Consumer Behavior

Consumer Behavior – Topic 2

Economic Models: Consumer Behavior Models; Need Recognition, Search, Pre-purchase Alternative Evaluation, Purchase, Consumption, Outcomes

You personal involvement in the product, service or candidate will impact how you buy, order or vote.  We speak of low and high involvement. This is a function of just how much searching you are willing to do.  Low involvement products would include such things as sugar or salt vs. high involvement such as cars or computers.  And the price of the item does not indicate the level of involvement by the consumer.  Some very inexpensive items become high involvement (i.e., clothes, gifts).

Factors that may lead to why people do not buy

1. marketing factors: Let me remind you of the 4-Ps of marketing – the marketing factors: product, price, promotion, and place.   Perhaps the product is poorly priced and thus is too high for the product category or the product is just not a good product.
2. cultural factors: a classic study was done immediately following World War II for Nescafe, an instant coffee.  During the war when many products were rationed, such as coffee, Nescafe was a very popular product.  However when the war ended, the product lost much share in the market.  A taste test revealed that the flavor was competitive with regular coffee.  Why then did people consider instant coffee as inferior?  Haire devised a study in which two identical shopping lists were presented to shoppers with only one difference – One of the lists had regular coffee while the other had instant Nescafe.  Then the subjects were asked to describe the shopper based on the list.  The shopper whose list included Nescafe was described as a “lazy housekeeper”.  Thus Haire determined that this was a cultural problem and his advice to the manufacturer was to stress taste.  Today the public has not problem with instant (in fact quick preparation is considered a positive attribute!)
3. social factors:  what will other people think – what will the neighbors think – this has to do with social risks.  Clothes fall into this factor.  Thus in marketing certain products associated with social risks, it is helpful to have someone famous wear them.  The classic example is Gloria Vanderbilt whose jeans set off a revolution.  Prior to G. Vanderbilt, jeans were considered work clothes and prohibited from most restaurants, schools, theaters etc.  Vanderbilt, whose ancestor was indeed the robber baron of the same name, was a minor model and clothing designer.  She designed a skin right woman’s jean and marketed them as evening, date, dress-up wear.  This was in the early 1970s.  Today jeans are accepted pretty much anywhere and the price point range from Wrangler through the top designers.
4. personal factors:  this has to do with how the individual may perceive of a product’s appropriateness for them – These considerations include gender, age, educational level.  For example, in our culture men generally do not shop for cosmetics although male skin is subject to the same degree of dryness and aging as a woman’s .  A mature female may feel that a particular outfit is too young for her or perhaps a skirt too short.
5. structural factors – think about how certain products simply would not fit into your life.  If you live in New York, where would you store a boat?  Where would you surf?  What about the scuba industry – where can you dive?  Consider how we park in this city with one bumper kissing the next.  Now imagine opening a large and heavy SUV back door – there simply isn’t room to do so.
6. psychological factors – really has to do with what limits our minds may place on certain categories:

1. instinctive fears – humans have a genetic predisposition to fight for life and that which is safe.  Electric blankets may be of concern to certain people who are fearful that they may be electrocuted.  The same is true with microwave ovens as they contain a small amount of radiation.  Certainly cell phones and the potential for  tumors from radiation has been a concern.  Contact lenses, laser eye surgery – all are concerning to some people.
2. fear of something new – computer  technology was extremely inaccessible

to many, in particular the elderly so to offset this fear, manufacturers would stress how simple it was that even a child could operate it  

1. fear of large expenditures – off course we are all concerned about spending large sums of money – the solution is to talk about the value and not the price of the product

There are also some confusions for the potential consumer that include issues such as being offered too many choices.  What the computer industry found was that it was far more effective to offer fewer models.  

There may also be confusion concerning how to estimate value, such as with  used cars.  Now new car companies have begun offering “pre-owned” vehicles with warranties (used cars in the past were sold with an “as is” condition and no warranty).  

Confusion may also exist with a “blurred image” that is, when products look much alike but in fact are different, such as with computers.  Computers companies began to differentiate their products with branding, such as with “intel inside”.

Economic Model

What economists have contributed to the field of consumer behavior

1. consumption function – the concept that everything relates to income – the availability of disposable income –
2. George Katona - - a psychological economist – developed the field of behavioral economics, that is the “human” side of economics.  Katona was interested in measuring consumer confidence and developed an Index of consumer confidence to measure consumer sentiment about the future of the economy.

The way people feel about the economy very much impacts spending.  That is if they feel good, then they will spend more.  

Several research organizations measure these feelings by telephone surveys.  In general, if consumer confidence goes down, then spending goes down.

1. Law of Demand - - when product scarce, it is very desirable.  Prices will go up but eventually, as desire is filled, then demand may go down, and with it, price.
2. Price/quality relationships – people don’t know how to judge quality and rely on such surrogate indicators  as cost, brand name (which is really a surrogate indicator of quality, the name of the retail store, or product, or manufacturer.

Price Quality Relationships

Consumers often are not able to judge quality so they will use surrogate indicators as substitutes.  To really be able to judge quality, often you would need an engineering degree!

A brand name might be used as a substitute for quality (i.e., IBM equals quality) – and a brand name can be transferred to other products via what is referred to as a Brand Extension.  Moving a name from one category to another, such as Tylenol, an analgesic and now leading in the cold/flue and allergy category.     Think about how Arm & Hammer has moved into new categories with its power name.

The public looks for ways of judging quality.  If there is no brand name, then they may use a store name.  Or perhaps the country where the product was manufactured.  Of course the worst cue is price yet we still imagine “you get what you pay for.”  In this case, it is advantageous for a company to charge the highest possible price.  But if the product is priced too high, then no one will buy it.   However if it is too inexpensive, it will not be purchased either.  Experience and good judgment are necessary in determining how to price a product.

A study published in the Journal of Consumer Affairs use ratings from Consumer Reports and compared these to price asking “do you get what you pay for?”  The study noted a low correlation

Engel, Kollet, Blackwell developed one of the most thorough models of Consumer Behavior.  First they identified all the relevant variables that effect consumers and then they showed the relationship among these variables.

Three major categories were identified:

1. Environmental Influences

1. cultural – what you buy, what you eat – culture is learned.  In American we don’t eat cats or dogs – they are our pets.  The same is true with insects although insects are consumed in many countries worldwide and are not only convenient, economical but also nutritious
2. Personal influences –consider the people you admire and your opinion leaders and reference groups (i.e., Paris Hilton – why do people care where she goes and what she does?).  

1. Industrial Differences

1. consumer resources (time, money) and information processing abilities.  The ability to process information (i.e., older people do so quite differently than you do) will effect the processing or ads as well.  For the elderly need simpler messages.
2. Motivational and involvement (both conscious and unconscious)  - motives certainly play a key role role in what you buy – is a car for transportation or MORE than transportation?  For many a car is a symbol of their success.  Sometimes there are hidden motives in purchases, such as a men who purchase diamonds and furs to again show how successful they are.  Diamonds are also a symbol of love and longevity.
3. Knowledge –what you know about a product or product category will clearly impact both search and purchase behavior.
4. Attributes – often times can predict behavior as their appears to be a connection  between attitudes and behavior.  Marketers try to study attitudes to predict behavior – attitudes include feelings and knowledge
5. Personality and lifestyle

1. Psychological Processes

1. information processing – we are bombarded with information – how does the consumer process and make sense of it?

Decision Processing Behavior

Three decisions occur over time: