Unit 1 - RM
Unit 1 - RM
CONSUMER BEHAVIOUR:
Introduction:
The study of consumer behavior assumes that the consumers are actors in the
marketplace. The perspective of role theory assumes that consumers play various roles in
the marketplace. Starting from the information provider, from the user to the payer and to
the disposer, consumers play these roles in the decision process.
The roles also vary in different consumption situations; for example, a mother plays
the role of an influencer in a child’s purchase process, whereas she plays the role of a
disposer for the products consumed by the family.
1. According to Engel, Blackwell, and Mansard, ‘consumer behaviour is the actions and
decision processes of people who purchase goods and services for personal
consumption’.
2. According to Louden and Bitta, ‘consumer behaviour is the decision process and
physical activity, which individuals engage in when evaluating, acquiring, using or
disposing of goods and services’.
3. Varies from consumer to consumer: All consumers do not behave in the same manner.
Different consumers behave differently. The differences in consumer behaviour are due to
individual factors such as the nature of the consumers, lifestyle and culture. For example,
some consumers are technoholics. They go on a shopping and spend beyond their means.
They borrow money from friends, relatives, banks, and at times even adopt unethical
means to spend on shopping of advance technologies. But there are other consumers who,
despite having surplus money, do not go even for the regular purchases and avoid use and
purchase of advance technologies.
4. Varies from region to region and country to county: The consumer behaviour varies
across states, regions and countries. For example, the behaviour of the urban consumers is
different from that of the rural consumers. A good number of rural consumers are
conservative in their buying behaviours.
The rich rural consumers may think twice to spend on luxuries despite having
sufficient funds, whereas the urban consumers may even take bank loans to buy luxury
items such as cars and household appliances. The consumer behaviour may also vary across
the states, regions and countries. It may differ depending on the upbringing, lifestyles and
level of development.
The knowledge of consumer behaviour enables them to take appropriate marketing decisions
in respect of the following factors:
a. Product design/model
b. Pricing of the product
c. Promotion of the product
d. Packaging
e. Positioning
f. Place of distribution
6. Leads to purchase decision: A positive consumer behaviour leads to a purchase decision.
A consumer may take the decision of buying a product on the basis of different buying
motives. The purchase decision leads to higher demand, and the sales of the marketers
increase. Therefore, marketers need to influence consumer behaviour to increase their
purchases.
7. Varies from product to product: Consumer behaviour is different for different products.
There are some consumers who may buy more quantity of certain items and very low or no
quantity of other items. For example, teenagers may spend heavily on products such as cell
phones and branded wears for snob appeal, but may not spend on general and academic
reading. A middle- aged person may spend less on clothing, but may invest money in savings,
insurance schemes, pension schemes, and soon.
8. Improves standard of living: The buying behaviour of the consumers may lead to higher
standard of living. The more a person buys the goods and services, the higher is the
standard of living. But if a person spends less on goods and services, despite having a good
income, they deprive themselves of higher standard of living.
9. Reflects status: The consumer behaviour is not only influenced by the status of a
consumer, but it also reflects it. The consumers who own luxury cars, watches and other
items are considered belonging to a higher status. The luxury items also give a sense of pride
to the owners.
3. Useful for Dealers and Salesmen: The study of consumer behaviour is not useful for the
company alone. Knowledge of consumer behaviour is equally useful for middlemen and
salesmen to perform their tasks effectively in meeting consumers needs and wants
successfully. Consumer behaviour, thus, improves performance of the entire distribution
system.
5. Adjusting Marketing Programme over Time: Consumer behaviour studies the consumer
response pattern on a continuous basis. So, a marketer can easily come to know the
changes taking place in the market. Based on the current market trend, the marketer can
make necessary changes in marketing programme to adjust with the market.
6. Predicting Market Trend: Consumer behaviour can also aid in projecting the future
market trends. Marketer finds enough time to prepare for exploiting the emerging
opportunities, and/or facing challenges and threats.
12. Effective Use of Productive Resources: The study of consumer behaviour assists the
manager to make the organisational efforts consumer-oriented. It ensures an exact use of
resources for achieving maximum efficiency. Each unit of resources can contribute
maximum to objectives.
It is to be mentioned that the study of consumer behavior is not only important for
the current sales, but also helps in capturing the future market. Consumer behavior
assumes: Take care of consumer needs, the consumers, in return, will take care of your
needs. Most of problems can be reasonably solved by the study of consumer behavior.
Modern marketing practice is almost impossible without the study of consumer behavior.
A well-organized customer research process produces valid, accurate, reliable, timely and
complete results. Carefully gathered research results that reflect your customers' opinions
and needs will help you sales and improve your operations.
To get the results you need, set and follow recognized customer research processes.
Choose a simple structure to record your data - for example, a table that allows you to list
survey questions vertically in your table and record your responses as numbers categorized
by age, gender, income, or other factors that are important to you.
choose a few strategies that will help you improve your business
act on your strategies
look for gaps in your information, and consider further research if necessary
Plan to review your research outcomes, and consider how effective your strategies
have been.
Consumer behaviour in a world of economic instability:
The financial instruments were too complex and twisted which caused distrust in the
global financial system. The crisis caused inflation and fluctuations in the prices of
commodities, and hence, consumers started to take a shifted action towards their needs
and wants. The psychological outcomes of the crash has extended worldwide as businesses
became receptive to the obstacles caused by this crisis especially regarding expansion of
their current projects and securing capital market investments for future growth. The
uncertainty that surrounded businesses have naturally affected job security for employees,
consumers has faced uncertainty regarding their income, and the consumption level
dropped. The sharp fall in the stock market has caused many distressful events such as,
reduction in credit, bank failures, dismissal of workers, contraction in the money supply and
closing down businesses. The new financial circumstances increased panic and uncertainty
among consumers.
Many consumers around the world had fears related to their financial and material
safety. Besides reduced employment earnings, many household lost their lifetime savings
due to failure in the banking system or sharp decline in the values of their houses and
stocks. The social impacts of the financial crisis can be seen more obvious in the developing
countries where the poor are being severely hurt during the crisis as demand for their
labour falls, prices of essential commodities rise substantially and social services are cut.
They find themselves forced to pull children out of schools and the food is being rationed
among the family, with women the first to sacrifice their share.
The data was analyzed using SPSS package to test the hypotheses. In order to
investigate the existence of the statistical significance between the variables in the
hypothesis, we are going to apply the One Sample T-test method. However, the paper
approaches some difficulties that faced consumers after the financial crisis and tries to
suggest some solutions. One of the most important problems that consumers are suffering
from is the accelerated prices of basic commodities such as food and housing. In order to
form a clear framework and address the objectives of this research, the research can be
divided into seven sections.
Consumer segmentation:
Definition for segmentation: Segmentation means to divide the marketplace into parts, or
segments, which are definable, accessible, actionable, and profitable and have a growth
potential. In other words, a company would find it impossible to target the entire market,
because of time, cost and effort restrictions. It needs to have a 'definable' segment - a mass
of people who can be identified and targeted with reasonable effort, cost and time.
Once such a mass is identified, it has to be checked that this mass can actually be targeted
with the resources at hand, or the segment should be accessible to the company. Beyond
this, will the segment respond to marketing actions by the company (ads, prices, schemes,
promos?)
Or, is it actionable by the company? After this check, even though the product and the
target are clear, is it profitable to sell to them? Is the number and value of the segment going
to grow, such that the product also grows in sales and profits?
Consumer segmentation:
Companies employing customer segmentation operate under the fact that every
customer
is different and that their marketing efforts would be better served if they target specific,
smaller groups with messages that those consumers would find relevant and lead them to
buy something. Companies also hope to gain a deeper understanding of their customers'
preferences and needs with the idea of discovering what each segment finds most valuable
to more accurately tailor marketing materials toward that segment.
Segmentation involves finding out what kinds of consumers with different needs
exist. In the auto market, for example, some consumers demand speed and performance,
while others are much more concerned about roominess and safety. In general, it holds true
that “You can’t be all things to all people,” and experience has demonstrated that firms that
specialize in meeting the needs of one group of consumers over another tend to be more
profitable.
Note that segmentation calls for some tough choices. There may be a large number of
variables that can be used to differentiate consumers of a given product category; yet, in
practice, it becomes impossibly cumbersome to work with more than a few at a time. Thus,
we need to determine which variables will be most useful in distinguishing different groups
of consumers. We might thus decide, for example, that the variables that are most relevant
in separating different kinds of soft drink consumers are (1) preference for taste vs. low
calories,
(2) Preference for Cola vs. non-cola taste, (3) price sensitivity—willingness to pay for brand
names; and (4) heavy vs. light consumers. We now put these variables together to arrive at
various combinations.
In the next step, we decide to target one or more segments. Our choice should
generally depend on several factors. First, how well are existing segments served by
other manufacturers? It will be more difficult to appeal to a segment that is already well
served than to one whose needs are not currently being served well. Secondly, how large is
the segment, and how can we expect it to grow? (Note that a downside to a large, rapidly
growing segment is that it tends to attract competition). Thirdly, do we have strengths as a
company that will help us appeal particularly to one group of consumers? Firms may already
have an established reputation.
It is possible using to target very specific customer groups based on magazine
subscriptions, past purchases, and demographic variables. A number of list brokers will sell
lists of names and addresses of homeowners in a particular area (information they get from
county registrars) or the subscribers to various magazines. Firms will often sell lists of their
customers to competitors since it is widely believed in the industry that more catalogs tend
to result more in incremental sales than in losing share in fixed-size pie. One can also buy e-
mail lists, but it is generally not legal to send soliciting e-mails to individuals with which one
does not already have an established business relationship, and these are also likely to be
discarded by "spam" filters. In the "merge-purge" process, lists from several sources are
combined (since none contains every relevant individual by itself), after which duplicates are
removed. Here is an illustration of what could be used by an online merchant of surf gear
seeking to find additional potential customers:
Positioning involves implementing our targeting. For example, Apple Computer has
chosen to position itself as a maker of user-friendly computers. Thus, Apple has done a lot
through its advertising to promote itself, through its unintimidating icons, as a computer for
“non-geeks.” The Visual C software programming language, in contrast, is aimed a “techies.”
Michael Treacy and Fred Wiersema suggested in their 1993 book The Discipline of Market
Leaders that most successful firms fall into one of three categories:
Treacy and Wiersema suggest that in addition to excelling on one of the three value
dimensions, firms must meet acceptable levels on the other two. Wal-Mart, for example,
does maintain some level of customer service. Nordstrom’s and Intel both must meet some
standards of cost effectiveness. The emphasis, beyond meeting the minimum required level
in the two other dimensions, is on the dimension of strength.
Repositioning involves an attempt to change consumer perceptions of a brand, usually
because the existing position that the brand holds has become less attractive. Sears, for
example, attempted to reposition itself from a place that offered great sales but
unattractive prices the rest of the time to a store that consistently offered “everyday low
prices.” Repositioning in practice is very difficult to accomplish. A great deal of money is
often needed for advertising and other promotional efforts, and in many cases, the
repositioning fails.
To effectively attempt repositioning, it is important to understand how one’s brand
and those of competitors are perceived. One approach to identifying consumer product
perceptions is multidimensional scaling. Here, we identify how products are perceived on
two or more “dimensions,” allowing us to plot brands against each other. It may then be
possible to attempt to “move” one’s brand in a more desirable direction by selectively
promoting certain points. There are two main approaches to multi-dimensional scaling. In
the prior approach, market researchers identify dimensions of interest and then ask
consumers about their perceptions on each dimension for each brand. This is useful when
(1) the market researcher knows which dimensions are of interest and (2) the customer’s
perception on each dimension is relatively clear (as opposed to being “made up” on the spot
to be able to give the researcher a desired answer).
In the similarity rating approach, respondents are not asked about their perceptions of
brands on any specific dimensions. Instead, subjects are asked to rate the extent of
similarity of different pairs of products (e.g., How similar, on a scale of 1-7, is Snicker’s to
Kitkat, and how similar is Toblerone to Three Musketeers?) Using computer algorithms, the
computer then identifies positions of each brand on a map of a given number of
dimensions. The computer does not reveal what each dimension means—that must be left
to human interpretation based on what the variations in each dimension appears to reveal.
This second method is more useful when no specific product dimensions have been
identified as being of particular interest or when it is not clear what the variables of
difference are for the product category.
With high volumes of data created across multiple marketing channels, brands are
challenged to organize and active the right data assets to maximize cross-channel
performance. To better understand your target audience, drive more sales, and reduce
marketing waste, you need to align your brand segmentation with digital activation and
reporting.
You must align the why they purchase with the who that buys (audience
segmentation) to the what (experience) and how (digital activation) so that all your efforts
are on the same page. The key reason for this alignment is to increase efficiencies and
synchronize your efforts so that each element is working in correlation with the other.
Knowing what audience to target determines what marketing initiatives you should use to
engage them, which in turn directs you to the right insights to improve your segmentation.
It’s a cycle that is interrelated and symbiotic.
Segmentation is making sure the right message -> gets to the right buyer ->at the
right time. It’s also a great deal more economically efficient than mass marketing. By
segmenting high-performing users you will increase engagement with current users to drive
more value from your audiences. Aligning your segmentation with the activation strategy is
key.
By targeting the segments which have the highest propensity to engage, you can
develop a more effective marketing strategy that better serves consumer needs and
ultimately boosts conversions.
5 elements of the most effective segments should be
You need to understand the buying behaviors of each segment and develop consumer profile
(via surveys and tracking of data rich websites).
You need to start with a brand DNA study to evaluate the strengths/weaknesses of
the brand
Segment to identify the target groups to focus on
Identify primary and secondary targets
Establish the brand positioning
Activate the target to interact with the brand in a meaningful way
Once you’ve segmented your target audience, you should be looking for the influencers,
brand ambassadors, evangelists, and advocates. Using these individuals or groups, you can
maximize the efficiency of brand activation and increase response rates.
Making use your CRM and third-party data sources, you can segment your audiences
and help plan activation. By identifying your best customers, you can focus on the best
media to reach them and the best message to engage them.
When you’re planning your marketing activities you have to keep segmentation in
mind so you can determine which elements to include in your marketing mix. The right mix
of marketing activities and vehicles is closely linked to the behaviors of the target audience.
Once you’ve figured out segmentation, you can align it with activation. Brand
activation involves bringing a brand to life in the marketplace. It’s about delivering brand
Growth by using all channel opportunities to connect with consumers and deepen their
experiences/relationships with your brand. You need to:
Your competitive edge depends on you finding the right audience for your
products/services, and then getting the right message to them.
Segmentation is the tool to help achieve this, but unless it is targeted with the right
marketing mix, you are wasting efficiency and cutting into your margins. The vast store of
data you have must be used to determine both who to talk to and how to reach them
effectively to drive engagement. Once you have aligned segmentation to optimization, and
tacked on equally effective reporting to gain insights, then you finally have the knowledge
you need to consistently optimize conversions.
Rural Marketing:
Introduction:
The emergence of rural markets as highly untapped potential emphasizes the need
to explore them. Marketers over the past few decades, with innovative approaches, have
attempted to understand and tap rural markets. Some of their efforts paid off and many
markets still an enigma. Rural marketing is an evolving concept, and as a part of any
economy, has untapped potential; marketers have realized the opportunity recently.
Improvement in infrastructure and reach, promise a bright future for those intending to go
rural. Rural consumers are keen on branded goods nowadays, so the market size for
products and services seems to have burgeoned.
The rural population has shown a trend of moving to a state of gradual urbanization
in terms of exposure, habits, lifestyles, and lastly, consumption patterns of goods and
services. So, there are dangers on concentrating more on the rural customers. Reducing the
product features in order to lower prices is a dangerous game to play. Rural buyers like to
follow the urban pattern of living. Astonishingly, as per the census report 2003-04, there are
total 638365 villages in India in which nearly 70% of total population resides; out of them 35
% villages have more than 1000population.
Rural per capita consumption expenditure grew by 11.5 per cent while the urban
expenditure grew by 9.6 per cent. There is a tremendous potential for consumer durables
like two-
Wheelers, small cars, television sets, refrigerators, air-conditioners and household
appliances in rural India.
Definitions:
“Rural marketing is a process of developing, pricing, promoting, and distributing rural
specific goods and services leading to desired exchange with rural customers to satisfy their
needs and wants, and also to achieve organizational objectives.”