Consumer Behaviour

What we’ll cover in this article: Definition, Consumer Behaviour theory, factors affecting consumer behaviour, psychology of marketing, consumer behaviour case study
 

Definition

Consumer behaviour refers to the psychological process that leads to a consumer’s decision to buy a product or service offering.

This process involves decisions in terms of what, when, where, how and from which vendor to make the purchase. This is influenced by:

  • Psychological factors such as the personal thinking process that includes motivation, personality, perception and the consumer’s attitude, the process of making the decision in marketing, consumer’s interaction with friends, family and peers and making the choice of where to buy from, based on cost, features and product appeal
  • Internal factors such as demographics, lifestyle, personality, motivation, information, beliefs and attitude
  • External factors such as reference groups, culture, family, race, social status, marketing mix

Studying consumers enables businesses to create the most appropriate marketing strategies for their target audience.

It allows them to understand issues including how consumers think and rationalize before they select a product from the choices available, what influences them, their behaviour when they shop and gaps that exist in information available with consumer.

This presents them with the knowledge required to create marketing campaigns that elicit the desired response from the consumer.

Consumer behaviour, besides its application in marketing strategy, is also used in social marketing to connect with the customer.

There are several classical theories that view consumer behaviour from various points of views. This helps to understand different market segments based on which marketing strategies are created to capture those markets.
 

Consumer behaviour theory

Broadly, these can be classified as:

  • Economic theories
  • Psychological theories
  • Psycho-analytical theories
  • Socio cultural theories

 

Economic Theories

Consumer behaviour seeks to explain how a consumer distributes her income across various purchases and how pricing is a deciding factor. There are two theories here:

  • Utility theory of Demand that deals with consumer satisfaction with the acquisition of a product. Introduced by British Economist William Stanley Jevons in 1870, it describes utility as the satisfaction or benefit that comes from consumption and assumed that this can be quantified and measured in “utils”. Utility theory of demand gives rise to the Law of Diminishing Marginal Utility which states that as the consumption of a product increases, the satisfaction declines.
  • Indifference preference theory – developed by economist Vilfredo Pareto, this is a more modern approach to consumer behaviour. Here, consumer behaviour analysis relates to consumer preferences of a combination of goods and services based on the nature of the goods and not from the ability to measure satisfaction.

 

Psychological Law of Consumption

Postulated by Keynes, the Psychological Law of Consumption states that when income increases, consumption also increases, but not in proportion to the increase in income.

This theory focuses on the fact that consumption relies on income and that there is a tendency to spend less on goods than the increment in income.

This theory is criticized on the grounds that there are many factors influencing consumer behaviour, that do not relate to income
 

Psychological theories

This believes that people learn from their experience and this will determine how they act in future. This makes sense when seen in conjunction with brand loyalty and repetitive buying. Psychological theories consist of stimulus response theories and cognitive theories.

Stimulus response theory assumes that learning is a result of a person’s response to a stimulus, which is then rewarded with satisfaction for the right response. People tend to remember the most frequent and recently experienced stimuli and respond to it. Advertisements take advantage of this.

The cognitive theory deals with post-buying behaviour and states that stimulation and want are influenced by the consumer’s awareness, beliefs, perception and attitude.

It assumes that even after making an informed purchase decision, consumers face anxiety, wondering whether they made the right choice as they compare other alternatives. These buyers need to be reassured by the seller that they took the right decision.
 

Psycho-analytic theories

Under this theory, Freud gives personality three aspects: the id, the ego and super ego and states that consumer behaviour is a result of the interaction between these three.

While the “id” triggers pleasure, the super ego sees the moral issues and the ego is the go-between, helping the consumer decide whether to buy or not.
 

Socio cultural theories

Also called the veblenian model, it labels man as a social animal whose wants and behaviour are shaped by his peer group. Regardless of personal preferences, people tend to blend in a society.

These theories on consumer behaviour help to marketers gain an insight into what factors lead their target audience to make their buying decisions so that they can develop their marketing message accordingly.
 

Factors affecting consumer behaviour

As a consumer goes through the process of choosing, buying and consuming goods and services based on wants, various factors influence the decision making process. These are:

  • Cultural
  • Personal
  • Psychological

 

Cultural factors

These include culture, subculture and social class. Since the buyer is part of a society, her decisions are affected by it. Global marketers must study the culture of various regions to understand what influences buyers in these markets.

Subculture refers to religion, nationality, region, race, and similar factors that facilitate market segmentation, so that products can be tailored to these segments. Social class or status, which is identified by income levels, education and occupation also plays a role in consumer behaviour.

Social factors that impact buying behaviour are reference groups, family, role and status. Reference groups, often including an opinion leader have a strong influence on buying decisions.

The decision maker in the family has an important role in the buying process. Buying decisions also depend on the consumer’s role and status.
 

Personal factors

Among personal actors that determine buying behaviour are economic level, lifestyle, age group, personality, occupation and self-concept. Since each person is unique, personality varies and plays a role in the buying process.
 

Psychological Factors

Four psychological factors, namely perception, motivation, learning, attitude and beliefs affect buyer behaviour.

Each individual is motivated by a different set of physiological, biological and social needs. While some needs are urgent, some are not. When the need is urgent, it becomes a motive.

Perception involves choosing, organizing and assimilating information for a meaningful experience. Consumers go through three perceptual processes. These are:

  • selective attention – where marketers attract the buyer’s attention
  • selective distortion – where the buyer interpret the information to suit their beliefs
  • selective retention – where marketers try to retain information that supports their beliefs

Beliefs and Attitudes surround a consumer’s view of a product and alsobuild the brand image, thereby affecting their buying behaviour. This triggers a marketer’s interest in them.

By introducing specially tailored campaigns, marketers attempt to change consumers’ attitudes and beliefs.
 

Consumer Behaviour Case Study

In an example of finely targeted marketing, Nike, the marketing giant makes use of the data streaming in from its Nike+ system to study consumer behaviour, tailor products and manage its brand strategy.

When Nike+ users used trails rather than paved roads for running, Nike’s trail-running product range was expanded. Its latest product is fuelband data that is being offered to marketing companies.

Consumers wearing this present Nike and its partners with enough information to strategize their marketing. As for Nike, it even knows exactly when a consumer needs a new pair of trainers.

Another example of perfectly targeted marketing based on consumer behaviour is from fast food chain Taco Bell, who leverages consumer data and has the reputation of not having a single product launch failure in 15 years.

Voted Marketer of the Year, Taco Bell uses its social command centre which receives 18+ million online messages to forecast the success of its new product launches accurately. (Reference link)

As consumers become more savvy, they only respond to the right messages delivered in a timely manner. For marketers to be customer-centric, they must collect and analyse the information available to manage customer expectations.

Today, marketing has changed to the extent where it has moved from getting to know the average consumer’s behaviour to focusing on individual customers.
 

Marketing Topics

Introduction to Marketing Concepts
Market Research
Marketing Strategy (Market Segmentation, 4-P Marketing Framework)
Product Management
MS in Luxury Brand Management

Back to the top: MBA Syllabus

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