Models and Determinants of consumer behavior

Environmental Determinants of
consumer behavior

Family influence on consumer behavior:
Family:
A family is an important element that affects the consumption and disposal of products by an
individual. A family may be defined as two or more people living together, related by blood or
marriage who share a common house, common income and similar status and values.
There are 2 types of families:
Nuclear family:
A small family comprising of a married couple and their children.
Joint family:
Family comprising of married couples, their parents, their children and their relatives.

Family life cycle stages
The concept of household or family life cycle is important for marketers in segmenting the market. In 1966, William
wells and George Gubar proposed eight stages to describe the family life cycle.
The following life cycle stages are typical of families:
•1. The bachelor stage: young, single person under age of 35 years. Incomes are generally low since they have
started careers, but they may have few financial burdens and sufficient discretionary income.
•2. Newly married: young couples, no children. If both spores are employed, they will have high level of
discretionary income.
•3. Full nest 1: young married couples with youngest child under 6 years of age. There would be greater squeezes on
income because of increased on childcare. However, if they are members of a joint family, the level of discretionary
income is likely to be high.

4. Full nest 2: young married couples with children from 6 years to 12 years of age. Better
financial position because income of both parents rising. Children spend more hours outside their
parents influence.
5. Full nest 3: older married couples with dependent teenage children living at home. Financial
position of family continues to improve. There are increasing costs of college education for children.
6. Empty nest 1: older married couples with no children living with them, parents still employed.
Reduced expenses result in greater savings and highest discretionary income.
7. Empty nest 2: older married couples with no children living with them and parents retired. Drop
in income and couple relies on savings and fixed income from retirement benefits.
8. Solitary survivor 1: older single persons with low income and increasing medical needs.

Buying Roles of a Family :
The various roles played by members of a family while making a purchase decision are:
• Influencer - The family member or family members who provide information about a product or
service to other family members
• Gate Keeper — Family members who controls the flow and direction of the contents of information
• Decider — The one with the power to select the product whether individually or jointly
• Buyer — The one who makes the actual purchase
• Preparer - The family member or family members who prepare the product for family consumption
• User — The consumers of the product or service
• Maintainer - The members who maintain the product for continued use and satisfaction
• Disposer — The member who disposes the product.

Family Dynamics:
Family influence on consumer behavior exists due to the relationship dynamics between
family members. The buying behavior of a family and its members basically depend upon
the dynamics of husband-wife in decision making. There may be the following types of
decisions on the basis of husband-wife influences
• Wife Dominant Decisions, E.g. grocery, food, home decoration
• Husband Dominant Decisions, E.g. phone, cars, insurance
• Joint Decisions, E.g. vacations, schools for children
• Automatic or Unilateral decisions, E.g milk, newspaper

Groups:
Meaning of Group:
Marvin E. Shaw has defined groups as “two or more persons who are interacting with one
another in a such a manner that each person influences and influenced by each other”
People generally tend to define a group differently, mainly because it is difficult to define a
group independent of some specific reference or purpose. As per the above definition when
two or more people interact together such that each member is influence as well as be
influenced by other group members, it is referred to as a group
Clouis R. Shepherd defines groups as “A group may be defined as the aggregation of small
number of persons who work for common goals, develop a shared attitudes and are aware
that they are part of a group and perceive themselves as such”.

Group dynamics is related to determining the interactions and forces between group members in a
social situation. The term dynamics originated from the Greek word meaning force. Thus if this term
can be extended to group dynamics, it refers to the study of forces operating within a group. Here it
would be proper to mention the difference between aggregates and groups. Aggregation of
individuals refers to where individuals are not aware of each other, or if aware, do not interact with
each other in a meaningful way. A group will comprise of:
1. Two or more people who are interdependent on each other, with group members and
2. The group share a set of beliefs, valves and norms, which regulates their mutual conduct.
Types of Groups:
1. Family life cycle
2. Friendship groups
3. Formal social clubs
4. Shopping friends/groups
5. Work Group
a) Permanent formal work group
b) Temporary formal work groups

Reference groups:
Groups that consumers compare themselves to or associate with. Reference groups are similar to opinion leaders
in that they can have a profound influence on consumer behavior. Reference groups are considered a social
influence in consumer purchasing. They are often groups that consumers will look to make purchasing decisions. So
if a reference group endorses a product, either through use or statements about the product, those that look to
the group will often purchase that product. On the other hand, if a reference group disapproves of a product, those
that associate with that group will probably not purchase the product
Types of Reference Groups
Reference groups can be either formal or informal.
Influence of Reference Groups
Reference groups can and do have a tremendous influence on purchasing decisions. This is evident in a number of
ways, such as through roles. Everyone is expected to behave in a certain way based on the reference group we
belong to. Students act like students. In keeping with this idea, people will often modify their own behavior to
coincide with group norms.
Reference groups communicate through opinion leaders, who influence what others do, act, and buy. In the
consumer world, this means that if a reference group purchases a product, those that associate with the group
likely will as well.

Culture:
Culture may be defined as the “personality of a society”. It is broad and all pervasive in
nature, inclusive of language, customs and traditions, norms and laws, religion, art and music, etc.
It also includes the interests of people, the work practices and orientations, as also their
attitudes towards general and specific issues.
Cultural factors have a significant effect on an individual’s buying decision. Every individual has
different sets of habits, beliefs and principles which he/she develops from his family status and
background. What they see from their childhood becomes their culture.

Culture and its impact on consumption behavior can be better explained by understanding the
nature and characteristics of culture:
a)Culture is natural and permeates naturally into the social system:
In terms of consumer behavior, the kinds of food we buy and eat or the clothes that we purchase and
wear, are all governed by the socialization process. Similar is with respect to other purchases that we
make. Culture encompasses the general and specific patterns of consumption behavior.
b) Culture helps in satisfaction of needs:
For example, in earlier times, people preferred eating their whole meals at home. In fact, eating out was
considered unhealthy and undesirable. With a change in society, and the emergence of dual income
households, people have begun eating out of home; the fast food culture is in. This has given a boost to
the fast food and restaurant industry. Thus, we see that when a value system fails to satisfy the members
of a social system, it is adapted, changed and/or modified to suit newer social patterns and trends.

c) Culture is not inborn; it is learnt as a result of the socialization process:
As consumers, it is through our culture learning that we are taught what is regarded as a desirable
purchase and what is not.
For example, in certain cultures, eating pork and beef is a taboo; thus, when McDonalds came to India,
they had to introduce the chicken burger, instead of the normal beef burger sold in the US. They could
not disregard the vegetarian population of the country and so introduced the veg-tikki burger.
d) Culture is shared:
As consumers, we are also impacted most by Social institutions (family), educational
institutions (schools, colleges and universities), political institutions (law, public policy, leaders
and government), and religious institutions (like places of worship, artifacts, and religious
leaders) etc., all help in transmitting this culture to the members of the society.
d) Culture is dynamic in nature, and evolves constantly with time:
Marketers need to continually assess the environment so as to identify changing need
patterns, and change/modify/adapt existing products and services, and even come up with new ones.

Subcultures:
Each culture further comprises of various subcultures such as religion, age, geographical location,
gender (male/female), status etc.
While culture is defined as the “personality of a society”, (inclusive of language, customs and
traditions, norms and laws, religion, art and music, etc), it is not entirely homogenous in nature. Not
all people within a social system, share the same language, religion, customs and traditions. Every
society is composed of smaller sub-units, homogenous within, and heterogeneous outside, all of
which when put together make a complex society. Such sub-units or sub-groups are known as sub-
cultures

Meaning and Definition of Social Class :
Consumer behaviour is influenced by environment in which one lives. The decision process is affected by a
number of factors such as culture, social class, personal influences, family, religion, region he lives in, and his
situation. Amongst them social class has great impact on consumer behaviour but what is a social class has been
described differently by different researchers.
It can be best described “divisions within society composed of individuals sharing similar values, interest and
behaviours”.
Leon G. Schiffman and Lisline Lazor Kanuk measure social class “in terms of social status” such as profession,
income, quality of neighborhood and dollar value of residence and do not consider cash, region and other social
factors stating that consumer behaviour study is different than socio-culture study.
According to W.P. Dommermuth “Social classes are very broad groupings of individuals which hold roughly
similar status levels in society arranged in a hierarchy from low through middle to upper class divisions”.

UNIT IV
Consumer’s decision making process
Consumer Decision Making Process Consumer Decision making is a process through which the customer selects
the most appropriate product out the several alternatives.
The Consumer decision making process consists of a series of steps that a buyer goes through in order to solve a
problem or satisfy a need. They are as follows:
(1) Need/ Problem Recognition - A purchase process starts with a need, a problem or a motive within a
consumer‘s mind. Any internal or external stimulus may drive a customer to believe that he lacks something and
motivates him to look for some thing that will satisfy his need or solve his problem.
(2) Information Search - When a need/problem receives heightened attention from a buyer, he become more
receptive about information that may solve his problem and starts gathering data about products/services that
will satisfy this need. He uses his personal sources (friends, family, peers etc.) and commercial sources (radio, T.V.
news papers, internet etc.) to look for relevant information.
(3) Evaluation of Alternatives - After collecting information from various sources, the customer evaluates the
benefits and disadvantages of various product alternatives and develops a set of choices regarding the product
attributes, brand, store etc. that suit his/ her needs, taste & preference, personality, lifestyle etc.

(4) Selection and Trial - After keeping a set of choices in mind the customer makes the first product
trial. He may buy different products in small quantities (1 kg, 1 packet, 1 bottle) or actually use
products individually for some time (tasting food, inspecting phones, taking a test drive) to form an
opinion and develop an attitude towards the product.
(5) Purchase Decision - When the customer believes that a product or service offers the best solution
to his need or problem, he makes the actual purchase. This includes making a product choice,
choosing a brand, a dealer and deciding the amount and time of purchase.
(6) Post Purchase Dissonance/ Behavior - A person seeks reassurance after making a purchase. A
purchase generally has the following three outcomes:
Actual Performance is equal to expected performance - Customer‘s behavior is natural as the product
performed according to his expectations. This leads to repeat purchases. Actual Performance is less
than expected performance - The customer is dissatisfied as the product did not meet his
expectations and hence he rejects the product.
Actual Performance is more than expected performance - This leads to customer delight/satisfaction
as the product performance is better than his expectations. This leads to customer loyalty.

Personal Influence:
Personal influence is best described as the effect or change in a person’s attitudes or behavior as a result of
communication with others.
Opinion leaders are people who are able in a given situation to exert personal influence. They are the ones to
whom others look for advice and information.
The Mechanism of Diffusion
Diffusion of innovations is a theory that seeks to explain how, why, and at what rate new ideas and technology
spread. Everett Rogers, a professor of communication studies, popularized the theory in his book Diffusion of
Innovations;
Diffusion is the process by which an innovation is communicated through certain channels over time among the
members of a social system . Given that decisions are not authoritative or collective, each member of the social
system faces his/her own innovation-decision that follows a 5-step process :
1) Knowledge – person becomes aware of an innovation and has some idea of how it functions,
2) Persuasion – person forms a favorable or unfavorable attitude toward the innovation,
3) Decision – person engages in activities that lead to a choice to adopt or reject the innovation,
4) Implementation – person puts an innovation into use,
5) Confirmation – person evaluates the results of an innovation-decision already made.

Models of Consumer Behavior:
A model may be described as a representative of an actual system. It represents the similar
characteristics of a system. However various models have been proposed based on various
factors such as scope, social, environmental, psychological, etc.
Uses of Consumer Behavior Models
The chief purpose of proposing models is to identify the purchasing behavior of consumers.
However, these models can be utilized in determining.
• Buying attitudes of consumers.
• Useful variables while purchasing.
• The characteristics of various variables and
• Interrelationships among them.

Classification of Consumer Behavior Models
• Economic Model – According to economic model, buying power of a consumer depends on the concept of
utility which states that if an individual has certain sum of money and defined sets of requirements and a set of
products then he or she will spend his or her money only on those products which yields him or her maximum
benefits.
• The Learning Model – The learning model is entirely based in the capability of an individual to learn, forget and
discriminate. It is based on Pavlov's stimulus response which states that in order to bring changes in buyer's
behavior one must change the drives, stimuli and responses as per buyer's attitude or perceptions.
• The Psychoanalytical Model – Since, the psychoanalytical model is a combination of two words 'psychology'
and 'analyses,' it mainly deals with the analysis of psychology of consumers. According to this model, every
purchasing decision has a complex motive by a purchaser which can be influenced by his or her sense of desires
and longings.
• The Sociological Model – According to the sociological model individual's decisions not only depends on utility
factors but mainly they are dependent on societal factors like levels of society, groups of society and attitudes of
individuals of society. However it should also be noted that purchasing decisions are governed by societal
restrictions also.

• The Nicosia Model – The Nicosia model is one of the examples of systems model where human
being is treated as a system, with inputs as stimuli and behavior being its output. It is mainly
constructed by considering the marketing viewpoint of a consumer. It was proposed by Francisco
Nicosia, an expert in consumer motivation and behavior in 1990. It establishes the relationship
between the firms and its consumer. It focuses how the activities of firm target the consumer to
purchase firm's products and finally its usage and evaluation on certain criteria.
• The Howard Sheth Model – The Howard sheth model has been put forward by John Howard and
Jagadish Sheth in 1969. This model states that there exists certain variable which affects the
perception and learning of consumer, apart from inputs and outputs. These variables are imaginary
as it is difficult to measure them directly.
Several other models have been proposed to explain purchaser's behavior. But all these models have
their own pros and cons. In spite of their limitations, these models are helpful in determining
consumer's behavior.

Consumer Behavior - Research Process:
Consumer research plays a very important aspect, especially when a company decides to
launch a new product into the market. Companies conduct market research to better
understand the consumers, their needs and their satisfaction level.
After conducting various surveys and focus groups, companies analyze the consumer data
and then make recommendations based on the results.

The following illustration explains the consumer research process −

Developing Research Objectives
The first step in the consumer research process is developing the research objectives which involves
defining the purposes and objectives to ensure an appropriate design. A statement of objective helps
to define the type and level of information needed.
Collect Secondary Data
There are two distinct sources of secondary data − internal and external. Always seek internal sources
first. Most go straight to Google without considering the fact that data might exist within the
organization itself. This can sometimes be in the ‘heads’ of the personnel.
External Sources
External sources are numerous. Consumer Generated Media (CGM), especially, has grown in
importance as a data source. The key is to avoid spending too much time following ‘blind alleys’. This
is where the time and cost can escalate sharply.
Directories
Country information
Published marketing research reports
News sources
CGM (Newsgroups, blogs, groups)
Internet – single search engines, and multiple search engines

Primary Research
Primary research is basically the original research. Here you yourself collect the information through various tools
available. In primary research, you don’t tend to depend on any third parties. You may conduct interviews or
surveys, observe, or even directly go to the object for collecting information.
Quantitative Research
A quantitative research study is comprised of research design, the data collection methods, instruments to be
used, and the sample design.
Following are the three basic designs or approaches used for quantitative design −
Observational Research − In this method of observational research, the people or customers are observed
effectively when they purchase a particular product. It helps the researcher to gain in-depth understanding of the
relationship between the people and products by observing them while purchasing and using the product.
Experimentation − Experimentation is a type of research where only certain variables are manipulated while
others are kept constant in order to encourage the change in the constant variable
Surveys − A survey is a method of research in which an interviewer interacts with respondents to obtain facts,
opinions and attitudes.

Following are the various survey methods which are generally used −
Personal interview survey
Telephone survey
Mail surveys
Online surveys
Quantitative research data collection instruments
Data Collection Instruments for Quantitative Research Data
Questionnaire and Attitude Scale − For quantitative research the primary data collection instrument is a
questionnaire and the most frequent one is attitude scale which is used to capture evaluative data.
Following are the important methods of data collection in the qualitative design techniques which are used in the
initial stages of research.
In-Depth Interview − Depth interview is conducted in length and in a non-structured manner where the
interviewer is highly trained and minimizes his own participation in the discussion once the general subject is
discussed.
Focus Group − Focus group involves many respondents who interact with the analyst in a group discussion and
focuses on a particular product.
Projective Techniques
Projective techniques are best used to understand the motives of people when they are unconsciously rational.
The analyst generally analyzes and reports his findings based on the responses received in qualitative research
whereas in quantitative analysis, the researchers oversees the complete research, analyses the open ended
questions, classifies the responses and systematically tabulate them.

UNIT V
Consumer satisfaction and consumerism
Customer satisfaction is the measure of how the needs and responses are collaborated and delivered
to excel customer expectation.
It can only be attained if the customer has an overall good relationship with the supplier. In today’s
competitive business marketplace, customer satisfaction is an important performance exponent and
basic differentiator of business strategies. Hence, the more is customer satisfaction; more is the
business and the bonding with customer.
Customer satisfaction is a part of customer’s experience that exposes a supplier’s behavior on
customer’s expectation. It also depends on how efficiently it is managed and how promptly services
are provided. This satisfaction could be related to various business aspects like marketing, product
manufacturing, engineering, quality of products and services, responses customer’s problems and
queries, completion of project, post delivery services, complaint management etc.

It is necessarily required for an organization to interact and communicate with customers on a
regular basis to increase customer satisfaction. In these interactions and communications it
is required to learn and determine all individual customer needs and respond accordingly.
Even if the products are identical in competing markets, satisfaction provides high retention
rates. For example, shoppers and retailers are engaged with frequent shopping and credit
cards to gain customer satisfaction, many high end retailers also provide membership cards
and discount benefits on those cards so that the customer remain loyal to them.
Higher the satisfaction level, higher is the sentimental attachment of customers with the
specific brand of product and also with the supplier. This helps in making a strong and
healthy customer-supplier bonding. This bonding forces the customer to be tied up with
that particular supplier and chances of defection very less. Hence customer satisfaction is
very important panorama that every supplier should focus on to establish a renounced
position in the global market and enhance business and profit.

10 Ways to Enhance Customer Satisfaction
Communicate. Communication with the customer is the key to enhancing customer
satisfaction. Follow Up and Follow Through to assure and confirm expectations have been satisfied.
Be Confident. Customers like to deal with people who know what they are doing. We don’t want to
hear, “This is my first time doing this so …”
Be Professional. The customer is always right – even when they are wrong.
Build Customer Confidence. Your performance and ability to meet the customers’ needs will re-
assure them that they have made the right decision.
Build Value (Reputation). Be effective and perform efficiently: Everyone wants the best lawyer or
the best doctor. “We have the best person on it.”
Ask the customer. Is there anything else we can do for you today? This suggests that you are able to
do more if necessary. The customer may just say, “Not today, but may be next time.” At least you
know they’ll may be back versus NEVER.

Don’t send out surveys. There are many ways to measure customer satisfaction without sending
surveys. “Paying” someone to provide an opinion may even change it. “Will I still get a free lunch if I
tell you what I’m really thinking?” Remember the Vending Machine example from above? The
vending machine knows exactly how poor performance looks and feels.
Be THE Solution. We coined a phrase some time ago – “Thinking so you don’t have to.” Take away
the problem and be the solution.
Thank You. Show your customers that you appreciate their business. It may be as easy as saying
“Thank You for Your Business.”
Smile – Whether the customer can see you or not – SMILE. Studies have suggested that people
know or can sense when other people are smiling. We can’t quote a source for this statement,
however, smiling is also good for you.

Models and Determinants of consumer behavior

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