Topic X Consumer

Behaviour and Marketing Strategy

LEARNING OUTCOMES
By the end of this topic, you should be able to: 1. 2. 3. 4. 5. Describe the term consumer behaviour in detail; Identify five consumer behaviour characteristics and their relevance to a company's marketing strategy; Examine four internal and external factors which can influence consumer behaviour; Summarise the importance of research studies on consumer behaviour; and Propose a consumer behaviour research.

X INTRODUCTION
What is the meaning of consumer behaviour? The term explains our position as consumers. However many do not comprehend the importance of the field of consumer behaviour. This is because consumer behaviour is usually connected only to individual purchasing activities; that is the personal consumer, whereas consumer behaviour actually includes the organisational consumer. Who is the personal consumer and who is the organisational consumer? Refer to Figure 1.1 and 1.2. Can you differentiate two consumer activities?

X TOPIC 1 CONSUMER BEHAVIOUR AND MARKETING STRATEGY

Figure 1.1: Consumers

The personal consumer is an individual consumer like you and I who buy goods for our own or family use such as food and clothing (Refer to Figure 1.1). The organisational consumer on the other hand buys goods for the use of all workers in an organisation; for example, stationery and work uniforms (Refer to Figure 1.2). Both categories of personal and organisational consumers are able to form their own markets, as well as to portray different consumption behaviour. In this topic, you will be exposed to various issues related to the consumption process. Discussions on each issue however will only be a brief overview, as indepth discussion will follow in the ensuing topics.

1.1

DEFINITION AND CHARACTERISTICS OF CONSUMER BEHAVIOUR

There are several definitions on consumer behaviour expressed in books on marketing. Basically, consumer behaviour refers to studies on individuals, groups or organisations and the process they all go through while choosing, storing, using and disposing of products, services, experience, time or even ideas for the purposes of satisfying particular needs, as well as, studies on the effect of these processes on consumers and society in general. The following are some of the characteristics of consumer behaviour which you need to know:

TOPIC 1 CONSUMER BEHAVIOUR AND MARKETING STRATEGY

(a)

Consumer behaviour is not only about what is done by an individual consumer but also what a group of people and an organisation do.

Family having their meal in a restaurant

Company purchasing a bus for its workers transportation

Figure 1.2: Group and organisational consumer

(b)

Consumer behaviour does not only involve certain particular products but would include ancillary products or services that are usually bound with the main product for the purpose of presenting a more interesting and comprehensive offer.

Figure 1.3: Comprehensive offer when buying a car

(c)

Besides the purchasing activity, consumer behaviour also involves several other activities.

X TOPIC 1 CONSUMER BEHAVIOUR AND MARKETING STRATEGY

Figure 1.4: Consumption process

(d)

Consumer Behaviour is a Dynamic Process Consumer behaviour involves a consumption process that goes through different time rates but usually based on a sequence of importance. For example, Figure 1.4 shows consumer activities taking place only after reading the available offer, followed by selecting and then purchasing of a product. Consumer Behaviour May Involve Many Individuals For example, the consumption process in a family usually involves the parents and their children. Besides that, each family member carries out several roles, namely: (i) Information collector;

(e)

(ii) Influencer; (iii) Proposer; (iv) Purchaser; and (v) Consumer.

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There are times when a family member may hold several concurrent roles, as shown in Figure 1.5.

Figure 1.5: Multiple roles

From the above example, we can summarise that other family members will also use goods purchased by one of the family members. The same consumption process also exists in an organisation. A purchase made would usually bring consumption benefits to many workers irrespective of their rank in the company.

SELF-CHECK 1.1
Look at your own self as an individual consumer. Using Figure 1.4 as a guide, how many functions do you usually carry out when you purchase a product?

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(f)

Consumer Behaviour Involves Important Decisions Related to Consumption Activities Among some frequently asked questions by the consumer himself about consumer behaviour are shown in Figure 1.6.

Figure 1.6: Variety of consumer behaviour characteristics Source: Adapted from Hoyer, W. D., & Mecinnis, D. J. (2006). Consumer behaviour. Houghton Mifflin Company.

The consumption process becomes complicated and very challenging due to the variety of consumer behaviour characteristics. The higher a consumer is involved in product purchasing; purchasing decision will be harder to make. This is because the consumer requires longer time and effort in getting information on the product. All the consumer behaviour characteristics stated in Figure 1.5 are very crucial matters that must be understood by the marketeer if they wish to approach the target market.

TOPIC 1 CONSUMER BEHAVIOUR AND MARKETING STRATEGY

ACTIVITY 1.1
Get hold of an advertisement of a product or service. Then identify and explain in detail the following consumer behaviours that are influenced by the advertisement (refer to Figure 1.6). x x x x x Type of decisions to be made? Consumption activities? Type of offers? Decision-maker? Time-frame?

1.2

MARKETING STRATEGY AND CONSUMER BEHAVIOUR

The right marketing strategy is very important to every company irrespective of the size of the organisation. The best marketing strategy is a strategy that takes into account consumer satisfaction whilst focusing on the company's long term gains. Consumer satisfaction too is the main focus of organisations that practice marketing concepts and societal marketing concept. Marketing strategy must go hand, in hand with targeted market strategy. Without an exact target, market efforts towards marketing strategy formation will be futile. In short, the ability to understand consumer behaviour is the main foundation for an effective marketing strategy. Study the following Figure 1.7 to understand the relationship between consumer behaviour and marketing strategy.

X TOPIC 1 CONSUMER BEHAVIOUR AND MARKETING STRATEGY

Figure 1.7: Relation between consumer behaviour and marketing strategy Source: Adapted from Hawkins, D. I., Best, R. J., & Coney, K. A., (2003)

Based on Figure 1.7, it can be said that: x x Forming a marketing strategy is closely linked to the process of analysing and segmenting the market. A marketing strategy will not be effective if the process of analysing and segmenting the market is not done correctly.

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On the other hand, marketing strategy is found to bear an important and positive relationship to the consumer's decision making process.

A resolute marketing strategy is able to: x x Attract consumer attention to try a product for the first time Convince the consumer to be loyal to a brand

For example, an effective use of advertising and distribution strategy as well as reasonable pricing is found to create consumer interest in buying for the first time or repeat buying. The following are brief explanations of each of the processes illustrated in Figure 1.7. You have to try and comprehend the link between marketing strategy and the other formed processes. (a) Market Analysis Market analysis is very important for every business organisation since any mistake made in the selection of target market will hinder the organisation from producing optimum consumer satisfaction. Among actions which need to be carried out are: (i) To acquire complete information on the strength, weaknesses, opportunities and threats from competitors (SWOT analysis of closest competitor). To study types of surrounding micro and macro factors which could influence the market. The micro represents the buyer and supplier whilst the macro refers to the economy and demographics. To acquire information on existing markets and future market potential, such as from reports and researches.

(ii)

(iii)

Correct market analysis may become the measuring rod of your own ability. To conduct a complete market analysis, a company needs to acquire complete information on: (i) (ii) (iii) Consumer Own company situation or capacity Competitors situation or capacity

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(b) Market Segmentation Market segmentation occurs when a company takes steps to form potential markets into distinct subsets called segments. Among variables that are usually used to form the segments are: x x x x Demographic; Geographical; Psychographic; and Behaviour.

You are encouraged to look at marketing modules for discussions on each of these variables. (c) Market Targeting A company can identify the most suitable segment as the chosen target market after the market segmentation has been carried out. For purposes of market targeting, a company may either choose to form: (i) (ii) (iii) Undifferentiated marketing strategy; Differentiated marketing strategy; or Concentrated marketing strategy.

Every segment needs a specific marketing strategy. A segment must also be big enough to ensure the company is able to generate profits. In fact, the more unique a segment is, the higher the chance for the company to be more competitive. (d) Marketing Strategy Companies have to design a marketing strategy to suit each segment after a target market has been identified. Basically, marketing strategy is summarised according to mixed marketing elements (4P). The marketeer will implement a market positioning strategy after all the mixed marketing elements are formed. (i) Positioning Positioning by a company is done when it identifies and then selects the best or most unique feature in the offer to be the distinct image.

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Figure 1.8: Distinct image of Perodua Kancil car

Still the positioning strategy will not however be successful if it is not combined with a creative advertising strategy, since an advertising strategy is able to introduce and raise the image of the offer to the target market. Image is always linked to perceptual mapping action. (ii) Perceptual Mapping Perceptual mapping is to identify the positioning of a proposition with the use of an instrument called the perceptual map. From such a position, it enables companies to be aware of consumer perceptions on the merits as well as weaknesses of the offer compared to the competitors. The comparison process is made from feedback garnered from company questionnaires. The feedback reflects respondents' perceptions on the performance of existing competitors' offer in the market. It therefore enables companies using perceptual analysis to determine which positioning is most suitable to be used as the main feature for the offer to be made. (e) Consumer Decision Making Process Companies will then tender the entire product offer to consumers after forming a marketing strategy. The consumer decision making process commences thereon, as to whether to buy or otherwise. This process involves several important steps, which are: (i) Problem Identification Consumers are aware of the existence of problems or needs which determine purchases to be made. The more difficult a problem or a need, the more difficult it is for the consumer to decide.

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(ii)

Information Search Consumers will search for information related to the product he wishes to buy. That information can be acquired from printed sources, advertisements or even from other individuals who are able to influence their purchase such as from opinion leaders or family members. Evaluation of Alternatives To identify the advantages and disadvantages of each alternative, consumers will evaluate all available alternatives or choices in the marketplace. Alternative evaluation is usually needed for purchases that involve extensive decision or imbued with some constraints. Purchase Consumers are very careful when making purchasing decision on offers, which are complex, rarely done, or is a novelty for them. However, consumers usually do not need a longer time to make decisions for routine purchases. These purchases could be for his use or for the entire household. Consumption Consumers will use a product for a certain period before being able to evaluate its performance. Evaluation of Product Performance Consumers can then decide whether to repeat the purchase or to stop buying altogether after having made an evaluation on the performance of the product. In other words, consumers will be loyal to the brand if they are satisfied with its performance, and vice versa.

(iii)

(iv)

(v)

(vi)

ACTIVITY 1.2
You might have once bought your dream product (such as a new car). Describe in detail the consumer decision making process you carried out in the purchasing process. We have already mentioned that the consumer decision making process may be influenced by a variety of internal and external factors present in the consumer's environment. A discussion on the factors influencing consumer behaviour will be carried out in the following topic. The types of consumer decision making process can be divided into three categories. These categories are:

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Extensive Problem Solving (Difficult) Normally, extensive problem solving occurs in purchases of highly involved products, is important to the consumer, risky, rarely done or is a novelty to them, and requires a longer time for decisions to be made.

Figure 1.9: Extensive problem solving

Limited Problem Solving Limited problem solving takes place when consumers already have some basic knowledge on product category but are unsure which brand is the best.

Figure 1.10: Limited problem solving

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Routine Problem Solving Routine problem solving takes place frequently as consumers already have some experience in using a product and are familiar with its performance.

Figure 1.11: Routine problem solving

(f)

Outcome Lastly, companies can see the effect or impact of the entire marketing strategy on the personal consumer, companies and society. (i) Outcome to Personal Consumer The outcome to the personal consumer refers to the level of satisfaction a consumer gets after using the product. Satisfied consumers will repeat purchase that the company's offers. Consumer satisfaction enables the company to enjoy long-term gains. Outcome to Company The outcome to the company can be seen from the total amount of sales made by the company. The amount of sales however, depends on the correct selection of product positioning strategy. Consumer satisfaction can be realised if the positioning is parallel to product image and quality. Outcome to Society The outcome to society can be viewed from the point of benefit to the entire proposition to the well-being of society at large whether economically, environmentally or socially. The company has to study whether the effect it would produce to every level of society is positive or negative.

(ii)

(iii)

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Figure 1.12: Effect of marketing strategy

1.3

FACTORS INFLUENCING CONSUMER BEHAVIOUR

The decision making process differs for each consumer. There are individuals who need a shorter period to make any purchasing decisions while there are those who need a longer period for the same product. This is because consumer behaviour could be influenced by several external and internal factors. All these external and internal factors can be classified into four categories of influencing factors, namely, cultural, personal, psychological and social factors (refer to Figure 1.13). (a) Cultural Factors Culture is the most significant factor which could influence consumer behaviour. In theory, culture encompasses the values, beliefs, and perceptions that man has about the world around him.

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Figure 1.13: Factors which influence consumer behaviour Source: Adapted from Kotler, P. and Amstrong, G. (2009). Principles of Marketing (13th ed). Prentice Hall

Three important cultural elements are culture, subculture and social class. (i) Culture Culture is the most significant external factor having the most impact on consumer behaviour. Theoretically, culture is formed when a group of people in society behaved alike and such behaviour is acceptable to each member of that society. Theoretically, culture is formed when a group of people in society behaved alike and such behaviour is acceptable to each member of that society. Culture shapes a consumer's personal values. Culture also determines patterns of individual purchasing and consumption, such as the type of product chosen and manner whereby a product is used. Refer to Figure 1.14 for an example of cultural difference.

Figure 1.14: Various mode of eating

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(ii) Sub-culture Sub-culture is a sub-cultural group that exists as a distinct segment within society. Sub-culture is a sub-cultural group that exists as a distinct segment within society. Some examples of sub-culture are nationality, religion, geographic, ethnic, gender, age and occupation (refer to Figure 1.15). Each sub-culture provides individual effects on consumer behaviour and is able to create a specific consumption culture. For example, Muslim consumers are usually very concerned about their foodstuff. They therefore pay great attention to the 'halal' logo portrayed on the product. Career women, on the other hand, need modern household appliances to help them complete their daily household chores with ease and speed.

Figure 1.15: Various sub-cultures

(iii)

Social Class Social class refers to social stratification of a group of people with similar or nearly similar values, interests and behaviours. There are three main social classes, namely upper class, middle class and lower class (refer to Figure 1.16). Each class reveals different forms of lifestyle and personal concept.

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The purchasing and consumption process therefore differs between each class. The human social class may however change, especially when their level of education and income increases or otherwise.

Figure 1.16: Three main social classes

(b)

Personal Factor Each consumer carries different personalities. The personal factor can be divided into three, i.e. demographics, personality and lifestyle. (i) Demographics Demographics is the basic information or background of an individual, such as gender, age, ethnicity, education level and income. This factor influences customer choice in the marketplace.

(ii) Personality The human personality also differs in individuals. The personality is the inner human attribute present since birth. Personality can be formed through learning and observation of the environment around us. Even though it could be lasting, the consumer's personality may change. The marketeer therefore, uses various strategies to influence consumer purchasing interest. (iii) Lifestyle Lifestyle provides a true reflection of how a consumer behaves. Lifestyle can be the determiner to the type of goods or services that would be selected by the consumer.

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(c)

Psychology The psychological factor is an inner factor which can influence consumer purchasing and consumption process. Motivation, perception, learning and attitude are among the psychological factors which will be discussed in this module. (i) Motivation Motivation is the intensity of instinct and feelings that propels an individual into action. Motivation exists due to one or more pressure, or even due to certain unfulfilled needs. Consumers are usually motivated to behave in a certain manner because of the existence of a goal they wish to achieve, or due to pressures from internal (such as learning and perception) or external (such as opinion leader and family members) factors. (ii) Perceptions Each individual has his own perception towards any excitement present in his surroundings. Companies usually try to excite consumers through various marketing efforts. For example, by diversifying advertising and annual sales promotion strategy in order to show obvious distinction of their offer and thus encourage purchasing. As a result, a positive perception towards product image or company brand is formed. Through perception, consumers will also appreciate the link between quality and price. For example, consumer perception of brands such as Bonia, Camel, Honda, MEC and others do differ between consumers. (iii) Learning Learning may take place either formally or informally, such as through observation. Learning starts from birth until our last breath. It is through learning that a marketeer educates consumers to be loyal to a particular brand, encourages them to use their product instead of the competitors', as well as, create new needs and desires within the consumer. For example, a marketeer teaches consumers to love drinking 'Nescafe' even though consumers have always been coffee-lovers.

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(iv) Attitudes Attitude is the inclination to have a particular perception toward objects, subjects and opinion of other individuals. Attitudes can be formed from actual experience or information gained from others. Attitudes could also shift due to external and internal factors which can influence consumer perception. Marketeers do their very best to try and suit their proposition with consumer attitudes and not to change consumer attitudes towards their offer. This is to ensure that consumers would easily accept the offer made by the company. (d) Social Factor The social factor is one of the external factors that can influence consumer behaviour directly or even indirectly. Among the most common social factors are reference group, opinion leader and family. (i) Reference Group It is usual for reference group to be the source of reference by a consumer. A reference group is normally with excellent credibility and appealing character or is able to influence attitudes and behaviours of others. Some examples of reference groups are family, close friends, association members, experts, politicians and members of exclusive clubs.

(ii) Opinion Leader Opinion leaders can use their position, status, expertise and knowledge of the product or services to influence other individuals purchasing decision. They are usually respected because of their open-mindedness as well as the ability to give information on a product or service sincerely. Some examples of opinion leaders are well-known celebrities, cooking experts and politicians. (iii) Family The family is the group nearest and closest to the consumer. In fact, the family is deemed to be the primary or main reference group. As we have learned previously, there are five main roles which could be held by family members, i.e.: consumer, purchaser, influencer, proposer and information collector. In whichever role held by family members, each role can be influenced by various factors such as lifestyle, social class, product importance, type of roles, risk perception, time limit and stage of the family life cycle.

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Family members can also give several forms of support to each other. Among the types of support are financial and morale, shaping of personal socialisation and so on. Figure 1.17 shows the subjects that we have covered in this topic.

Figure 1.17: Consumer decision making process and factors which influences Source: Adapted from Etzel, M. J. Walker, B. J. & Stanton W. T. (2006). Marketing: The International Edition (15th ed.). McGraw-Hill Irwin.

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ACTIVITY 1.3
Explain using one example how psychological factors can influence the purchasing decision of an individual consumer. Relate the explanation to your own experience on purchasing.

1.4

THE IMPORTANCE OF RESEARCHES ON CONSUMER BEHAVIOUR

It is clear that consumer behaviour is crucial to the stability of any business organisation. The field of consumer behaviour is indeed complex and involves a multi-dimensional process. The marketer therefore must spare time, effort and money to carry out researches on consumer behaviour to ensure that any marketing effort undertaken will generate profitable returns. Since consumer behaviour first emerged only around the 1960s and is thus a new field, most researchers still draw on several research approaches to study this field. Figure 1.18 shows the various applicable research approaches.

Figure 1.18: Research approaches

Some examples of questionnaires about the consumer, which could be answered through a consumer research process, are: x x What is the consumer's opinion about the company's product and its competitors? Which consumer proposals could be used to improve and raise product performance?

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x x x x

How does consumer use the product? What kind of attitude consumer holds about marketeer's product or advertisement? What are the consumers' opinion about their role in the family institution and society? What are their hopes and desires for themselves and their family?

From the examples of questions listed above, it is clear that consumer behaviour cannot be taken lightly, as consumer behaviour helps smoothen the planning process and the managing of marketing environment which is ever-changing, especially that of consumer taste itself. For example, big international companies such as Procter and Gamble, Colgate, Palmolive, Nestle, IBM and the likes, allocate huge sums for research to ensure their products are well received in the marketplace.

1.4.1

Groups Which Benefit from Consumer Research Findings

Consumer researches are not only carried out by business organisations, but also by academicians, non-governmental bodies, consumer associations and the likes. Look closely at the benefits obtained by each of the parties. (a) Business Organisations From consumer research findings, the relevant company can identify consumer wants and tastes, as well as, its own ability and weaknesses and also that of their competitors. They can therefore, form more effective marketing strategies and tactics. Lawmakers This group usually needs guidelines or basis for the drafting of rules or even laws. Consumer research outcomes can help relevant parties such as the government ministry, to provide a more competitive and harmonious business atmosphere for business organisations and the marketplace generally. Consumer Associations Consumer associations usually act as the arbiter between business organisations and consumers. Through the researches made, consumer associations help create a marketplace free of unhealthy activities such as deceptions, excessive increase in the price of goods, environmental pollution and others. Academicians Consumer research outcomes can be an incentive for either academicians or students to carry out new researches. New findings in research

(b)

(c)

(d)

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undertaken by academicians are also able to assist authorities, companies, consumer associations, consumers and the public to be more aware of changes and problems that take place in the marketplace. This is because their findings are more transparent and unbiased. (e) Consumers From the research findings consumers can get the latest information on the best product or service or vice versa. Consumers can elude themselves from being deceived by sweet promises from various types of offer that are at times of low quality and not according to standards. Public This group is frequently exposed to the harm caused by business organisations and entrepreneurs. Consumer research outcomes can provide the latest information to the public. Therefore they are more aware of problems related to their personal welfare, the surrounding, the economic and social issues.

(f)

Consumerism, therefore, is very important to each individual so that he would not easily fall prey to any irresponsible entrepreneur or business organisation.

Consumer behaviour refers to the study of consumer and the consumption process they go through (selecting, purchasing, consumption, and disposal of any offer), as well as, the impact of such processes. Consumer behaviour is definitely an important issue for any individual involved, including yourself, whether directly or indirectly, in marketing activities. Consumer behaviour is influenced by internal and external factors. The four categories of factors are cultural, personal, psychological and social. Each factor is capable of influencing the consumer decision making process, whether directly or indirectly. Consumer behaviour is closely linked with marketing strategy, especially for business organisations practicing marketing concepts. Consumer behaviour helps marketeers in the process of market analysis, market segmentation and in selecting the target market. The consumer decision making process involves problem identification, information search, evaluation of alternatives, purchasing, consumption and evaluation of performance activities. The decision making process between one consumer and another differs and is hard to anticipate due to the existence of various influencer factors.

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Attitude Consumer behaviour Culture Demographic factor Family Household Market segmentation Motivation

Perception Personality Positioning Psychological factor Reference group Social class Social factor Sub-culture

TRUE (T) or FALSE (F) Statements 1. 2. 3. 4. Consumer behaviour is not just those done by consumers but may also be by a group of people and even by an organisation. Consumer behaviour involves important decisions which are related to marketing activities. Marketing strategy will be effective if the analysis and market segmentation process is carried out in detail. Positioning is an action by companies to identify and later select the best and most unique feature in product offered by competitors. The first step in consumer decision making process is to search for information. The following are personal factors which influence consumer behaviour, namely demographic, personality, attitude, and lifestyle. Motivation is the force of instinct or feelings within an individual that propels them into action. There are five main roles held by family members, that is, as consumer, purchaser, influencer, proposer and information collector.

_________ _________ _________

_________ _________

5. 6.

_________ _________

7. 8.

_________

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9. 10. 11.

Consumer behaviour merely involves product purchasing activity. The basic consumption process includes selecting, purchasing, consumption and disposing of product. Routine problem solving takes place when a consumer has some basic knowledge on product category but is unsure which is the best brand. Factors that influence consumer behaviour are classified into four categories of influencer factors, namely cultural factor, personal factor, psychological factor, and social factor. Demographic variables are the most easy and popular variables. One world, one market' concept refers to differentiated marketing strategy. Alternatives evaluation/choice is the last step in the consumer decision making process.

_________ _________

_________

12.

_________ _________ _________ _________

13. 14. 15.

Multiple Choice Questions 1. Which of the following is NOT targeting market strategy? A. B. C. D. 2. Positioning Undifferentiated marketing strategy Differentiated marketing strategy Concentrated marketing strategy

Usually, this form of decision making usually involves the purchasing of high-involvement products, is important to consumer, risky, is rarely done or a novelty and where longer time is needed to make decisions. This type of consumer decision making is_________. A. B. C. D. Routine problem solving Limited problem solving Extensive problem solving Collective problem solving

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3.

Which of the following is NOT a cultural factor? A. B. C. D. Culture Sub-culture Family Social class

4.

Which of the following is NOT a social factor? A. B. C. D. Lifestyle Reference group Opinion leader Family

5.

Which of the following is NOT a psychological factor? A. B. C. D. Motivation Perception Attitude Personality

6.

'One world, one market' marketing concept refers to_________. A. B. C. D. Undifferentiated marketing strategy Differentiated marketing strategy Concentrated marketing strategy Mapping

7.

Arrange consumer decision making process according to the CORRECT arrangement. I. II. III. IV. V. VI. A. B. C. D. Evaluation of alternatives Information search Purchasing Consumption Problem identification Absolute performance evaluation I, II, III, IV, V and VI II, III, IV, V, I and VI V, II, I, III, IV and VI V, II, I, III, VI and IV