UNIT IV -BUYER BEHAVIOUR

Understanding Industrial and Consumer Buyer Behavior − Influencing factors – Buyer

Behaviour Models – Online buyer behaviour − Building and measuring customer satisfaction
– Customer relationships management – Customer acquisition, Retaining, Defection −
Creating Long Term Loyalty Relationships
According to Solomon, “Consumer behaviour is the process involved when individuals or
groups select, purchase, use, or dispose of products, services, ideas or experiences to satisfy
needs and wants.”

Essential Steps in the Consumer Buying Process

 Stage 1: Problem Recognition.
 Stage 2: Information Gathering.
 Stage 3: Evaluating Solutions.
 Stage 4: Purchase Phase.
 Stage 5: The Post-Purchase Phase.
Importance of Consumer Buying Behaviour:
 Production Policies.
 Decision Regarding Channels of Distribution.
 Decision Regarding Sales Promotion.
 Exploiting Marketing Opportunities.
 Consumers do not always act or react predictability.
 Consumer preferences are changing and becoming Highly Diversified.
 Rapid Introduction of New Products.
 Implementing the “Marketing Concept”.

Introduction to Industrial Markets:

According to Philip Kotler, “The industrial market consists of all the organizations that acquire
goods and services that are sold, rented or supplied to others.”
Characteristics of Industrial Markets:
o Market Structure and Demand:
 Geographical Concentration:
 Fewer, larger buyers.
 Vertical or Horizontal Markets.
 Derived Demand.
 Inelastic demand.
 Fluctuating Demand.
o Buyer Characteristics:
 Group Involvement.
 Professional Purchasing / Technical Knowledge.
 Rational Motivation.
o Decision Process and Buying Patterns
Factors Influencing Consumer Behavior

 Psychological Factors
 Social Factors
 Cultural Factors
 Personal Factors
 Economic Factors

1. Psychological Factors
These factors are difficult to measure but are powerful enough to influence a buying decision.
Some of the important psychological factors are:
i. Motivation
When a person is motivated enough, it influences the buying behavior of the
person.
ii. Perception
Consumer perception is a major factor that influences consumer behavior.
Customer perception is a process where a customer collects information about a product
and interprets the information to make a meaningful image of a particular product. When
a customer sees advertisements, promotions, customer reviews, social media feedback,
etc. relating to a product, they develop an impression about the product. Hence consumer
perception becomes a great influence on the buying decision of consumers.
iii. Learning
A consumer’s learning depends on skills and knowledge. While skill can be
gained through practice, knowledge can be acquired only through experience.
2. Social Factors
Humans are social beings and they live around many people who influence their buying
behavior. Humans try to imitate other humans and also wish to be socially accepted in the
society. Hence their buying behavior is influenced by other people around them. These factors
are considered as social factors. Some of the social factors are:
i. Family
Family plays a significant role in shaping the buying behavior of a person. A
person develops preferences from his childhood by watching family buy products and
continues to buy the same products even when they grow up.
ii. Reference Groups
A reference group is a group of people with whom a person associates himself.
Generally, all the people in the reference group have common buying behavior and
influence each other.
iii. Roles and status
A person is influenced by the role that he holds in the society. If a person is in a
high position, his buying behavior will be influenced largely by his status. A person who
is a Chief Executive Officer in a company will buy according to his status while a staff or
an employee of the same company will have different buying pattern.
3. Cultural factors
A group of people is associated with a set of values and ideologies that belong to a particular
community. When a person comes from a particular community, his/her behavior is highly
influenced by the culture relating to that particular community. Some of the cultural factors are:
4. Personal Factors
Factors that are personal to the consumers influence their buying behavior. These personal
factors differ from person to person, thereby producing different perceptions and consumer
behavior.
Some of the personal factors are:
i. Age
Age is a major factor that influences buying behavior. The buying choices of
youth differ from that of middle-aged people. Elderly people have a totally different
buying behavior. Teenagers will be more interested in buying colorful clothes and beauty
products. Middle-aged are focused on house, property and vehicle for the family.
ii. Occupation
Occupation of a consumer influences the buying behavior. A person tends to buy
things that are appropriate to this/her profession.
For example, a doctor would buy clothes according to this profession while a
professor will have different buying pattern.
iii. Lifestyle
Lifestyle is an attitude, and a way in which an individual stay in the society. The
buying behavior is highly influenced by the lifestyle of a consumer.
For example when a consumer leads a healthy lifestyle, then the products he buys
will relate to healthy alternatives to junk food.
5. Economic Factors
The consumer buying habits and decisions greatly depend on the economic situation of a country
or a market. When a nation is prosperous, the economy is strong, which leads to the greater
money supply in the market and higher purchasing power for consumers.
Economic factors bear a significant influence on the buying decision of a consumer. Some of the
important economic factors are:
i. Personal Income
When a person has a higher disposable income, the purchasing power increases
simultaneously. Disposable income refers to the money that is left after spending towards
the basic needs of a person.
ii. Family Income
Family income is the total income from all the members of a family. When more
people are earning in the family, there is more income available for shopping basic needs
and luxuries. Higher family income influences the people in the family to buy more.
When there is a surplus income available for the family, the tendency is to buy more
luxury items which otherwise a person might not have been able to buy.
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Customer Retention:
Customer Retention marketing is a tactically-driven approach based on customer behavior. It's
the core activity going on behind the scenes in Relationship Marketing, Loyalty Marketing,
Database Marketing, Permission Marketing, and so forth.

Here’s the basic philosophy of a retention-oriented marketer:

1. Past and Current customer behavior is the best predictor of Future customer behavior.
Think about it
 2. Active customers are happy (retained) customers; and they like to "win."
3. Retention Marketing is all about: Action – Reaction – Feedback – Repeat
4. Retention Marketing requires allocating marketing resources.
Seven Determinants Of Customer Retention:
1. Customer expectations versus the delivered quality of the prod¬uct or service
2. Value
3. Product uniqueness and suitability
4. Loyalty mechanisms
5. Ease of purchase
6. Customer service
7. Ease of exit (lock-out provisions

CUSTOMER EXPECTATIONS VERSUS DELIVERED QUALITY:

Customers do not simply evaluate a product or service on its own merits.
They evaluate it relative to their expectations. This is a crucial issue, because
through its market communications a firm sets customer expectations.
When customer expectations are too high (though this can generate initial
trial) and the delivered product does not meet those expectations, the customer
will not repeat-purchase.
Thus a critical factor in determining retention is the difference between the
customer's expectations and the delivered quality of the product or service.
VALUE :
Here, we define value as quality divided by price. A firm can provide
greater value either by offering higher quality and matching the competition on
price or by offering the same quality at a lower price.
PRODUCT UNIQUENESS AND SUITABILITY:
The more different (or less substitutable) a product is, the greater the
retention rate. When a customer has access to almost identical products or
services, the probability of purchasing any particular one decreases significantly.
In addition, it is critical that products remain relevant to customers. Just as the use
of "acquisition products" is important in obtaining new customer assets, so too
companies should ensure that their product portfolios contain "retention"
offerings that customers can trade up to as they proceed through their life cycles.
LOYALTY MECHANISMS

Loyalty mechanisms can generate high retention rates even when

competing products or services are almost identical.
For example The airlines have used frequent-flyer programs to generate
high degrees of loyalty even though their services are very similar.
 EASE OF PURCHASE:
Some products and services are very difficult to find or purchase, which
hurts retention.
For example, a customer will not regularly buy a specialty brand of
stocking if it is not widely available, even if the product is highly differentiated.
Ease of purchase is not only a consideration for retail companies; manufacturers
of specialty industrial components also need to make sure that their products are
easily available to buyers.
CUSTOMER SERVICE:
Clearly, customer service is an important factor in customer retention. In
some recent studies, customer service was the most important determinant of
whether or not a customer would defect from a firm.
But defining customer service is not as easy for a company to do as it may
seem. Customer service has many components, and many parts of an organization
provide it.
Customer service opportunities are pervasive in any organization. The
issue becomes how best to manage the process. Some companies have customer
service representatives who are responsible for handling all customer problems.
Other companies decentralize the process.
For the customer equity-oriented manager, evaluating the range of service
options comes down to three questions:
• What customers will this service approach retain, and for how long?
• What is the potential asset value of those customers?
• Does the retention equity created exceed the service cost?

EASE OF EXIT:
Exit barriers offer one strategy for increasing retention. Examples of these
barriers include programs that reward continued use based on historical usage;
product-design characteristics that make it difficult to change suppliers; and
product-learning curves that make it costly to switch to competing products.

How to Build Customer Loyalty:

Customer loyalty is among the most important problems faced by an organization.
Ultimately, it is not rocket science to retain loyal customers. However, it does involve
implementing the following steps to help build customer loyalty and retain customers.
Customer Service:
According to industry estimates, companies lose nearly 50% of their
customer base over a five year period. The single most important reason for
 customers switching vendors is dissatisfaction with the customer service. Today,
customers want more than just service. They want quick resolution of the problem
and an enhanced support experience. Customer service needs to be customized
according to the customer’s unique needs to ensure complete satisfaction.
Business should provide “true” customer service. Criticism surrounding customer
service and the lack thereof is easy to find. The focus should be on providing
creative, personalized service to differentiate your offerings in an ever
increasingly crowded market.

Product Knowledge:
Customers often look to customer service representatives (CSRs) for
product suggestions, especially when making online purchases. CSR suggestions
often increase the level of confidence the customer has about the company. The
greater the CSRs product knowledge, the greater the customer’s level of respect
and confidence in the firm. To ensure a high level of customer confidence, there
should be regular training of the CSR staff on new products and modifications or
enhancements to existing products. Your customer should be confident in
receiving satisfactory answers when communicating with support staff. Once this
occurs, you can be assured of repeat visits by the customer—which translates into
increased first time sales and up-sell/cross-sell opportunities.

WHY CUSTOMER RETENTION PREFERRED?

• Customer retention is the process of keeping customers in the customer inventory for an ending
period by meeting the needs and exceeding the expectations of those customers.
• It is approach of converting a casual customer into committed loyal customers.
• Customers come in a fold of an organization in following ways:

• Customer by chance. • Customer by occasion. • Customer by choice. • Customer by repetition.

• Customer by loyalty. • They makes every effort to convert a customer by chance into customer
into loyalty.
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Acquisition:
• Acquisition refers the process of attracting the new customers, making them initial purchase
and trying to incur gain for its investment on acquiring the new customers.

Definition
Customer acquisition is a process of gaining new customers through marketing and sales
efforts. It involves identifying the target market and prospects, designing marketing and sales
campaigns and implementation of the same to increase the customer base.
PROCESS OF ACQUISITION:
The acquisition process constitutes the following stages:
 Enquiry: The prospective buyer undertakes a detailed enquiry
with regard to several aspects pertaining to the organization,
product, nature of transaction and all other related aspects.
 Interaction: Where the customer interacts with the organization
and obtains additional information, clarifies and ensures already
collected information
 Exchange: - Terms of exchange, mode of delivery and other things
related to exchange are settled at the exchange stage.
 Co-ordination: - Further coordinated effort on either side would
lead customers to…
 Adoption: - Moving adoption of the product or service concerned
and that completes the acquisition process.

REQUISITES FOR EFFECTIVE ACQUISITION:

 Focused Approach: (knowers , preferers, indifferent, rejecters).
 Providing a win-win platform.
 Initiate Forum For Communication.

Influencing Factors:
The acquisition process is influenced by:

• Type of buying.
• Type of product.
• Type of customers.
• Economic Environment.
• Contextual Operations Definition- Customer retention
• Customer retention is the forging of a relationship with an existing customer that will lead to
continuous, on-going business.
• It is about employing strategies and programs that lead to optimal realization of customer
lifetime value (e.g.; value of a customer to a business over lifetime of the interaction).

WHY DO COMPANIES MEASURE CONSUMER SATISFACTION?

Measuring consumer satisfaction is a means of determine how well a product or service is
meeting customer expectations & organizational objectives. • It is to communicate “we care”
message to customers. • Customer satisfaction is often measured by surveying customers and by
recording certain objective measures of operational activity.
What is a consumer behavior model?
 A consumer behavior model is a theoretical framework for explaining why and
how customers make purchasing decisions.
 The goal of consumer behavior models is to outline a predictable map of customer
decisions up until conversion, thus helping you steer every stage of the buyer’s
journey.
 Businesses aim to understand buyer behavior through customer behavior analysis,
which involves the qualitative and quantitative analysis of a target market. Even
though this data can tell you your customer’s favorite brand of socks, it doesn’t
mean much if it doesn’t tell you why they purchased that brand of socks.
 That’s where consumer behavior models come in. Consumer behavior models
contextualize results from customer behavior analysis studies and help you get to
the “why” of purchasing decisions.

Consumer Behavior Models

Customer behavior models help you understand your unique customer base
and more effectively attract, engage, and retain them. These models are either
traditional or contemporary.

Traditional Behavior Models

Traditional behavior models were developed by economists hoping to
understand what customers purchase based on their wants and needs.
Traditional models include the following:
 Learning Model
 Psychoanalytical Model
 Sociological Model
 Economic Model

Learning Model of Consumer Behavior

 Buyers are driven to satisfy basic needs for survival and needs learned from lived
experience.
 The needs of a customer decide whether he will buy a product or not.
  If he requires food, then he will not purchase clothes or postpones the idea of
buying clothes at that point of time or will buy it later when his/her pocket allows

them to buy.

Psychoanalytical Model

 This model considers the fact that consumer behaviour is affected by both the conscious
and unconscious mind.
 The three levels of consciousness explained by Sigmund Freud are (id, ego and
superego).
o In which id is an individual’s identity with which he/she is born with,
o superego is formed out of values,
o ego acts as a balance between id and superego.
Example: In today’s market, there are numbers of fake products which are a true copy
of the original brand. Suppose there is a true copy of ABC brand in the market,
almost everything is same, packaging, colour, picture, only a little or slightly change
in the logo or spelling of the name of the product. But customer’s unconscious mind
believes that the product is a real one, even if it is fake and they buy it. It may be
because of their unawareness about the product or maybe the customer is in a hurry.

Sociological Model
 The Sociological Model of consumer behavior says that purchases are influenced by an
individual's place within different societal groups: family, friends, and workgroups, as
well as less-defined groups like Millennials or people who like yoga.
 An individual will essentially purchase items based on what is appropriate or typical of
the groups they’re in.
 For Example, C-Suite executives are expected to be professional and formal. People who
hold these jobs will make purchases that speak to and uphold this group’s rules, like
formal business wear.

Economic Model
This model focuses on the “act of purchase” of “Average consumer” and describe what a
 buyer would buy and “In what quantity”. Consumer try to satisfy their needs by spending
the resources(money)

Contemporary Models
Contemporary models of consumer behavior focus on rational and deliberate decision-
making processes rather than emotions or unconscious desires. The contemporary models
include:
 Engel-Kollat-Blackwell (EKB) Model
 Black Box Model
 Hawkins Stern Model
 Howard Sheth Model
 Nicosia Model

Engel-Kollat-Blackwell (EKB) Model of Consumer Behavior

EKB says that consumers make decisions based on influencing factors that they assess
through rational insight.
The Engel-Kollat-Blackwell model of consumer behavior outlines a five-stage decision
process that consumers go through before purchasing a product or service.

 Awareness: During this stage, consumers view advertisements from a

business and become aware of their need, desire, or interest, to

purchase what they've just discovered.
 Information Processing: After discovering a product or service, a

consumer begins to think about how the product or service relates to

their past experiences or needs and whether it will fulfill any current
needs.
 Evaluation: At this point, consumers will research the product they’ve

discovered and research options from competitors to see if there is a

better option or if the original product is the best fit.
 Purchasing Decision: A consumer will follow through with a purchase

for the product that has beat out competitors to provide value. A
consumer may also stop the process if they change their mind.
 Outcome Analysis: After making a purchase, a customer will use what

they’ve bought and assess whether their experience is positive or

negative. After a trial period, they’ll keep a product and maybe decide
 to become repeat customers or express dissatisfaction and return to
stage three.

Black Box Model of Consumer Behavior

The Black Box model, sometimes called the Stimulus-Response model, says that
customers areindividual thinkers that process internal and external stimuli to make
purchase decisions.

Hawkins Stern Impulse Buying Model

The Impulse Buying theory is an alternative to the Learning Model and EKB, as it claims
that purchases aren’t always a result of rational thought. When we think of impulse buying, we
typically imagine picking up a candy bar or a pack of gum right before checking out.
These are certainly impulse purchases, but Hawkins Stern categorizes them into four
different types:
 Escape Purchase: Sometimes called pure impulse, this involves purchasing an
item that isn’t a routine item or on a shopping list. Consumers are drawn to these
items through appealing visuals.
 Reminder Purchase: A consumer makes a reminder impulse purchase when they
come across a product through in-store setups, promotional offers, or a simple
reminder that a product exists, like a strategically placed ice cream scoop in the
freezer aisle of a grocery store.
 Suggested Purchase: Suggested impulse purchases occur when a consumer is
made aware of a product after a recommendation or suggestion from an in-store
salesperson or online algorithms. For example, seeing an ad that says, “Other
people who bought this shoe you’re about to buy also purchase these socks.” The
consumer didn’t know the socks existed, didn’t plan to buy them, but now the
suggestion has told them that they need them.
 Planned Purchase: Although planned is the opposite of impulse, these purchases
occur when a consumer knows they want a particular product but will only buy it
 if there is a deal involved. An unexpected price drop could lead a customer to
make a planned impulse purchase.
Howard Sheth Model of Buying Behavior
In this model, customers put on a “problem-solving” hat every step of the way — with
different variables influencing the course of the journey.
According to this model, there are three successive levels of decision-making:
 Extensive Problem-Solving: In this stage, customers know nothing about the
product they’re seeking or the brands that are available to them. They’re in active
problem-solving mode to find a suitable product.
 Limited Problem-Solving: Now that customers have more information, they
slow down and begin comparing their choices.
 Habitual Response Behavior: Customers are fully aware of all the choices they
have and know which brands they prefer. Thus, every time they make a purchase,
they know where to go.
Nicosia Model
The model is comprised of four “fields”:
 One: The business’ characteristics and the customer’s characteristics. What
does your marketing messaging look like? And what’s your customer’s perception
of that messaging? Are they predisposed to be receptive to your message? The
latter is shaped by the customer’s personality traits and experiences.
 Two: Search and evaluation. Similar to the Howard Sheth model’s “limited
problem-solving” stage, the customer begins to compare different brands here
based on the company’s messaging.
 Three: Purchase decision. The purchase decision will occur after the company
convinces the customer to choose them as their retailer or provider.
 Four: Feedback. During the feedback field, the company will determine whether
it should continue using the same messaging, and the customer will decide
whether they will continue to be receptive to future messages