Economic or Marshallian Model
This theory was first advanced by the economists. They gave formal explanation of buyer behavior. According to this theory the consumers are assumed to be rational and conscious about economic calculations. They follow the law of marginal utility. An individual buyer seeks to spend his money on such goods which give maximum satisfaction (utility) according to his interests and at relative cost. The buying behavior is determined by the income – its distribution and level - affects the purchasing power. The economic factors which affect the buyer behavior are:
1. Disposable Personal Income
The economists attempted to establish relationship between income and spending. Disposable personal income represents potential purchasing power that a buyer has. The change in income has direct relation on buying habits. Personal consumption spending tends to both rise and fall at a slower rate than what disposable personal income does. Disposable of personal income depend on various situations such as:
1. Size of family income
Size of family and size of family income affect the spending and saving patterns. Usually large families spend more and small families spend less in comparison.
2. Income Expectation
The income expected to be got in future has direct relation with the buying behavior. The expectation of higher or lower income has a direct effect on spending plans.
3. Tendency to Spend and to Save
This is related to the habit of buyers to spend or save out of the disposable income. If the buyers give importance to the present needs, they dispose off their income. And buyers spend less if they give importance to future needs.
4. Liquidity of Funds
The present buying plans are greatly influenced by liquidity of assets readily convertible into cash. For example, readily marketable shares and bonds, bank balances come into this category. However, this convertible assets influence offer freedom to buyer, who actually buys with current income.
5. Consumer Credit
Facility of consumer credit system - hire purchase, installment purchase etc., plays an important role in purchase decision. A buyer can command more purchasing power. ‘Buy now and pay later’ plays its role effectively in the rapid growth of market for car, scooter, washing machine, furniture, television and so on.
The economic model of consumer behavior is uni-dimensional. It is based on certain predictions of buying behavior.They are:
- a. Lower the price of the product, higher the sales
- b. Lower the size of the substitute product, lower the sale of the product
- c. Higher the real income, higher the sales of this product d. Higher the promotional expenses, higher are the sales
However, ‘lower the price of a product, higher the sales’ may not hold good as buyer may feel that the product is sub-standard one.
The behavioral researchers believe that this model ignores all the other aspects such as perception, motivation, learning, attitude and
personality, and socio-cultural factors. Further, it is also observed that consumer also gets influenced by other marketing variables such as products, effective distribution network and marketing communication. Hence, it is felt that the economic model is inadequate. It assumes that market is homogeneous where markets are assumed to be heterogeneous.
Learning or Pavlovian Model
Psychology has contributed lot to the marketers to understand the buyers. It explains how consumers learn about a product and the way they can recall from the memory, and the development of buying habits. All theories of buyer’s behavior have been primarily based on learning, viz., Stimulation-Response or S-R model, this theory of learning is explained as a process of repetition, motivation, conditioning and relationship. Repetition improves learning. For example, when advertisements are repeated, people may be able to understand further about the product. This is aimed at repeated advertisements for drawing the attention and interest of the people. According to stimulus- response theory learning involves the following steps.
a. Drive: It is a strong internal stimulus which impels action and when it is directed towards a drive reducing object, it becomes a motive. A drive thus motivates a person for action to satisfy the need. Drives may be primary-thrust, hunger etc., and secondary - desire for money, pride etc.
b. Cues: These are weak stimuli. They determine when the buyer will respond. c. Response: Response is the feedback reaction of the buyer. It is an answer given to drive or cue. The individual has to choose some specific response in order to fulfill the drive or the need which was acting as a stimulus. For example, a hunger drive can be satisfied by visiting a shop known through an advertisement and buying the readymade food product. If that experience is satisfactory, this response of satisfaction is strengthened.
Drives, Cues, and Responses
Thus this learning of links which mean stimulus, cue and response results in habits. Along with this, attitudes and beliefs are also learnt. As it becomes a habit, the decision process for the individual becomes routine affair. Thus, learning model has the following prediction:
a. Learning refers to change in behavior brought about by practice or experience. Everything one does or thinks is learnt.
b. Product features such as price, quality, service, brand, package etc., acts as cues or hints influencing consumer behavior
c. Marketing communications such as advertising, sales promotion etc., also act as guides persuading buyer to purchase the product.
d. Response is decision to purchase.
Psychoanalytical Model
Sigmund Freud developed this theory. According to him human personality has three parts:
1. The Id, is the source of all mental energy that drives us to action
2. the super ego, the internal representation of what is social is approved conscience
3. The Ego, the conscious director of id impulses for finding him satisfaction in socially acceptable manner.
The buyer behavior depends upon the relative strength of the three elements in the personal ability. Motivational research has been involved in investigating motives of consumer behavior so as to develop suitable marketing implications accordingly. This approach has been used to generate idea for developing- design, features, advertising and other promotional techniques.
Sociological Model
According to this theory the individual decision and behavior are quite often influenced by the family and the society. He gets influenced by it and in turn also influences it in its path of development. He plays many roles as a part of formal and informal associations or organizations i.e., as a family member, employee of a firm, member of professional forum, and as an active member of an informal cultural organization. Hence he is largely influenced by the group in which he is a member. For example, the decision may be made by one, actual buying may be done by another, and the product is used by yet another member of the family. Here, a mother takes a decision to buy a tiny cycle for her child, the cycle is purchased by the father and the user is the child.
Howard - Sheth Model
The Howard - Sheth model shows the processes and variables influencing the buyer behavior before and during the purchase. It emphasizes three key variables- perception, learning and attitude formation. It explains the way consumers compare available products in order to choose the best which fits their needs and desires. Consumers learn by finding out the relevant information about products through two sources of information:
a. Social sources
b. Commercial sources
The gathered information is used for comparison of alternative brands according to various choice criteria. The basic structure of the model is given below
Basic Structure of Buying Behavior
The following predictions can be made about the model
i. Stimuli or perceived learning occurs and results in output
ii. Output occurs on the basis of the perception and learning non- observable variables.
iii. Exogenous or outside variables such as social class, financial status etc., are used to predict perception and learning
This model describes the buying behavior in various stages
Stage 1: Motives are based on needs demanding satisfaction. They lead to goal directed behavior satisfaction. Motives ignite a drive to search and secure information from alternatives. Stimulus- input variables are marketing programme and social environment.
Input or stimuli:
I. Product themselves in the market
II. Commercial information on them, say quality, price, availability and distinctiveness
III. Product information obtained from friends, acquaintances and reference groups.
Thus, a number of products or brands are perceived and considered by the consumers mind. In this manner the resulting perception is selected.
Stage 2: While evaluating, many brands are eliminated or left out for further consideration. Now, only few will receive further consideration. Each will have plus / minus points. These choice considerations act as connecting links between motives and selected brands choice consideration which provide a structure to motives and the process of learning and experience. These considerations develop as criteria/rule to decide on the goods that have the prospects of yielding maximum satisfaction. The market must offer a good marketing-mix that is used by the buyer to influence the choice criteria.
Stage3: The choice criteria gives rise to predisposition- the relative preference in favour of particular brand. Sudden hindrances may sometimes stop the process. This may be in form of price, inadequate supply of brand, external variables such as financial status, time pressure etc. If they do not occur, the preference results in a response output such as attention, comprehension, attitude, buying intention and preferably actual purchase.
Stage 4: Feedback of purchase experience is sent to the buyer which shows if the actual satisfaction was equal to the expected satisfaction. Satisfaction leads to repurchase, and repeat orders indicate brand loyalty. The marketer is interested in this outcome. Buying behavior is influenced by motives (rational / emotional curiosity) attitudes, perception, social factors and personal factors.
Black Box of Buyer behavior
Thus models of buyer behavior are generally based on certain factors internal to the consumer e.g., learning, personality, attitudes and perceptions. The external factors may be in the form of group, cultural and inter-personal influences and effects advertising and communications. The action of individuals is the result of both internal / external factors and interactions to the consumer decision making processes. The modern concepts of the buying behavior state that the behavior is the result of interaction between people centered factors and situation centered factors
The marketer is expected to be aware of the person centered factors such as buyer motivation, learning, perceptions, attitudes, values and beliefs. Similarly, marketers must be aware of social environment and internal personal interactions influencing the buyer behavior.
Howard – Sheth Brand Buyer Behavior Model
Nicosia Model
The buyer behavior model is taken from the marketing mans point of view. It is also called systems model as the human is analysed as a system, with stimuli as the input to the system and the human behavior as an output of the system. Francesco Nicosia, an expert in consumer motivation and behavior has developed this in 1966. He tried to explain buyer behavior by establishing a link between the organization and its prospective consumer. Here the messages from the company initially influence the predisposition of the consumer towards the product and service. Based on the situation, the consumer will have a certain attitude towards the product. This may result in a search for the product or an evaluation of the product attributes by the consumer. If this step satisfies the consumer, it may result in a positive response, with a decision to buy the product or else the reverse may occur.
The Nicosia model divides the above activity explanation into four basic areas:
Area 1: Field one has two sub areas-the consumer attributes and the firms attributes. The advertising message from the company will reach the consumers attributes. Certain attributes may develop sometimes depending upon the way the message is received by the consumer. The newly developed attribute becomes the input for area 2.
Area 2: This area is related to the search and evaluation undertaken by the consumer of the advertised product and also to verify if other alternatives are variable. If the above step motivates to buy the product / service, it becomes the input for the third area.
Area 3: This area explains as how the consumer actually buys the product.
Area 4: This is related to the uses of the purchase items. This can also be used as an out put to receive feedback on sales results to the firm.
Summary
The heterogeneity among people across the world makes understanding consumer buying behavior an intricate and challenging task. Product motives and patronage motives play a crucial role in consumer purchases. Like individuals organizations also make many buying decisions. The major factors that distinguish it from consumer decision are Market structure and Demand, Buyer characteristics, and Decision process and buying patterns.
The degree of involvement has a lot of impact on search of information, Information processing, and Transmission of information. The various models of consumer involvement help marketers to study purchase behavior across product segments.
Consumers usually go through five stages in arriving at a purchase decision. In the first stage, the customer identifies an unsatisfied need. In the second stage consumer collect information about the product and brands. In a third stage, the consumer evaluates all the alternatives with the help of available information. Later in stage four, the customer makes a purchase decision. And finally in the fifth stage, consumer experiences post-purchase satisfaction or dissatisfaction. Organizational buyer has different decision making criteria. Decision making rules – Compensatory and Non compensatory – simplify the complex nature of decision making to consumers.
Understanding consumer behavior is the basis of the formulation of marketing strategies. Consumer behavior studies help in designing effective marketing strategies like, Marketing-mix Strategy, Market Segmentation Strategy, Product Positioning Strategy, and Marketing Research. As consumer behavior is very complex to understand, consumer models aid marketer to put their effort to understand in right direction. The models –Economic, Learning, Psychoanalytic, Sociological, Howard-Sheth and Nicosia enables marketers to understand and predict consumer behavior in the market place.
Self Assessment Questions
1. Explain the nature of consumer behavior
2. Justify the statement, “The evaluation of marketing concept from mere selling concept to Consumer-oriented marketing has resulted in buyer behavior becoming an independent discipline.”
3. Compare and contrast the buying behavior of organization market and retail consumers.
4. What is Consumer Involvement? Discuss the factors that affect the Consumer Involvement.
5. How does processing of information affect consumer involvement?
6. Discuss various consumer involvement models and their suitability to different organizations?
7. What essential elements are required to understand consumer decision making?
8. How does decision making change because of change in purchase involvement?
9. How can a consumer arrive at a decision? Explain various stages in it.
10. What is customer value and why is it important to marketers?
11. What are the four major marketing implications to understand consumer Behavior?
12. List the inputs of various decisions making models and discuss their limitations in the market place.
13. How do compensatory and non-compensatory decision rules vary?
14. Define extensive problem solving, limited problem solving and routine problem solving.
What are the differences among the three decision-making approaches?
What type of decision process would you expect most consumers to follow in their first purchase of a new product or brand in each of the following areas
(a) Cosmetics
(b) Computer
(c) Mobile
(d) Edible oil
(e) Air-conditioner. Explain your answers.
Application Activities
1. Conduct a focus group interview to discover the buying motives influencing the purchases of following products and brands
a) Vacuum cleaner b) Purchases in Hyper-Markets c) LG Refrigerator d) Sun Umbrella
2. Interview 15 students on your campus and determine their internet shopping behaviors. Divide them into appropriate groups such as heavy, moderate, light, and non-shoppers and explain why each group behaves as it does.
3. Develop a short questionnaire designs to measure the information search consumers engage in prior to purchasing an expensive recreational or entertainment item or service. Your questionnaire should include measures of types of information sought, as well as sources that provide this Information. Also include measures of the relevant consumer characteristics that might influence information search, as well as some measure of past experience with the products. Then interview two recent purchasers of each product, using the questionnaire you have developed.Analyze each consumers response and classify each consumer in terms of information search.
4. What are the marketing implications of your results?
5. Develop a short questionnaire to elicit the evaluative criteria consumer might use in selecting the following. Also have each respondent indicate the relative importance he or she attaches to each of the evaluative criteria. Then, working with several other students, combined your information and develop a segmentation strategy based on consumer evaluation criteria and its importance. Finally develop an advertisement for the members of each market segment to indicate that their needs would be served by your brand.
a) Shaving cream
b) Stationery
c) Santro Car
d) Panasonic Mobile
e) Whirlpool Refrigerator
f) Durian Furniture
Glossary Attitude: A learned predisposition to behave in consistently favorable or unfavorable manner with respect to given object.
Behavioral Learning Theories: Theories based on the premise that learning takes place as the result of observable responses to external stimuli.
Brand Loyalty: Consumers consistent preference and / or purchase of the same brand in a specific product or service category
Cognitive Learning: The acquisition of new knowledge about the world.
Compensatory Decision Rule: A type of decision rule in which consumer evaluates each brand in terms of each relevant attribute and then selects the brand with the highest weighted score
Conditioned Learning: According to Pavlovian theory conditioned learning results when a stimulus paired with another stimulus that elicits a known response serves to produce the same response by itself
Conditioned Stimuli: When new products bear a well known symbol on the belief that it embodies the same attributes with the name it is associated with
Conjunctive Decision Rule: Non-compensatory decision rule in which consumers establish a minimally acceptable cut off points for each attribute evaluated. Brands that fall below the cutoff point on any one attribute are eliminated from further consideration
Consumer Behavior: The behavior consumers display in searching for, purchasing, using, evaluating and disposing of products, services, and ideas.
Consumer decision making: Cognitive and emotional aspects such as impulse, family, friends, advertisers, role models, moods, and situations that influence a purchase
Consumer Decision Rules: Procedures adopted by consumers to reduce the complexity of making products and brand decisions
Consumer Research: Methodology used to study consumer behavior
Consumer Socialization: The process, started in childhood by which an individual first learns the skills and attitudes relevant to consumer purchase behavior
Cues: Stimuli that give direction to consumer motives (i.e., that suggest a specific way to satisfy a salient motive
Customer Life Time Value: Profiles based on the collection and analysis of internal secondary data.
Customer Retention: Providing value to customers continuously so that they will stay with the company rather than switch to another firm
Customer Satisfaction: An individual’s perception of the performance of the product or service in relation to his or her expectation
Customer Value: The ratio between the customers’s perceived benefits and the resources used to obtain those benefits
Differentiated Marketing: Targeting a product or service to two or more segments, using specifically tailored product, promotional appeal, price, and/or method of distribution for each
Disjunctive Rule: A non-compensatory decision rule in which consumers establish a minimally acceptable cut off point for each relevant product attribute; any brand meeting or surpassing the cut off point for any one attribute is considered an acceptable choice
Emotional Motives: The selection of goals according to personal or subjective criteria (e, g., the desire for individuality, pride, fear etc)
Evoked Set: The specific brands consumer considers in making a purchase choice in a particular product category
Extensive Problem Solving: Decision making efforts by consumers that have no established criteria for evaluating a product category or specific brands in that category or have not narrowed the brands to a manageable subset
Feed Back: The response given by a receiver to the sender of the message
Focus Group: A Qualitative research method in which about eight to ten persons participate in an unstructured group interview focused on a product or service concept
Freud Theory: A theory of personality and motivation developed by the psychoanalyst Sigmund Freud
Information Processing: A cognitive theory of human learning patterned after computer information processing that focuses on how information is stored in human memory and how it is retrieved
Involvement Theory: A theory of consumer learning which postulates that consumers engage in a range of information processing activity from extensive to limited problem solving depending on the relevance of the purchase
Lexicographic Decision Rule: A non-compensatory decision rule in which consumers first rank product attributes in terms of their importance then compare brands in terms of the attribute considered most important. If one brand scores higher than the other brands it is selected: if not the process is continued with the second rank attribute, and so on
Non-compensatory Decision Rule: A type of consumer decision rule by which positive evaluation of a brand attribute does not compensate for negative evaluation of the same brand on some other attributes
Organizational Consumer: A business, government agency, or other Institution that buys the goods, services, and/ or equipment necessary for the organization to function
Purchase Behavior. Behavior that involves two types of purchases: trial purchases and repeat purchase
Repeat Response Behavior: A habitual purchase response based on predetermined criteria
Word-Of-Mouth: Informal conversations concerning products or services
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