Behaviour and Cognition in Marketing

Consumer behavior

The process we use to select, purchase, use, and dispose of goods, services, ideas, or experiences to satisfy needs and wants

¡  Consumers – end users of products.

¡  Customers – may be end users (individuals) or businesses who need a product to produce or manage their own. 

¡  Buyers – Conventionally understood as a business function.

The consumption decision and the amount of effort expended by consumers varies according to:

Need for information:

                Extended problem-solving versus habitual decision making

Involvement:
Relative importance of perceived consequences of the purchase

Perceived risk:
That level of risk a consumer believes exists regarding the purchase of a specific product from a specific retailer, whether or not that belief is factually correct

DECISION MAKING PROCESS –
 Step 1: PROBLEM RECOGNITION

Occurs when a consumer sees a significant difference between the current and ideal states

Marketers can develop adverts that stimulate problem recognition

• e.g.  Radio ads promoting restaurants are played at lunchtime
• e.g. TV ad showing excitement of owning a new car

DECISION MAKING PROCESS –
 Step 2: INFORMATION SEARCH

Consumers need adequate information to make a reasonable decision

• Consumers search their memory and the environment for information
• Internet search engines, portals, or “shopping robots” are being increasingly relied upon

Behavioral targeting:

• Marketers watch what consumers look for online
• then they deliver ads for those products
• making sure they are placed to catch the consumer’s attention

DECISION MAKING PROCESS –
 Step 3: EVALUATION OF ALTERNATIVES

A consumer identifies a small number of products in which s/he is interested, then narrows choices and compares the pros/cons of each.

Evaluative criteria:

•       Product characteristics consumers use to compare competing value propositions

•       Marketers identify and use important evaluative criteria

•       Marketing research is very helpful here

DECISION MAKING PROCESS –
 Step 4: PRODUCT CHOICE

Consumers often rely on heuristics* to make decisions.

 
A mental rule of thumb used for a speedy decision, such as . . .

• Price equals quality
• Brand loyalty
• Country of origin

DECISION MAKING PROCESS –
 Step 5: POST-PURCHASE EVALUATION 

Consumer satisfaction/dissatisfaction after purchase of product is critical

• Satisfaction is influenced by whether or not expectations of the product are met/exceeded
• Marketing communications must create accurate expectations for the product
• Cognitive dissonance may occur. Then…?

Internal Influences – Perception

Process by which we select, organize, and interpret information from outside world

3 factors are necessary for perception to occur:

• Exposure: capable of registering a stimulus
• Attention: mental processing activity
• Interpretation: assigning meaning to a stimulus

Internal Influences – Motivation

Motivation

• Internal state that drives us to satisfy needs
• Activates goal-oriented behavior

  Maslow’s hierarchy of needs

•       Maslow identifies five different types of needs

•       Needs are arranged in a hierarchy

•       Lower needs must be met before upper needs become important

INTERNAL INFLUENCES - ATTITUDES

Lasting evaluations of a person, object or issue

Three attitude components

• Affect (feel): emotional response
• Cognition  (knowing): beliefs or knowledge
• Behavior (doing): intention to do something

Attitude component will drive consumer preferences and purchase decisions

INTERNAL INFLUENCES - PERSONALITY

The set of unique psychological characteristics that consistently influences the way a person responds to situations in the environment

Personality traits:

• Innovativeness, materialism, self-confidence, sociability, need for recognition

Self-concept:

• Feelings about oneself

Situational Influences
on Consumers’ Decisions

Many situational influences shape purchase choices, for example in retail:

• Important dimensions of the physical environment include décor, smells, and lighting
• Arousal and pleasure determine consumers’ reaction to store environment
• Entertainment helps enhance the shopping experience

Time is a situational factor

Social Influences – Groups

We are members of many groups that influence our buying decisions:

• Culture/subcultures
• Social class
• MBA class @ NBS    
• Opinion leaders
• Gender roles
• Churches
• Other group

    memberships

Social Influences - 
 Culture and Subcultures

Culture:

• The values, beliefs, customs, and tastes produced or practiced by a group of people
• Includes key rituals like weddings and funerals
• Cultural values are important

Subculture:

• A group within a society who share a distinctive set of beliefs, characteristics,
  or common experiences

Social Influences – Emerging Trends

¡  Social movements/Consumerism within society can also influence consumer choices

Ø  Consumerism

A social movement that attempts to protect consumers from harmful business practices

Resulted in the Consumer Bill of Rights:

• Right to be safe; right to be informed; right to be heard; right to choose freely
• Environmentalism

Seeks conservation and improvement of the natural environment

   e.g. Kyoto Protocol, Green marketing

Consumer-to-Consumer (C2C) Markets and E-Commerce

C2C E-Commerce:

Online communications and purchases that occur among individuals without directly involving the manufacturer or retailer

Popular online C2C formats include:

• Chat rooms, lists, and boards
• Social networks
• Online brand communities
• Blogs

Moving on to Business Decision Making (B2B)

Business-to-business (B2B)marketing:
The marketing of goods and services that businesses and other organizations buy for purposes other than personal consumption

B2B (organizational) markets include retailers, manufacturers, wholesalers, and other organizations such as hospitals, and government

Characteristics That Make a Difference in Business Markets

Multiple buyers are involved

• A buyer from one company may be a seller to another
• Fewer customers exist (mostly they are firms, not consumers)

Types of B2B Customers

Producers:

Individuals or firms that purchase products for use in the production of other goods and services

1. e.g.: Dell buys RAM chips from IntelR for integration into their PCs
2. Dell is the purchaser; IntelR is the ‘vendor’ (seller)

Resellers:

Individuals or firms that buy goods for reselling, renting, or leasing

Government markets

Governments at any level (state, local) that buy goods and services to carry out public objectives and to support their operations

Not-for-profit firms

Charitable, educational, community, and other public service organizations that buy goods and services to support their functions and to attract and serve their members

B2B Demand

Differs from consumer product demand, because demand is:

• Derived
• Inelastic
• Fluctuating
• Joint

B2B Demand

Inelastic demand:

• Changes in price have little or no effect on the amount demanded

Fluctuating demand:

• Small changes in consumer demand create large increases or decreases in business demand
• Life expectancy of the product can cause fluctuating demand

Joint demand:

• Small changes in consumer demand create large increases or decreases in business demand or two or more goods used together to create a product