Consumer Behaviour Lecture

1. What is consumer behaviour?

This chapter will outline the key concepts which will make the subject of this paper, as well as the importance of studying consumer behaviour and its various business applications. Consumer behaviour studies are crucial in strategic marketing planning, which guides the company towards the most appropriate tactics to be adopted in their respective market. Academic research depicts the decision making processes of consumers in order to inform organisations of the best approach to improve the reputation of their brand and increase profitability. Consumer behaviour studies depict the various stages that a potential or existing client goes through before choosing a certain product available to them in the market and indicates where companies can intervene in order to build and maintain the loyalty of their consumers.

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1.1. Who is the consumer?

A consumer is an individual who makes a conscious decision in regards to the purchase of a product, or service for personal use and whose choice can be influenced by advertising and marketing. Organisations define their target consumers through market segmentation, dividing the population in subcategories in order to make information gathering and analysis easier for the purpose of studying consumer behaviour in detail (Wedel & Kamakura, 2012). The consumer subsets are usually defined by the existing or perceived communal interests or needs, such as financial status, hobbies, culture, lifestyle etc. Market segmentation is crucial, as it helps narrow down the focus of the advertising and marketing actions of the organisations. The choice of a unique selling point, mediums for communication, engagement tactics all depend on the effective target audience profiling, as each consumer group responds in a distinct manner to the marketing stimuli of the branding. In general, in order to effectively define the consumer behaviour as well as to influence this through marketing tactics, businesses need to analyse the demographic, psychographic, geographic and behaviour related information. The table below depicts the detailed factors of each category of information used for profiling the target consumer (Solomon, 2014).

Although iconic studies regarding consumer behaviour research can still be applied in today’s business context, the 21^st century brings new and unique challenges for organisations. The modern consumer is more empowered than before, due to his immediate and widespread access to information, through the use of digital media and smartphones (Kaplan & Haenlein, 2010). Companies need to be aware of this when analysing their consumers’ behaviour and targeting the consumers, as they have to align their marketing and advertising tactics to the needs and desires of the consumer. The categories presented above adapted from Solomon’s (2014) theory become a good starting point for profiling a target consumer group, but they are no longer all-encompassing for the modern consumer. Theories therefore need to be adapted to the ever-changing business world, which is obtainable through effective market research. The following chapters will provide details on how marketing and consumer behaviour constantly influence one another.

1.2. What is consumer buying behaviour?

Designing products or services, altering them and promoting them all depend on the behaviour of the customer and their likeliness to purchase these goods, as well as becoming loyal to a particular brand in a competitive market. The decision making process behind the purchase can indicate whether the company’s products and marketing strategy are appealing to the consumer. In addition to this, it can reveal the most important stages and the potential actions of organisations which can be taken in order to increase a company’s market share. Consumer buyer behaviour is therefore the in-depth study of the internal and external factors which contribute to a customer’s decision to purchase a particular product from the competing offers available in the market (Underhill, 2009).

The multiple variations of these elements which make-up the consumer behaviour cannot be contained in a straightforward analysis, particularly due to the fact that, as previously seen in market segmentation, each consumer is a unique individual who responds differently to marketing messages.

The decision making process behind purchases is a six stage process which informs businesses of the various stages where they can influence the consumer through strategic marketing and advertising:

Need Recognition/Problem Recognition

The first stage of the process is a prerequisite for the purchase of a product or service. Essentially, the individual has to become aware of a gap between the consumer’s actual situation and the ideal or desired one. A certain deficit has to be acknowledged by the consumer, which can be generated by internal (hunger, thirst and other physiological needs) or external stimuli (created by the advertising and marketing activities of companies). Successful brands can anticipate or create these problems or needs of consumers through effective targeting of the consumer. The needs of the consumer can be classified depending on their origin into functional, social or change need. The marketing activity surrounding a specific product could focus the functionality of the product, on the potential social advantages that an individual may obtain as a result of the purchase, or the ability to notice a change in one’s current state of affairs through a particular purchase.

Information Search

Once the need or problem is identified by the individual, either due to an internal or external stimulus, the consumer will start seeking the information about a feasible solution to the problem. The complexity of the choice and the level of involvement will influence the consumer in their information search activities. To begin with, the individual will first and foremost identify whether any internal information can be helpful in weighing the solutions to the problem, namely if they had any previous experience with the product or service, and the opinion he has of the brand or company itself, based on other purchases. Following this, the individual seeks external information, either through word of mouth from his/her peers or family or through the information made available by the company and other consumers. Oliver’s (2014) research in regards to consumer behaviour outlines that brands need to meet the expectations of the consumer and be able to anticipate their information needs and make all required information readily available to them.

Evaluation of Alternatives

Further to gathering the information required about the brands and options available for the purchase, the customer will compare and contrast the offerings based on various criteria such as price, utility, reputation of the brands, etc. (Macdonald & Sharp, 2000) Marketing professionals have to be aware of the certain criteria which will make subject of the customer’s evaluation and convince their potential and existing clients that their particular product reflects the qualities that they are looking for. Prior to the purchase, more and more individuals tend to check the different options they have in the market through digital media, which indicates that brands need to pay increasing attention to updating the online information available about their products (Sashi, 2012).

Product Choice and Purchase

At this point, the customer decides which of the various alternatives they will purchase, as well as how and where to buy that particular product. If, for instance, a customer decides they want a particular tablet, they will be able to find this in a number of retailers and some may offer discounts or longer warranty periods, in order to attract the consumers. In addition to this, the consumer may decide that they want to order the product online, if this is an option and companies need to ensure that the process of ordering is seamless for the client. This stage indicates that the effective supply chain management of companies can also influence the consumer’s preference for a particular brand.

Post-purchase Use and Evaluation

Once the purchase is complete, the consumer will evaluate their satisfaction with their purchase, following its use and may experience a complete satisfaction or a post-purchase dissonance, if the customer feels like they should have chosen another brand or another product type. Companies need to ensure that they minimise the negative impact of post-purchase dissonance on the likeliness of repurchase from the same brand or the negative word of mouth marketing of their customers. In other words, many companies offer a timeframe when their customers can return the product and various options to obtain support in using a particular product like comprehensive instructions or a troubleshooting line where clients can get in touch with dedicated support agents. Customers are increasingly seeking retailers who can offer them the opportunity to change their mind whenever making a purchase that doesn’t satisfy their needs.

Disposal of the Product

Corporate Social Responsibility practices have prompted organisations and consumers alike to reconsider the issue of disposal of products. The ethical attitude of the brand towards recycling and environmental impact has become one of the factors which influence the decision of the consumer (Laroche, Bergeron, & Barbaro-Forleo, 2001). The empowered consumer of the 21^st century had a great influence over the ethical conduct of brands through demanding to know more information in regards to the impact of product disposal. At the same time, companies who demonstrate a preference for recycling material for their products are more likely to tempt ethical consumers to choose them over their competitors.

Essentially these six stages process are a guideline for brands which informs them of the most important aspects to be taken into account when launching a new business or product, promoting it, creating loyalty and maintaining it. In an ever increasingly competitive business world, differentiating one’s product is more and more difficult, unless the product can effectively demonstrate that it essentially improves the quality of life and fulfils the needs and desires of the consumer. The evaluation of alternatives stage is slowly becoming more challenging for all brands due to the fact that, as explained in the previous chapter, the modern consumer has the ability to compare and contrast the offerings of all competitors in a specific industry. As such, brands need to be able to capture the attention of the consumer through appealing to his immediate needs and providing them with as much information as possible. Brands need to anticipate the need of their consumers for comprehensive information about their products or services (Aaker, 2012). Subsequent to this, they need to understand where the potential or existing consumer would be looking for the information and enable them to access this information in a very convenient and quick manner. Also, increasing attention should be given to the post-purchase stage, the stage which effectively builds the loyalty of consumers for a particular brand.

Consumer behaviour is influenced by the personal, situational, psychological and social factors reminded in the previous chapter, but much of the buying behaviour can also be influenced by the expectations set by certain brands, traditionally the market leaders of a particular industry (Aaker, 2012). Individuals develop a systematic process of choosing amongst different products available to them, usually at quite an early age, based on the stimuli that they respond best to from the advertising targeted at their age group. As an example, some individuals respond better to visual stimuli whist others tend to go for audio stimuli first and foremost. This may be the reason why a lot of TV advertising for instance is a burst of audio-visual stimuli which try to lure as many customers as possible to choose their products.

2. Influencing factors

Individuals purchase certain goods or services in order to fulfil a need. Sometimes this need is a basic one, such as the need for food or shelter. Other times this need is closely linked to hobbies, lifestyle, culture, religion, a classification developed by Maslow (1943) and pictured below. This chapter will cover the motivational factors which influence purchases, as well as the relevance of these for the marketing strategy of organisations. Ultimately, companies want to convince a large share of the market to purchase their products or services, as well as promote these products through word of mouth, online reviews, etc.

In the previous chapter the six stage decision making process behind the purchase was presented, but consumer behaviour studies uncovered the underlining factors which influence individuals at each of the six stages. These factors can be split into cultural, social, personal and psychological macro-environmental factors influencing the decision of the consumers.

2.1. Cultural Factors

To begin with, culture influences the consumer in their choices due to the fact that values, preferences and certain behaviours are well engrained in the consumer’s mind depending on the culture they belong to. The expectations, perception and habits of individuals from the same culture can guide companies in regards to adapting their product and/or marketing strategy (Soares, Farhangmehr, & Shoham, 2007). For instance, food and drink retailers often adapt their products in order to fit the expectations of the culture where they are promoting their brand. A few examples of companies who use culture in order to design their local strategy are Starbucks, McDonalds or Coca-Cola who have launched locally specific products in certain regions where the products they developed for the US market are less likely to appeal to the local audience they are targeting (Steven White & Griffith, 1997).

Apart from cultural differences between distinct geographical regions, it’s also important to take into account the potential influence of sub-cultures, usually a group of individuals easier to profile and target. For instance, some companies may target the female urban subculture in a specific region, rather than the entire population. These cultural and sociological characteristics influence individuals in choosing a specific product, based on the things they have learned from their immediate and extended network, as well as what is expected from them as individuals. Specific targeting of subcultures can help companies build and maintain a more loyal consumer base, as the expectations and behaviour of each group can be anticipated and tracked in a more effective manner. Another sub factor from the cultural category is the social class, which also influences the consumer behaviour and brands often target the lower, middle or upper class in their adverts and through their pricing, positioning or product design. The marketing tactics for each of the social classes has certain particularities, due to the fact that consumers from each social class tend to read distinct magazines, watch different TV shows and shop in distinct stores. Cultural trends also influence the consumer behaviour to a great extent, as was the case with the growing popularity of social media platforms like Facebook, Twitter or Instagram. An increasing number of consumer have begun to consult the social media pages of certain retailers, in order to check the reviews of existing consumers. This indicates that brands need to be able to promote themselves through their social media accounts, following the cultural trend in order to be able to remain competitive.

2.2. Social factors

Throughout their lives, individuals will be influenced in making certain product or service choices by their family and the social groups they belong to or aspire towards. To begin with, the consumption patterns of the family are often replicated by the next generation, often due to the fact that some tastes are acquired at an early age and these are influenced by a parent’s purchase decisions. This is particularly noticeable with food or beverage products, and many companies market their products in a way which awakens the customer’s desire through evoking childhood memories. Further on in life, belonging to a certain social group or aspiring to belong to that group will influence individuals to opt for a particular brand or product category. These groups can often be identified through a variety of similarities amongst their members, such as the style of dressing, their hobbies, the places where they spend their free time, etc. All of these are closely linked to purchases of products or services, which in turn influence the behaviour of the buyer including their choice of products or brands.

The role an individual holds in the society and their status also influences their behaviour as a consumer, as consumers tend to shop for products which are marketed specifically for them, as well as making certain purchases which can gain them the acceptance of their peers. For example, an individual from the upper social class will likely purchase items which are branded as luxury, whilst lower or middle income groups are less likely to become the target consumer of luxury brands. When purchasing a car, for instance, a CEO or Senior Director will ponder over the effect of a certain vehicle on their reputation, as they will show up to important meetings in this car. At the opposite end of the spectrum, individuals from the lower income class will pay attention to the price of the car, the fuel consumption and costs of maintenance of their vehicle, and will opt for the best value for money option which fits their budget.

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2.3. Personal Factors

The age, occupation, economic condition, lifestyle or personality of an individual are all factors which contribute towards the purchasing decision and behaviour of the customers. For instance, an individual working in a corporate setting will purchase more elegant clothes in order to blend in with his or her workmates. Teenagers are more attracted to brightly coloured garments, unlike middle aged or elderly consumers. The buying behaviour of an individual is closely linked to their economic condition and the price of a product may influence consumers from a lower income group more than those from a higher income group, who will focus more on the brand recognition or reputation. The lifestyle and personality of an individual also influences the type of products an individual may be interested in. To exemplify, a music lover will stay up to date with offers for musical instruments, concerts etc.

2.4. Psychological Factors

The motivation of the consumer determines the needs and desires of consumers which is a crucial step in the decision making process, as explained in the previous chapter. The intrinsic or external motivation which prompts the consumer to identify a need or problem is a prerequisite for the entire purchase process. Physical needs like hunger or thirst determine individuals to look for food or drinks and marketers are tasked with targeting these needs through appealing imagery, sounds, smells, etc. Recognition and self-esteem are also needs identified in Maslow’s hierarchy and these are needs which brands usually target in their advertising and marketing efforts. Products and brands can become a status symbol and purchasing these products which would be recognised due to their particularities can fulfil the recognition and self-esteem needs.

Beliefs and attitudes have a great influence on the consumer behaviour and successful brands can attain the loyalty of their market share through creating and promoting a recognisable brand image that their consumers can relate to. The technical features of a product can become irrelevant for an individual who has developed a loyalty towards a brand. The ethical consumer is often influenced by their attitude towards the environment or social and economic wellbeing of communities in their product choice. As such, they will investigate the corporate social responsibility actions of the brands when deciding to purchase a certain product. More and more companies are labelling their products to reflect their positive impact on the environment, as well as their efforts to source ethical products. There are brands which managed to differentiate themselves from their competitors and gain their market share through appealing to the consumers’ beliefs or attitudes. An example would be New Balance, the sports apparel retailer who managed to enter a rather saturated market, with well established brands like Nike and Adidas, and take over a share of their market through their attitude towards their supply chain and ethical business conduct (Schlesinger, 2015).

3. Level of Involvement

Depending on the potential length of use of the product, its price and all factors normally influencing the buying behaviour of consumers, like their economic situation or needs and desires, the buyer can skip some of the steps in the decision making process, or spend a longer time on evaluating alternatives and ending up not purchasing any of them. This is known as the level of involvement in the purchasing process.

3.1. Low Involvement

The lack of planning or evaluation of options when purchasing a certain product is labelled as impulse buying (Hausman, 2000). Supermarkets rely on positioning the products which people would normally buy for everyday use like milk and bread a few isles apart, in order to tempt individuals to make impulse purchases when they notice new products whilst in the store. On a regular basis, the low-involvement products, even those not purchased on impulse, but with a very short analysis of the potential implications of the buy are inexpensive items. If the consumer purchases a more expensive item in a low-involvement context, they may experience a post-purchase dissonance which impacts on the overall reputation of the company (Sweeney, Hausknecht, & Soutar, 2000). So, whilst companies may be tempted to market their products in a manner which attracts many buyers in a short span of time, who buy their goods or services on instinct, this is not an appropriate long-term strategy for successful business. This approach is mainly applicable to products which require less information gathering from the consumer’s side and be purchased as a routine response behaviour.

3.2. High Involvement

On the other hand, high-involvement purchases are usually more risky, complex and pricier products or services, such as a car, insurance, luxury holidays, etc. In these cases, individuals are less likely to have sufficient background information about the purchase prior to identifying that particular need and they would not engage in a routine response. Instead, they engage in a comparison of the offerings of the market, taking into account product specifications, its price, support in using the product, warranties, etc. Efficient consumer behaviour research prompts companies to offer all the necessary information and support for customers in making the best decision in regards to high involvement purchases, therefore avoiding the potential post-purchase dissonance which can subsequently occur in these cases. Effective marketing tactics explore the potential of offering all the necessary information about their competitors, whilst also highlighting the added value offered by their brand compared to others in the market. At the same time, offering the client an exit strategy from the purchase during the most critical time when they may experience the dissonance subsequent to buying a product or service can help them in the case of high-involvement purchases.

3.3. Limited Involvement

The third type of purchase is the most common one and falls in the middle of the two ends of the spectrum presented so far, when the client engages in a limited problem solving, using the knowledge they already have about the goods or services they identified as potential purchases, but they seek more information. In these cases, customers will spend a shorter amount of time researching the various options available in the market and reach a conclusion fairly quickly. When shopping for clothes, individuals will normally research the offerings of their favourite brands and spend some time on comparing and contrasting their options, arriving to a conclusion in a shorter span of time than in the case of a high-involvement purchase.

4. Types of buying situations

Any new purchase requires a distinct level of effort from the buyer, depending on their existing knowledge and experience in regards to that particular purchase. This includes the information they have about the product or service, the vendor, their reliability and reputation in the market, better deals for the same purchase, etc. There are three types of buying situation, applicable in both business to consumer (B2C) and Business to Business (B2B) contexts.

4.1. Straight Rebuy

As suggested by its name, this is a straightforward process for the purchase, where consumers follow the well-established pattern of previous purchases and handles this type of transaction as a routine reorder from the same supplier. Vendors need to ensure that they build and maintain the satisfaction of their customers from the first encounter in order to tempt them to opt for their services or products each time they need them. This is particularly important in competitive industries, where clients will be targeted by other suppliers with more attractive offers, discounts and other advantages in order to convince clients to switch suppliers. However, many individuals prefer to maintain the status quo as far as suppliers are concerned when they have experienced a high level of satisfaction, due to the fact that a straight rebuy takes little time and effort on his or her side.

4.2. Modified Rebuy

This is a situation which requires more effort from the purchaser, when a similar product is needed, but they make a decision to change the product specifications or the supplier, either due to a dissatisfaction with the services, or due to a change in the customer’s circumstances. In the case of a change to the specifications, the customer usually contacts their current supplier with whom they have developed a relationship, to see if they can find a solution and continue to collaborate in order to fulfil the new needs. If the customer is dissatisfied with the quality of the product or service from a supplier, however, they will study the competitors’ offerings, attempting to find a better alternative. This type of buying situation requires some research, a discussion about the new options available and a decision where one or more individuals will be involved. It may be an opportunity for suppliers to strengthen their relationship with their client, based on their capacity to satisfy their new needs and desires, increasing their customer’s loyalty even further.

4.3. New task

This is the most challenging type of buying situation, when the customer needs to evaluate their needs, study the available options in the market and make an informed decision about a purchase which they haven’t had any experience with beforehand. The need for information is greater than in all other situations, and companies need to anticipate this and provide all the necessary information in a quick and comprehensive manner to their potential clients. Usually, this is also the greatest opportunity for companies to enlarge their market share through offering discounts and special deals to their new clients and demonstrating their quality services in order to gain the loyalty of the consumers in the long term.

5. Models of Buyer Behaviour

In order to aid companies in studying and understanding their target audience buying behaviour, a number of models serve as guidance for information gathering and strategy design, in order to ensure that companies dedicate their attention to the most relevant aspects from the consumer’s viewpoint.

5.1. Economic Model

This is one of the most basic models of buying behaviour, which pays attention to the economic factors and is particularly relevant when targeting consumers from a lower income groups. At the same time, it is useful for products or services which are the subject of a straight routine rebuy, when the client pays attention to the price and may be looking for special discounts which would offer them increased satisfaction. This is, however, a very simplistic view of the very complex behaviour of the psychological, social or motivational influencing factors.

5.2. Learning Model

Companies allow consumers to explore their learning and information seeking capacities in order to attract them towards their brand. This model allows companies and marketers to explore the behaviour of the consumer throughout their learning experience and uncover information which provides a good background for improving the products, services and marketing tactics to promote them in the markets. This model is very appropriate for the empowered consumer of the 21^st century who has access to information about all the specifications of products, alternatives in the market, etc. Challenging the consumer in this context can build the brand reputation and increase the loyalty of the consumer.

5.3. Psychological Model

This buying behaviour model focuses primarily on the personality and motivation of the consumer and prompts companies to uncover the underlining factors behind consumer’s purchases in order to appeal to them through their marketing and advertising efforts. This is a more complex approach towards buyer behaviour, as it takes into account the most important factors which determine the consumer’s purchase. It helps the brands understand how they can develop and improve their products based on the motivation, needs and desires of the consumers.

5.4. Sociological Model

The previous chapters have explained the importance of the individual’s social context for their buying behaviour. The desire to belong to a group, the social pressure and norms that individuals encounter when they are part of a social group or their role in the society all influence the buying behaviour of individuals. Rigorous market segmentation and effective target audience profiling allows companies to study the buying patterns of their consumers in detail, providing rich and relevant information for long-term strategic planning.

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6. Summary

The study of buyer behaviour is a complex task for companies, which can aid them in gaining and maintaining the loyalty of their consumers. Companies need to study their target consumers’ behaviour in order to know how to respond to their needs and desires, as well as shape these through effective marketing that targets their motivation, cultural, economic and social background. In order to enhance brand reputation, companies need to demonstrate an awareness of their buyer’s behaviour through their strategy and tactics. Studying the purchase decision making, types of buying situations, buyer behaviour models and all factors influencing the thought process of the individuals can lead organisation to increase their profitability and market position in the long term.

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