with the
monetary cost to form a total customer cost. Manufacturers of
products and brands where group influence is strong must
determine how to reach and influence opinion leaders in these
reference groups. An opinion leader is the person in informal,
product-related communications who offers advice or
information about a specific product or product category.
Marketers try to reach opinion leaders by identifying
demographic and psychographic characteristics associated
with opinion leadership, identifying the media read by opinion
leaders, and directing messages at opinion leaders.
Family
The family is the most important consumer-buying
organisation in society, and family members constitute the
most influential primary reference group. We can distinguish
between the following two families in the buyer‘s life:
The family of orientation consists of parents and siblings.
A more direct influence on everyday buying behaviour is the
family of procreation namely, one‘s spouse and children.

Marketers are interested in the roles and relative influence of

family members in the purchase of a large variety of products
and services. With expensive products and services, the vast
majority of husbands and wives engage in more joint decision-
making. Men and women may respond differently to
marketing messages.
Another shift in buying patterns is an increase in the amount of
money spent and the direct and indirect influence wielded by
children and teens.

Roles and Statuses

A person participates in many groups and a person‘s position
in each group can be defined in terms of role and status. Each
role carries a status. Marketers must be aware of the status
symbol potential of products and brands.

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 and economic circumstances; personality
and self-concept; and lifestyle and values.

Age and Stage in the Life Cycle

People buy different goods and services over a lifetime.
Consumption is also shaped by the family life cycle. In addition,
the psychological life cycle stage may matter. Critical life
events or transitions give rise to new needs.

Occupation and Economic Circumstances

Occupation influences consumption patterns and economic
circumstances influence product. These comprise of:
• Spendable income (level, stability, and time pattern)
 • Savings and assets
• Debts
• Borrowing power
• Attitudes toward spending and saving.

Personality and Self-Concept

Each person has personality characteristics that influence his
or her buying behaviour. Personality is a set of distinguishing
human psychological traits that lead to relatively consistent
and enduring responses to environmental stimuli. The idea is
that brands have personalities and 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.

Lifestyles and Value

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,
interests, and opinions. Lifestyle portrays the ―whole person‖
interacting with his or her environment. Marketers search for
relationships between their products and lifestyle groups.
Lifestyles are shaped partly by whether consumers are money-
constrained or time-constrained. Consumers who experience
time famine are prone to multitasking. Consumer decisions are
also influenced by core values, the belief systems that underlie
consumer attitudes and behaviours. Core values go much
deeper than behaviour or attitude, and determine, at a basic
level, people‘s choices and desires over the long term

KEY PSYCHOLOGICAL PROCESSES

The starting point for understanding consumer behaviour is
the stimulus-response model.
The marketer‘s task is to understand what happens in the
consumer‘s consciousness between the arrival of the outside
marketing stimuli and the ultimate purchase decisions.

Following are the 4 key psychological factors:

Motivation
We all have many needs at any given time. 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—
carry quite different implications for consumer analysis and
marketing strategy.
Perception
How the motivated person actually acts is influenced by his or
her view or perception of the situation.
Perception is the process by which an individual selects,
organises, and interprets information inputs to create a
meaningful picture of the world.
Perception depends not only on the physical stimuli, but also
on the stimuli‘s relation to the surrounding field and on
conditions within the individual.
The key point is that perceptions vary widely among
individuals exposed to the same reality.
In marketing, perceptions are more important than the reality,
as it is perceptions that will affect consumers‘ actual
behaviour.
Selective Attention
It has been estimated that a person is exposed to over 1,500
ads or brand communications a day. Because a person cannot
possibly attend to all of these, most stimuli will be screened
out - a process called selective attention. Selective attention
means that marketers have to work hard to attract consumers’
notice.
People are more likely to notice stimuli that relates to a
current need
People are more likely to notice stimuli that they anticipate
People are more likely to notice stimuli whose deviations are
large in relation to the normal size of the stimuli

Selective Distortion
Selective distortion is the tendency to interpret information in
a way that will fit our preconceptions. Consumers will often
distort information to be consistent with prior brands and
product beliefs. Examples of branded differences can be found
with virtually every type of product. Selective distortion can
work to the advantage of marketers with strong brands when
consumers distort neutral or ambiguous brand information to
make it more positive.

Selective Retention
People will fail to register much information to which they are
exposed in memory, but will tend to retain information that
supports their attitudes and beliefs. Because of selective
retention, we are likely to remember good points about a
product we like and forget good points about competing
products.
Subliminal Perception
The selective perception mechanisms require active
engagement and thought by consumers. The topic of
subliminal perception, the argument that marketers embed
covert, subliminal messages in ads or packages and consumers
are not consciously aware of these messages, but yet they
affect their behaviour. No evidence supports this notion that
marketers can systematically control consumers at the
unconscious level.

Learning
Learning involves changes in an individual‘s behaviour arising
from experience. A drive is a strong internal stimulus impelling
action. Cues are minor stimuli that determine when, where,
and how a person responds. Discrimination means that the
person has learned to recognise differences in sets of similar
stimuli and can adjust responses accordingly.

Memory
All information and experiences individuals encounter as they
go through life can end up in their long-term memory.
Cognitive psychologists distinguish between short-term
memory (STM) - a temporary repository of information.
Long-term memory (LTM) - a more permanent repository. The
associative network memory model views LTM as consisting of
a set of nodes and links. Nodes are stored information
collected by links that vary in strength.
Consumer brand knowledge in memory can be conceptualized
as consisting of a brand node in memory with a variety of
linked associations. Brand associations consist of all brand-
related thoughts, feelings, perceptions, images, experiences,
beliefs, and attitudes, linked to the brand node. Marketers can
be seen as making sure that consumers have the right types of
product and service experiences such that the right brand
knowledge structures are created and maintained in memory.
Memory Processes: Encoding
Memory encoding refers to how and where information gets
into memory. Memory encoding can be characterised
according to the amount or quantity of processing that
information receives at encoding and the nature or quality of
processing that information receives at encoding. The quantity
and quality of processing will be an important determinant of
the strength of an association. In general, the more attention
placed on the meaning of information during encoding, the
stronger the resulting associations in memory will be. Another
key determinant of the strength of a newly formed association
will be the content, organisation, and strength of existing
brand associations in memory. One reason why personal
experiences create such strong brand associations is that
information about the product is likely to be related to existing
knowledge. Repeated exposures to information provide
greater opportunity for processing and thus the potential for
stronger associations. [See Fig 6.3]
Memory Processes: Retrieval
Memory retrieval refers to how information gets out of
memory. Successful recall of brand information by consumers
does not depend only on the initial strength of that
information in memory. Three factors are particularly
important:
The presence of other pertinent information in memory can
produce interference effects
The time exposure to information at encoding affects the
strength of a new association - the longer the time delay, the
weaker the association
Information may be ―available in memory (potentially
recallable) but may not be ―accessible (unable to be recalled)
without the proper retrieval cues or reminders

THE BUYING DECISION PROCESS: THE FIVE-STAGE MODEL

These basic psychological processes play an important role in
understanding how consumers actually make their buying
decisions. Marketers must understand every facet of consumer
behaviour [See Fig 6.4]

Problem Recognition
The buying process starts when the buyer recognises a
problem or need. The need can be triggered by internal or
external stimuli. Marketers need to identify the circumstances
that trigger a particular need so that they can develop
marketing strategies that trigger consumer interest.

Information Search
An aroused consumer will be inclined to search for more
information. We can distinguish between two types of arousal.
The milder state is called heightened attention where a person
simply becomes more receptive to information about a
product. The second level is active information search where a
person looks for reading material, going online, etc. 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.
These information sources fall into the following four groups:
Personal (family, friends)
Commercial (advertising, Websites, salespeople)
Public (mass media, consumer organisations)
Experiential (handling, examining, using the product)

Generally speaking the consumer receives the most

information about a product from commercial sources. The
most effective information often comes from personal sources
or public sources that are independent authorities. The
Internet has changed information search. Most consumers are
hybrid consumers.
The consumer will come to know only a subset of these brands
(awareness sent). [See Fig 6.5] Some brands will meet initial
buying criteria (consideration set). Only a few will remain as
strong contenders (choice set) and the consumer makes a final
choice from this set.
The company must also identify the other brands in the
consumer‘s choice set so that it can plan the appropriate
competitive appeals.
Evaluation of Alternatives
No single process is used by all consumers or by one consumer
in all buying situations. The most current models see the
process as cognitively orientated. 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.
Beliefs and Attitudes
Evaluations often reflect beliefs and attitudes. Through
experience and learning, people acquire beliefs and attitudes.
These in turn influence buying behaviour.
A Belief is a descriptive thought that a person holds about
something.
An Attitude is a person‘s enduring favourable or unfavourable
evaluation, emotional feeling, and action tendencies toward
some object or idea.
Attitudes: (1) put people into a frame of mind.
(2) lead people to behave in a fairly consistent way toward
similar objects.
(3) can be very difficult to change.

Expectancy-Value Model
The expectancy-value model of attitude formation contends
that consumers evaluate products and services by combining
their brand beliefs - the positives and negatives - according to
importance. Most consumers consider several attributes in
their purchase decisions.

Purchase Decisions
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. In
executing a purchase intention, the consumer may make up to
five sub-decisions:
A) Brand
B) Dealer
C) Quantity
D) Timing
E) Payment-method

Non-Compensatory Models of Consumer Choice

Consumers may not always want to invest so much time and
energy to evaluate brands. They often take ―mental shortcuts
that involve various simplifying choice heuristics. With non-
compensatory models of consumer choice, positive and
negative attribute considerations do not necessarily net out.
With the conjunctive heuristic method, the consumer sets a
minimum acceptable cutoff level for each attribute and
chooses the first alternative that meets this minimum
With the lexicographic heuristic method, the consumer
chooses the best brand on the basis of its perceived most
important attribute
With the elimination-by-aspects heuristic method, the
consumer compares brands on an attribute selected and
brands not meeting this attribute are eliminated
Consumers do not adopt only one type of choice rule and may
combine two or more decision rules

Intervening Factors
Even if consumers form brand evaluations, two general 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 the
preference for an alternative depends on two things:
The intensity of the other person‘s negative attitude toward
the consumer‘s preferred alternative
The consumer‘s motivation to comply with the other person‘s
wishes
The second factor is unanticipated situational factors that may
erupt to change the purchase intention. A consumer‘s decision
to modify, postpone, or avoid a purchase decision is heavily
influenced by perceived risk. There are many types of risks that
consumers may perceive in buying and consuming a product.
Some of the risks are as follows:
Functional risk
Physical risk
Financial risk
Social risk
Psychological risk
Time risk

Marketers must understand the factors that provoke a feeling

of risk in consumers and provide information and support to
reduce perceived risk.
Post-Purchase Behaviour
After the purchase, the consumer might experience
dissonance about their purchase and be alert to information
that supports their decision. Marketing communications
should supply beliefs and evaluations that reinforce the
consumer‘s choice and help him or her feel good about the
brand. Marketers must monitor post-purchase satisfaction,
post-purchase actions, and post-purchase uses.

Post-Purchase Satisfaction
Satisfaction is a function of the closeness between
expectations and the product‘s perceived performance.
If performance falls short of expectations the consumer is
disappointed
If the performance meets expectations the consumer is
satisfied
If the performance exceeds expectations the consumer is
delighted
Consumers form their expectations on the basis of messages
received from sellers, friends, and other information sources
The importance of post-purchase satisfaction suggests that a
product claim must truthfully represent the product‘s likely
performance
Post-Purchase Actions
Satisfaction or dissatisfaction with the product will influence
subsequent behaviour. A dissatisfied consumer may abandon
or return the product.
Post-Purchase Use and Disposal
Marketers should also monitor how buyers use and dispose of
the product. [See Fig 6.7] A key driver of sales frequency is
product consumption rate. One potential opportunity to
increase frequency of product use is when consumers’
perceptions of their usage differ from reality.
Marketers must also need to know how the consumer disposes
of the product once it is used

OTHER THEORIES OF CONSUMER DECISION-MAKING

There are other theories and approaches to how consumers
make decisions. These are as follows:
Level of Consumer Involvement
Consumer involvement can be defined in terms of the level of
engagement and active processing undertaken by the
consumer in responding to a marketing stimulus.
Elaboration Likelihood Model
This describes how consumers make evaluations in both low
and high involvement circumstances. Consumers follow either
a central route or peripheral route. Consumers follow the
central route only if they possess sufficient motivation, ability,
and opportunity. If any of these are lacking then the
consumers tend to follow the peripheral route.
Low Involvement Marketing Strategies
Many products are bought under conditions of low
involvement and the absence of significant brand differences.
Marketers use four techniques to try to convert a low-
involvement product into one of higher involvement.
Variety-Seeking Buying Behaviour
Some buying situations are characterised by low involvement
but significant brand differences. Brand switching occurs for
the sake of variety rather than dissatisfaction.
Decision Heuristics and Biases
Heuristics come into play when consumers forecast the
likelihood of future outcomes or events.
Mental Accounting
Mental accounting refers to the manner by which consumers
code, categorize, and evaluate financial outcomes of choices.
Profiling the Customer Buying Decision Process
This describes how marketers can learn about the stages in the
buying process for their products using either the introspective
method, retrospective method, prospective method or
prescriptive method.