L4 Marketing management - consumer behavior

In marketing we look at consumers in different ways:

- B2C (Business to consumer)

- B2B (Business to business)

- P2P/C2C (customer to customer) - shading service, not organization

Why are the customer important?

They provide profits that businesses need to survive.

Consumer behavior = How:

- Consumer make decisions:

- How consumers uses and disposes their goods:

Key aspect of consumer behavior is value received form purchases

Value is their personal assessment of the net worth obtained. When purchasing consumer consider the value a product creates for them that engage them in value perception and responding to value proposition.

There are 3 types of personal values:

- Perceived value

- Utilitarian value

- Hedonic value

Perceived value

The value consumer expects from a purchase and is reason how products are purchased. Consumer decide the perceived value of a product and decide whether it's utilitarian or hedonic value.

Utilitarian value

Value from a product that can solve problems and accomplish tasks, the usefulness and features of a product. These are effective, helpful, functional, necessary and practical e.g. pen, car, glasses that solve eye problems.

Hedonic value

Value a customer receives from a product because it's fun, exciting, enjoyable, thrilling and doesn't solve a problem, it's more about a want just because e.g. computers, clothes, sports car.

The traditional consumer decision making process consists of 5 steps

1. Need recognition

2. Information search

3. Evaluation of alternatives

4. Purchase

5. Postpurchase behavior

1. Need recognition

When consumer is aware of the want-got gap which is difference between what a consumer wants from a product and what they get. Before they look for solution they need to know that there is a problem.

What does the need recognition start with, what is the stimulus and what can drive the consumer to action?

o Starts with a difference between need (something we cannot live without e.g. food) and want (recognize an unfulfilled need and a product to satisfy it).

Marketers do not differentiate

o Stimulus: Any input affecting our senses (sight, smell, taste, touch, hearing) can trigger this recognition.

o Want got gap must be large enough to drive the consumer to action and a marketing manager aims to make consumers recognize this gap.

2. Information search

Consumer seek info to make informed decisions about a product/service where they evaluate, compare which influences their purchasing behavior.

Internal information search

Recalling past info from memory e.g. routine when buying groceries, brands we already know and have bought.

External information search and non market/market controlled:

External information search: Seeking info from outside environment.

- Can be non marketing-controlled: Info not associated with promotion

- Marketed-controlled: Info originating from marketers promoting a product e.g. infouencers, ads.

o Customers seek more information about a product when there

More risk involved

Less knowledge and less product experience

High level of interest

Lack of confidence in the decision taken

3. Evaluating alternatives

•Based on information search, the person weighs and evaluates different alternatives, their evoked set.

E.gö likes, disklikes, price, availability, quality.

Consumers evaluate alternative from an:

Evoked set: Set of brands resulting from search they can choose from. Consumers evaluate and compare these with info gathered from their environment, internal info and external info.

The evoked set includes:

Includes: known brands that can be acceptable, unacceptable, indifferent (whatever brands) and overlooked (don't consider). Also include unknown brands.

Consideration set

alternatives that are considered acceptable for further consideration in decision making.

- Purchaeed brands

- Not purchased brands

4. Purchase stage

Chooses the product or brand to be bought; product availability may influence the decision.

What type of decisions does the consumer make in the purchase stage?

Consumer makes several decisions: Whether to buy, when, what to buy (product type and brand), where to buy (type of retailer, specific retailer, online or in-store) and how to pay.

Purchases can be:

o Partially planned purchase: Made by consumers when they know the product category they want to buy but want until they get to the store or go online.

o Unplanned (impulse): Often driven by emotional connection.

o Psychological ownership:

- Post purchase behavior

Psychological ownership

Developing feeling of ownership without even owning the good, service or brand (endowment effect) e.g. Apple letting us touch, use, see the phone without owning it, gives pain of not owning it.

Post purchase behavior

After purchase consumers experience post-purchase cognitive dissonance: Experience conflicting information about a product or service after making a purchase decision. (Feeling of tension or doubt about if they have done the right decision in buying a product) Arises from inconsistency between behavior, values or opinions.

cognitive dissonance is reduced by:

- Seeking information that strengthens their decisions

- Avoid contradictory information.

- Returning the product

Consumer involvement

How much time, effort and thought a customer puts into choosing a product/service and how much fun they have doing it.

Consumer buying decisions exist on a continuum:

• Routine response making

• Limited decision making

- Extensive decision making

Routine response making

For frequently purchased, low-cost items like groceries or chocolate bars, requiring minimal thought.

- Low involvement

- Short time

- Low cost

- Internal info search

- One alternative

Limited decision making

used when a person buys goods and services that he or she has purchased before but not regularly. For products bought less often, like coffee machines, requiring some research and consideration but less than extensive decisions.

- Low to moderate involvement

- Short to moderate time

- Low to moderate cost

- Mostly internal info search

- Few alternatives

Extensive decision making

the most complex type of consumer decision making, used when buying an unfamiliar, high risk, expensive product or an infrequently bought item; requires use of several criteria for evaluating options and much time for seeking information, comparison.

- High involvement

- Long time

- High cost

- Internal amd external search

- Many alternatives

The level of consumer involvement in the decision-making process is influenced by several factors:

• Previous experience.

• Interest: Higher interest leads to greater involvement.

• Perceived risk of negative consequences: This includes

o Financial risk

o Social risk (what others think)

o Psychological risk (how one feels about themselves), and

• Social visibility (How want to be seen, wanting to display certain brands)

Types of involvement:

• Product involvement: the product is highly relevant.

• Situational involvement: the circumstances of purchase change your behaviour e.g. someone significant comes for dinner... how does it affect your purchases?

• Shopping involvement: the personal relevance of shopping e.g. some people love shopping....

• Enduring involvement: an ongoing interest in some product.

• Emotional involvement: how emotional a consumer gets during a specific consumption activity e.g.sports fans

High and low involvement product for marketers

- High-involvement purchases: Require extensive and informative promotion to the target market e.g. cars and computers.

- Low-involvement purchases: Require in-store promotion, eye-catching package design, coupons, two for one offers and good displays. Products bought routinely e.g. groceries.