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CONSUMER BEHAVIOR Dr. S. Borna MBA 671 CONSUMER BEHAVIOR Dr. S. Borna MBA 671

Lecture Outline 1. Some basic terms related to the consumer behavior. 2. Why study Lecture Outline 1. Some basic terms related to the consumer behavior. 2. Why study consumer behavior? 3. A model of consumer behavior.

Lecture Outline Cont. 4. Three building blocks of C. B. Model: a. Exogenous Variables Lecture Outline Cont. 4. Three building blocks of C. B. Model: a. Exogenous Variables b. Individual Variables c. Consumer Decision Process

Marketer asks the following questions: 1. Who is our market? 2. What does the Marketer asks the following questions: 1. Who is our market? 2. What does the market buy or want? 3. Why does the market buy certain products?

Questions Cont. 4. Who participates in the buying? 5. When does the market buy? Questions Cont. 4. Who participates in the buying? 5. When does the market buy? 6. Where does the market buy (outlet questions)?

Consumer Behavior Defined: A. Those acts of individuals (or decision units) directly involved in Consumer Behavior Defined: A. Those acts of individuals (or decision units) directly involved in obtaining and using economic good and services including the decision process that precede and determine these acts.

Two key assumptions and their ramifications 1. Consumer behavior can be understood through research. Two key assumptions and their ramifications 1. Consumer behavior can be understood through research. 2. Consumer behavior can be influenced.

A diagram of the Black-Box approach to infer about intervening variables observable Process stimuli A diagram of the Black-Box approach to infer about intervening variables observable Process stimuli Black Box (inputs) inference Observable Responses (outputs)

Three Main Building Blocks of Our Consumer Behavior Model 1. Exogenous variables affecting consumer Three Main Building Blocks of Our Consumer Behavior Model 1. Exogenous variables affecting consumer behavior. 2. Individual variables affecting consumer variables. 3. Consumer decision process.

Exogenous Variables Culture Sub-culture Social Class Reference Groups Family Exogenous Variables Culture Sub-culture Social Class Reference Groups Family

Culture Defined “A culture is the configuration of learned behavior and the results of Culture Defined “A culture is the configuration of learned behavior and the results of behavior whose component elements are shared and transmitted by the members of a particular society. ”

Cultural Values Value General Feature Relevant to Marketing Achievement Hard work is good Justification Cultural Values Value General Feature Relevant to Marketing Achievement Hard work is good Justification for Success follow acquisition of hard work goods Individualism Self-Reliance Freedom Customized Products Freedom of choice Differentiate P.

Cultural Values Value General Feature Youthfulnes A State of mind that stresses being young Cultural Values Value General Feature Youthfulnes A State of mind that stresses being young Progress The acceptance of change Relevant to Marketing Product that provide the illusion of being young Stimulate desire for new products

Values of Society family Media Schools Religious Institutions Individual Internalized Values Values of Society family Media Schools Religious Institutions Individual Internalized Values

Sub-Culture (micro-culture) A sub-culture is a segment of a culture that share distinguishing patterns Sub-Culture (micro-culture) A sub-culture is a segment of a culture that share distinguishing patterns of behavior.

Sub-Culture Technically, the term “subculture” should be applied only to groups that include both Sub-Culture Technically, the term “subculture” should be applied only to groups that include both sexes of all ages and have institutions paralleling those of the dominant society.

Social Class äA number of people who have approximately equal positions in a society. Social Class äA number of people who have approximately equal positions in a society.

Reference Group Defined äA group that serves as a frame of reference or comparison Reference Group Defined äA group that serves as a frame of reference or comparison for an individual making a consumption decision.

Types of Families ä Nuclear Family ä Family of Orientation ä Family of Procreation Types of Families ä Nuclear Family ä Family of Orientation ä Family of Procreation ä Extended Family

Family Roles 1. 2. 3. 4. 5. gather information influences decision maker purchaser consumer Family Roles 1. 2. 3. 4. 5. gather information influences decision maker purchaser consumer

Family Life Cycles young singles young married full nest I, III post parenthood dissolution Family Life Cycles young singles young married full nest I, III post parenthood dissolution joint decisions

Limitations of FLC ä Unmarried Couples. ä Mature individuals who marry late in life. Limitations of FLC ä Unmarried Couples. ä Mature individuals who marry late in life. ä Childless Families ä Families broken up by separation

Consumer Decision Process problem identification search for information alternative evaluation decision (purchase) retail outlet Consumer Decision Process problem identification search for information alternative evaluation decision (purchase) retail outlet decisions post-purchase evaluation

Problem Recognition äA significant difference between ideal state of affairs and actual state of Problem Recognition äA significant difference between ideal state of affairs and actual state of affairs.

Information Search INTERNAL MARKET ER CONTROLLED EXTERNAL NON-MARKET ER SOURCE OF INFORMATION Information Search INTERNAL MARKET ER CONTROLLED EXTERNAL NON-MARKET ER SOURCE OF INFORMATION

COST VS. BENEFITS OF INFORMATION DECISION DELAY costs OPPORTUNITY COST INFORMATION OVERLOAD PSYCHOLOGICAL COST COST VS. BENEFITS OF INFORMATION DECISION DELAY costs OPPORTUNITY COST INFORMATION OVERLOAD PSYCHOLOGICAL COST

FACTORS INFLUENCING EXTERNAL SEARCH A. B. NO. OF ALTERNATIVES STORE CONCENTRATION C. INFORMATION AVAILABILITY FACTORS INFLUENCING EXTERNAL SEARCH A. B. NO. OF ALTERNATIVES STORE CONCENTRATION C. INFORMATION AVAILABILITY

FACTORS INFLUENCING EXTERNAL SEARCH PRODUCT CHARACTERISTICS ä PRICE ä PRODUCT DIFFERENTIATION ä POSITIVE PRODUCT FACTORS INFLUENCING EXTERNAL SEARCH PRODUCT CHARACTERISTICS ä PRICE ä PRODUCT DIFFERENTIATION ä POSITIVE PRODUCT CONT.

CONSUMER CHARACTERISTICS PERCEIVED RISK AGE, SEX, SOCIAL STATUS CONSUMER CHARACTERISTICS PERCEIVED RISK AGE, SEX, SOCIAL STATUS

ALTERNATIVE EVALUATION 1. HOW TO IDENTIFY EVALUATIVE CRITERIA 2. HOW TO MEASURE EVALUATIVE CRITERIA ALTERNATIVE EVALUATION 1. HOW TO IDENTIFY EVALUATIVE CRITERIA 2. HOW TO MEASURE EVALUATIVE CRITERIA

Alternative Evaluation cont. 3. CONSUMERS’ PERCEPTION OF PERFORMANCE LEVEL OF EACH EVALUATIVE CRITERIA 4. Alternative Evaluation cont. 3. CONSUMERS’ PERCEPTION OF PERFORMANCE LEVEL OF EACH EVALUATIVE CRITERIA 4. IMPORTANCE ATTACHED TO EACH EVALUATIVE CRITERIA

ALTERNATIVE EVALUATION (CONTINUED) 5. DECISION RULES USED BY CONSUMERS IN SELECTING DIFFERENT ALTERNATIVES ALTERNATIVE EVALUATION (CONTINUED) 5. DECISION RULES USED BY CONSUMERS IN SELECTING DIFFERENT ALTERNATIVES

DECISION RULES USED IN ARRIVING AT A DECISION A. COMPENSATORY MODELS DECISION RULES USED IN ARRIVING AT A DECISION A. COMPENSATORY MODELS

B. NON-COMPENSATORY MODELS: CONJUNCTIVE DISJUNCTIVE LEXICOGRAPHIC B. NON-COMPENSATORY MODELS: CONJUNCTIVE DISJUNCTIVE LEXICOGRAPHIC

Perception Defined: äPerception is the process by which a person selects, organizes, and interprets Perception Defined: äPerception is the process by which a person selects, organizes, and interprets information.

Selective nature of perception selective exposure selective attention selective comprehension selective retention Selective nature of perception selective exposure selective attention selective comprehension selective retention

Subliminal Advertising: What is the controversy about by: S. C. Dudley, Akron Business and Subliminal Advertising: What is the controversy about by: S. C. Dudley, Akron Business and Economic Review. (Summer 1987) pp. 6 -18.

Subliminal Perception ä Subliminal perception refers to the individuals ability to perceive and respond Subliminal Perception ä Subliminal perception refers to the individuals ability to perceive and respond to stimuli that are below the “limen” or level of consciousness. awareness threshold (supraliminal) subliminal absolute threshold

Methods ä Briefly presenting visual stimuli (utilizing a tachistoscope) ä Accelerating Speech ( low Methods ä Briefly presenting visual stimuli (utilizing a tachistoscope) ä Accelerating Speech ( low volume auditory messages)

Methods cont. • Embedding (print Media) • Suggestive methods (picture implies much more than Methods cont. • Embedding (print Media) • Suggestive methods (picture implies much more than a quick glance would indicate)

Motivation äA motive (or drive) is a need that is sufficiently pressing to compel Motivation äA motive (or drive) is a need that is sufficiently pressing to compel the person to act.

Maslow’s Hierarchy of Needs 5 Selfactualization (self-development and realization) 4 Esteem needs (self-esteem, recognition) Maslow’s Hierarchy of Needs 5 Selfactualization (self-development and realization) 4 Esteem needs (self-esteem, recognition) Social needs 3 (sense of belonging, love) 2 1 Safety needs (security, protection) Psychological needs (food, water, shelter)

Attitude Defined: An attitude is an enduring organization of motivational, emotional, perceptual, and cognitive Attitude Defined: An attitude is an enduring organization of motivational, emotional, perceptual, and cognitive process with respect to some aspect of our environment.

Tri- component model of attribute Cognition Conation - Likelihood or tendency to act. Affect Tri- component model of attribute Cognition Conation - Likelihood or tendency to act. Affect

Attitude Change Strategies 1. Changing the cognitive component. 2. Changing the affective component. 3. Attitude Change Strategies 1. Changing the cognitive component. 2. Changing the affective component. 3. Changing the behavioral component

Learning Any change in the content and organization of long-term memory. Learning Theories: Classical Learning Any change in the content and organization of long-term memory. Learning Theories: Classical Conditioning Operant Conditioning Cognitive Theories