Module 7: Analyzing Customer Markets

The following are discussed in this module:

• What Influences Consumer Behavior?
• Key Psychological Processes
• The Buying Decision Process: The Five-Stage Model
• Behavioral Decision Theory and Behavioral Economics
What Influences Consumer Behavior?
Consumer behavior is the study of how individuals, groups, and organizations select, buy, use, and
dispose of goods, services, ideas, or experiences to satisfy their needs and wants.
Cultural Factors
• Culture is the fundamental determinant of a person’s wants and behavior.
• Subcultures provide more specific identification and socialization for their members. Subcultures
include nationalities, religions, racial groups, and geographic regions.
• Social classes, exhibit social stratification, most often in the form of homogeneous and enduring
divisions in a society, hierarchically ordered and with members who share similar values, interests,
and behavior.
Social Factors
• Reference Groups A person’s reference groups are all the groups that have a direct (face-to-face) or
indirect influence on their attitudes or behavior. Groups having a direct influence are called membership
groups. Some of these are;
• Primary groups with whom the person interacts fairly continuously and informally, such as
family, friends, neighbors, and coworkers.
• Secondary groups, such as religious, professional, and trade-union groups, which tend to
be more formal and require less continuous interaction.
• Aspirational groups are those a person hopes to join or be similar to.
• Dissociative groups are those whose values or behavior an individual reject.
• Cliques Communication researchers propose a social-structure view of interpersonal communication.
Clique members are similar, and their closeness facilitates effective communication but also insulates
the clique from new ideas.
• Family The family is the most important consumer buying organization in society, and family members
constitute the most influential primary reference group. There are two families in the buyer’s life. The
family of orientation consists of parents and siblings. A more direct influence on everyday buying behavior
is the family of procreation—namely, the person’s spouse and children.
• Roles and Status, each participated in many groups—family, clubs, organizations—and these are often
an important source of information that helps to define norms for behavior. A role consists of the activities
a person is expected to perform. Each role in turn connotes a status.
Personal Factors
Personal characteristics that influence a buyer’s decision include age and stage in the life cycle,
occupation and economic circumstances, personality and self-concept, and lifestyle and values.
• Age and Stage in the Life Cycle Our taste in food, clothes, furniture, and recreation is often related to
our age. Consumption is also shaped by the family life cycle and the number, age, and gender of people
in the household at any point in time. In addition, psychological life-cycle stages may matter. Adults
experience certain passages or transformations as they go through life. Marketers should also consider
critical life events or transitions—marriage, childbirth, illness, relocation, divorce, first job, career change,
retirement, death of a spouse—as giving rise to new needs.
• Occupation and Economic Circumstances Occupation also influences consumption patterns.
Marketers try to identify the occupational groups that have above-average interest in their products and
services.
• Personality and Self-Concept By personality, we mean a set of distinguishing human psychological
traits that lead to relatively consistent and enduring responses to environmental stimuli including buying
behavior. Brands also have personalities, and consumers are likely to choose brands whose
personalities match their own. We define brand personality as the specific mix of human traits that we
can attribute to a particular brand.
• Lifestyle and Values People from the same subculture, social class, and occupation may adopt quite
different lifestyles. A lifestyle is a person’s pattern of living in the world as expressed in activities,
interests, and opinions. Consumers who experience time famine are prone to multitasking, doing two or
more things at the same time. They will also pay others to perform tasks because time is more important
to them than money. Consumer decisions are also influenced by core values, the belief systems that
underlie attitudes and behaviors.

Key Psychological Processes

Marketing and environmental stimuli enter the consumer’s consciousness, and a set of psychological
processes combine with certain consumer characteristics to result in decision processes and purchase
decisions.
Motivation
We all have many needs at any given time. Some of which are biogenic; they arise from physiological
states of tension such as hunger, thirst, or discomfort. Other needs are psychogenic; they arise from
psychological states of tension such as the need for recognition, esteem, or belonging.
Three of the best-known theories of human motivation carry quite different implications for consumer
analysis and marketing strategy.
• Sigmund Freud assumed the psychological forces shaping people’s behavior are largely unconscious
and that a person cannot fully understand his or her own motivations.
• Abraham Maslow sought to explain why people are driven by particular needs at particular times. His
answer is that human needs are arranged in a hierarchy from most to least pressing—from
physiological needs to safety needs, social needs, esteem needs, and self-actualization needs.
• Frederick Herzberg developed a two-factor theory that distinguishes dissatisfiers (factors that cause
dissatisfaction) from satisfiers (factors that cause satisfaction).
Perception
Perception is the process by which we select, organize, and interpret information inputs to create a
meaningful picture of the world. Classifications are:
• Selective Attention is the allocation of processing capacity to some stimulus.
• Selective Distortion the tendency to interpret information in a way that fits our preconceptions.
• Selective Retention likely to remember good points about a product we like and forget good points
about competing products.
• Subliminal Perception has long fascinated armchair marketers, who argue that marketers embed
covert, subliminal messages in ads or packaging.
Learning
When we act, we learn. Learning induces changes in our behavior arising from experience. Most
human behavior is learned, though much learning is incidental. Learning theorists believe learning is
produced through the interplay of drives, stimuli, cues, responses, and reinforcement.
Emotions
 Consumer response is not all cognitive and rational; much may be emotional and invoke different
kinds of feelings. A brand or product may make a consumer feel proud, excited, or confident. Emotions can
take all forms.
Memory
Cognitive psychologists distinguish between short-term memory (STM)—a temporary and limited
repository of information—and long-term memory (LTM)—a more permanent, essentially unlimited
repository. All the information and experiences we encounter as we go through life can end up in our long-
term memory.
• Memory Processes, a very constructive process because we don’t remember information and events
completely and accurately. Memory encoding describes how and where information gets into
memory.
• Memory retrieval is the way information gets out of memory. Three facts are important about memory
retrieval.
1. The presence of other product information in memory can produce interference effects and cause
us to either overlook or confuse new data.
2. The time between exposure to information and encoding has been shown generally to produce
only gradual decay.
3. Information may be available in memory but not be accessible for recall without the proper
retrieval cues or reminders.

The Buying Decision Process: The Five-Stage Model

The basic psychological processes we’ve reviewed play an important role in consumers’ actual
buying decisions. Understanding Consumer Behavior provides a list of some key consumer behavior
questions marketers should ask in terms of who, what, when, where, how, and why.
Problem Recognition
The buying process starts when the buyer recognizes a problem or need triggered by internal or
external stimuli. Marketers need to identify the circumstances that trigger a particular need by gathering
information from a number of consumers.
Information Search
Surprisingly, consumers often search for only limited information. We can distinguish between two
levels of engagement in the search. The milder search state is called heightened attention. At this level a
person simply becomes more receptive to information about a product. At the next level, the person may
enter an active information search: looking for reading material, phoning friends, going online, and visiting
stores to learn about the product.
• Information Sources Major information sources to which consumers will turn fall into four groups:
• Personal. Family, friends, neighbors, acquaintances
• Commercial. Advertising, Web sites, e-mails, salespersons, dealers, packaging, displays
• Public. Mass media, social media, consumer-rating organizations
• Experiential. Handling, examining, using the product
• Search Dynamics By gathering information, the consumer learns about competing brands and their
features. Marketers need to identify the hierarchy of attributes that guide consumer decision making in
order to understand different competitive forces and how these various sets get formed. This process
of identifying the hierarchy is called market partitioning.
Evaluation of Alternatives
• Beliefs and Attitudes Through experience and learning, people acquire beliefs and attitudes. These
in turn influence buying behavior. A belief is a descriptive thought that a person holds about
something.
 • Expectancy-Value Model, the consumer arrives at attitudes toward various brands through an
attribute-evaluation procedure, developing a set of beliefs about where each brand stands on each
attribute. The expectancy-value model of attitude formation posits that consumers evaluate products
and services by combining their brand beliefs—the positives and negatives—according to
importance.
Purchase Decision
• Noncompensatory Models of Consumer Choice The expectancy-value model is a compensatory
model, in that perceived good things about a product can help to overcome perceived bad things.
• Intervening Factors The first factor is the attitudes of others. The second factor is unanticipated
situational factors that may erupt to change the purchase intention.
Post purchase Behavior
• Post purchase Satisfaction, is a function of the closeness between expectations and the product’s
perceived performance.
• Post purchase Actions, A satisfied consumer is more likely to purchase the product again and will
also tend to say good things about the brand to others.
• Post purchase Uses and Disposal, Marketers should also monitor how buyers use and dispose of
the product. Consumers may fail to replace some products soon enough because they overestimate
product life.
Moderating Effects on Consumer Decision Making
• Low-involvement Consumer Decision Making The expectancy-value model assumes a high level of
consumer involvement, or engagement and active processing the consumer undertakes in
responding to a marketing stimulus.
• Variety-Seeking Buying Behavior Some buying situations are characterized by low involvement but
significant brand differences. Here consumers often do a lot of brand switching.

Behavioral Decision Theory and Behavioral Economics

Behavioral decision theorists have identified many situations in which consumers make seemingly
irrational choices.
Decision Heuristics
1. The availability heuristic—Consumers base their predictions on the quickness and ease with which
a particular example of an outcome comes to mind.
2. The representativeness heuristic—Consumers base their predictions on how representative or
similar the outcome is to other examples.
3. The anchoring and adjustment heuristic—Consumers arrive at an initial judgment and then adjust
it— sometimes only reluctantly—based on additional information.
Framing
Decision framing is the manner in which choices are presented to and seen by a decision maker.
Marketers can be very clever in framing decisions.

Mental Accounting Researchers have found that consumers use a form of framing called “mental
accounting” when they handle their money.80 Mental accounting describes the way consumers code,
categorize, and evaluate financial outcomes of choices. Mental accounting has many applications to
marketing.