CONSUMER MARKETS AND BUYER BEHAVIOR

Consumer Buyer Behavior — The buying behavior of final consumersindividuals and households who buy goods and services for personal consumption CONSUMER MARKETS AND BUYER BEHAVIOR COLLEGE OF BUSINESS ADMINISTRATION CHUNG-ANG UNIVERSITY PROF HYUNSUK SUH What is “Consumer Buyer Behavior”? Consumer Buyer Behavior Consumer Buyer Behavior: The buying behavior of final consumers- individuals and households who buy goods and services for personal consumption Kotler and Armstrong, 2013  Consumer Behavior: It is the process by which individuals or groups select, use, or dispose of goods, services, ideas, or experiences to satisfy needs and wants Sheth and Krishnan, 2004 Consumer behavior is the study of individuals, groups, or organizations and the processes they use to select, secure, use, and dispose of products, services, experiences, or ideas to satisfy needs and the impacts that these processes have on the consumer and society Hawkins, Mothersbagh, and Best, 2007  Objectives The objectives of the current chapter are described Objectives Understand the model of consumer buyer behavior Understand the major factors that influence consumer buyer behavior Understand the different stages of the buyer decision process Factors Affecting Buyer Behavior To understand consumer behavior, we need to understand how consumers perceive, learn, and make decisions to satisfy their needs and wants Model: Stimulus-Response of Buyer Behavior Key Question How consumers respond to various marketing efforts the company use? Stimulus Organism Response Marketing and other stimuli Buyer’s Black Box Buyer Responses Marketing Other Product Economic Price Technological Place Political Promotion Cultural Buyer characteristics Product choice Brand Choice Dealer choice Buyer Decision Process Purchase timing Purchase amount - Marketing and other stimuli enter the buyer’s “black box” and produce certain choice / purchase responses - Marketers must figure out what is inside of the buyer’s “black box” and how stimuli are changed to responses Factors Affecting Buyer Behavior There are complex factors in the black box that influence buyer behavior that can be categorized Factors Affecting Consumer Behavior Cultural Social Personal Culture Reference groups Subculture Family Psychological Age and lifecycle Economic situation Motivational Perceptual Occupation Social class Roles and status Learning Lifestyle Beliefs and attitudes Personality BUYER Factors Affecting Buyer Behavior Cultural factors exert the broadest and deepest influence on consumer behavior Cultural Factors Culture Subculture The set of basic values, perceptions, wants, and behaviors learned by a member of society from family and other important institutions (e.g Color red, funeral, Campbell’s soup) A group of people with shared value systems based on common life experiences and situations (e.g Religions, racial groups-Hispanics are branded, higher quality products) Relatively permanent and ordered divisions in a society whose members share Social class similar values, interests, and behaviors (e.g frame of reference, order of hierarchy, and order changes) Factors Affecting Buyer Behavior Let’s take a look at the definitions about culture Culture Definitions ۵ Culture is the complex whole that includes knowledge, belief, art, law, morals, customs, and any other capabilities and habits acquired by humans as members of society (Hawkins, Mothersbagh, and Best, 2007) ۵ Culture is the collective programming of the mind that distinguishes the members of one category of people from those of another (Geert Hofstede) Although pizza is eaten most everywhere, what is on the pizza can be quite different! Pepperoni Tuna & Corn Black Bean Sauce Squid BBQ Chicken Eggs Factors Affecting Buyer Behavior The diversity of cultures around world is also reflected in languages Culture Watch: Using English as a Marketing Tool in Japan Example CULTURE WATCH: Using English as a Marketing Tool in Japan In Japan, consumer packaged goods have English, French, or German labels to suggest a stylish, Western look A Westerner may wonder what the copywriters wish to achieve English on the label of City Original Coffee proclaims "Ease Your Bosoms This coffee has carefully selected high quality beans and roasted by our all the experience." The intended message: Drinking the coffee provides a relaxing break and "takes a load off your chest." One expert believes these messages highlight differences between Japanese and other languages Many Western languages lack exact equivalents for the rich variety of Japanese words that convey feelings This presents difficulties for copywriters trying to render feelings in a language other than Japanese Q: Why are Japanese retailers unconcerned that the messages are syntactically suspect ? Factors Affecting Buyer Behavior The important distinction between cultures suggested by Hall is that between HIGH and LOW context cultures which are described below High and Low Context Cultures HIGH CONTEXT - Nonverbal messages are full of important and intended meanings - When words are spoken, “reading between the lines” is important emphasis on background, basic values -The meaning of individual behavior and speech changes depending on the situation or context - Less emphasis on legal paper work - Focus on personal reputation - Latin American countries, Japan, and industrializing Asian countries LOW CONTEXT - Messages are explicit and specific - Words carry all information (intentions are expressed verbally) - Reliance on legal paperwork - Focus on non-personal documentation of credibility - Low context cultures can be found in culturally diverse countries such as Switzerland, US, and Germany Factors Affecting Buyer Behavior The high and low context cultures across different countries are illustrated below High and Low Context Cultures Example H/L Communication Style A US business man picked up a German client from his hotel near LAX and asked what kind of food he wanted for dinner He said, “something local.” Now in LA, the local food is Mexican food We went to a great Mexican restaurant in Santa Monica and had it all When we were done I asked him how he like the food He responded rather blandly, “It wasn’t very good” Germans being low-context oriented, they deliver information without any social padding If it was Americans in the same situation, the answer would more likely be “It was pretty good but a bit too spicy.” A Japanese would answer “It was very good Thanks.” But he would never order Mexican food again 10 Factors Affecting Buyer Behavior The most widely used lifestyle classifications, research firms developed is VALS (Values and Lifestyles developed by SRI consulting) VALS Lifestyle Classifications segmenting the consumer marketplace on the basis of the personality traits that drive consumer behavior High Resources High Innovation Actualizers Principle Oriented Action Oriented Fulfilleds Achievers Experiencers Believers Low Resources Status Oriented Strivers Makers Strugglers Ref: SRI international 13 Low Innovation Factors Affecting Buyer Behavior The VALS categories are described below (1/2) Characteristics of VAL Category Category Description  Actualizers (Innovators)  They are successful, sophisticated, take-charge people with self-esteem Image is important as expression of their taste and independence They are the leaders and seek challenge  Fulfilleds (Thinkers)  The are motivated by ideals They are well-educated and seek out information in decision-making process They are conservative, practical consumers: they look for durability, functionality, and value in products they buy  Achievers  They have goal-oriented lifestyles and a deep commitment to career and family They are politically conservative and respect authority They prefer prestige products to demonstrate success to their peers They like variety of time-saving devices  Experiencers  They are motivated by self-expression As young, enthusiastic and impulsive consumers, their energy finds an outlet in exercise, sports, outdoor recreation, and social activities They spend comparatively high portion of income on fashion, entertainment, and socializing 14 Factors Affecting Buyer Behavior The VALS categories are described below (2/2) Characteristics of VAL Category Category  Believers  Strivers  Makers  Strugglers (Survivors) Description  They are conservative people with concrete beliefs on family, religion, and nation They express deep moral codes As consumers, they are predictable: they choose familiar products and established brands They are loyal to their national products  The are trendy and fun-loving They are concerned about the opinions and approvals of others Money defines success for them They emulate the purchases of people with greater material wealth They are active consumers because shopping is both social activity and an opportunity to demonstrate to peers their ability to buy  Like experiencers, they are motivated by self-expression by working on building a house, raising children, fixing a car, or growing vegetables They are suspicious to new ideas and unimpressed by material possession They buy basic products (prefer value to luxury)  They live narrowly focus lives Due to shortage of resources, they must focus on meeting needs rather than fulfilling desires They are cautious with loyal to favorite brands as long as they can purchase them at a discount stores 15 Factors Affecting Buyer Behavior The example of VALS survey is described below Results VALS Questionnaire Example Homework a b Ref: http://www.strategicbusinessinsights.com/vals/presurvey.shtml 16 What is your VALS type? Do you agree with the assessment? How can marketers use VALS information to serve consumers better? Factors Affecting Buyer Behavior Psychological factors also influence on consumer behavior in terms of motivation, perception, learning, and beliefs & attitudes Psychological Factors Motivation A need that is sufficiently pressing to direct the person to seek satisfaction (e.g Maslow’s needs hierarchy) Perception The process by which people select, organize, and interpret information to form a meaningful picture of the world (e.g selective attention, selective distortion, selective retention) Learning Changes of an individual’s behavior arising from experience (e.g conceptual learning, experienced learning) Beliefs and Attitudes A descriptive thought that a person holds about something A person’s consistently favorable/unfavorable evaluations, feelings, and tendency toward an object or idea 17 Factors Affecting Buyer Behavior Maslow’s hierarchy of needs explain why people are driven by particular needs by particular times Maslow’s Hierarchy of Needs s A person tries to satisfy the most important need first s When the need is satisfied, it will stop being a “motivator” and a person will try to satisfy the next most important need s Without most pressing needs being satisfied, the next phase won’t be satisfied s (e.g starving people will not take interest how they are seen or esteemed by others (esteem needs), or what’s happening in the art world (self-actualization)) 18 Factors Affecting Buyer Behavior Amongst exposed stimuli, people form different perceptions of the same stimulus due to three perceptual processes Types of Perceptual Information Processing Selective Attention The tendency of people to screen out most of the information to which they are exposed Selective Distortion The tendency of people to interpret information in a way that will support what they already believe Selective Retention The tendency to retain information that supports their attitudes and beliefs 19 Decision Process The buyer decision process is illustrated below Buyer Decision Process Need Information Evaluation of Purchase Post-purchase Recognition Search Alternatives Decision Behavior The first stage of buyer decision process in which consumer recognizes a problem or needs The consumer is aroused to search for more information The consumer uses information to evaluate alternative brands in the choice set 20 The buyer’s decision about which brand to purchase The consumers take further action after purchase, based on their satisfaction or dissatisfaction Decision Process The precise understanding of consumer’s need is the very first step to understand consumer behavior Types of Need Ideal state Need Recognition Utilitarian Need Satisfying practical need of the consumer -Focused on thinking and cognition of practicality (e.g house ware, machinery) To arouse purchase urge GAP!!! Self-expressive Need -Focused on individual characteristic (e.g suit, cosmetics, accesory, perfume) Hedonic Need -Focused on feeling and affection (e.g music, travel) Current state 21 Decision Process The consumer’s evaluation of the product or service starts from information search Types of Information Source Attention: Yerkes-Dodson’s Law High Information Infoprocessing Ability Loose Attention Search Information Source Internal Source (consumer’s memory) Useful Theory Low Proper Narrow Attention Attention focus Arousal level High External Source Personal Marketer Outer-marketer - Attention and Arousal are closely related to each other Non-personal Sales person Exhibit (showroom) WOM Expert opinion -If arousal is too low, attention is loose, and your ability to process info is also low Advertisement Promotion Newspaper Magazine - If arousal is too high, attention is too focused and becomes narrow, so that you are not able to process information correctly 22 Decision Process Some of the information perception theories are described below Perception: Information Distortion Perception: Information Organization Information Search Information selection can be perceived in distored manner Perceptual defense ( 방어 ) People tend not to perceive certain object or information that are opposite to his/her belief (e.g advertisement, cigarette smoker tend to avoid smoking-free campaign) Perceptual vigilance ( 경각 ) On typical situation, people tend to perceive certain object or information better than normal situation (e.g Starved group tend to perceive food-related words relatively faster than other words) 23 Characteristic of Information organization process can be twofold Categorization ( 항목화 ) People tend to organize information of new products based on their prior knowledge (e.g resale vale of Hyundai Accent vs Benz) Integration ( 통합화 ) People tend to perceive information as “organized whole” rather than “individualized” (e.g Halo effect) Decision Process When consumers evaluate product and service, they use both internal sources of information (memory) as well as external sources Types of Evaluation Category vs Attribute Categorization ( 항목 ) e.g Bird-eagle, canary, parrot Evaluation of Alternatives Stimulus-based (e.g purchasing unknown/unused products) Useful Theory Memory-based (e.g selecting experienced goods and services) Out of sight, out of mind (except, comparatively more number of superior attributes, exaggeration) Attribute ( 속성 ) Intrinsic: color, size, styles Extrinsic: brand, country of origin, price Example: 500 candidates have applied to A company where it only plans to hire 20 new employees Methods Read all the details of the documents each candidates handed in Interview every individuals to make evaluation 24 Make an assessment based on the important list of items such as the level of education, job experience, and etc Decision Process When consumers making decisions about the purchase, they make the complicated problems simple and make decisions on their own called “decision fallacy” Types of Decision fallacy Types of Decision Behavior Purchase Decision High Involvement Low Involvement Significant diff b/w Brands 축소처리 오류 (UNDERPROCESSING BIAS) (e.g McDonald, WOM-friend’s opinion) Complex buying behavior Varietyseeking buying behavior Few diff b/w Brands Dissonancereducing buying behavior Habitual buying behavior 확대처리오류 (OVERPROCESSING BIAS) (e.g 원산지 명 , 브랜드 명 , dilution effect ) 상황적 오류 (SITUATIONAL BIAS) (e.g 23C in March Vs 23C in August; 월 달의 23 도의 온도와 월 달의 23 도의 온도 ) 25 Decision Process The customer’s dissatisfaction will not disappear automatically, but the company must eagerly participate in solving those problems Service Recovery Example Post-purchase behavior Distributive justice ( 배분적 정의 ) 물질적 보상 (e.g 환불 , 교환 , 가격할인 , 수리 , 사과 )Example Procedural justice ( 과정적 정의 ) 책임성 있는 반응 , 반응의 속도 , 편의성 , 융통성 등 (e.g How serious effort of service recovery?) Interactional justice ( 상호작용적 정의 ) 정직성 , 태도 , 예의 , 정보제공 (e.g communication, information exchange) A customer purchased a coat from the DS Later a person realized that something wrong with the sewing She went back to the DS and explained what seems to be the problem A shop assistant explained how/why such a thing can happen to the customer politely ( ) The shop assistant proposed that, In order to straighten things out, it can either be quick fixed or if the customer wishes, he can get a brand new one for her ( ) The customer does not need a new coat right away, so she decided to get a brand new one ( ) DS=Department Store 26 Application The connectivity between marketing strategy and consumer behavior can be illustrated as following Marketing strategy vs Consumer behavior Model of Consumer Behavior Marketing Strategy Cultural Social Personal Psychological S T P Need recognition Pre-purchase Activity Seeking New Customers Information Search Evaluation of Alternatives Purchase Decision Post-purchase Activity Customer Retention Postpurchase Behavior 27 ...What is ? ?Consumer Buyer Behavior? ??? Consumer Buyer Behavior Consumer Buyer Behavior: The buying behavior of final consumers- individuals and households who buy goods and services for personal... model of consumer buyer behavior Understand the major factors that influence consumer buyer behavior Understand the different stages of the buyer decision process Factors Affecting Buyer Behavior. .. understand consumer behavior, we need to understand how consumers perceive, learn, and make decisions to satisfy their needs and wants Model: Stimulus-Response of Buyer Behavior Key Question How consumers