CONSUMER BEHAVIOUR

MBA III SEM

UNIT 1: Introduction to Consumer Behaviour: Definition, Nature and Scope of Consumer Behaviour, Customer
Satisfaction, Customer Loyalty, Customer Retention, Consumer Research. Consumer Decision Making–
Factors influencing consumption decisions, Process and Models of Consumer Decision Making- Howard Sheth
Model, Nicosia Model, Webster and Wind Model.

INTRODUCTION TO CONSUMER BEHAVIOUR

MEANING AND CONCEPT

Though similar, consumers are unique in themselves; they have needs and wants which are varied
and diverse from one another; and they have different consumption patterns and consumption
behaviours. The study of consumer behaviour is the study of how individual make decisions to spend
their available resources (money, time, and effort) on consumption- related items. The marketer helps
satisfy these needs and wants through product and service offerings. For a firm to survive, compete
and grow, it is essential that the marketer identifies these needs and wants, and provides product
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offerings more effectively and efficiently than other competitors. A comprehensive yet meticulous
knowledge of consumers and their consumption behavior is essential for a firm to succeed.

DEFINITIONS OF CONSUMER BEHAVIOUR

Consumer Behaviour can be defined as “the study of individuals, groups, or organisations and the
processes they use for selecting, securing, and disposing of products, services, experiences, or ideas
to satisfy needs; and the impacts that these processes have on the consumer and society”.

Other Definitions:

• The study of consumers as they exchange something of value for a product or service that
satisfies their needs - Wells and Prensky

• The decision process and physical activity engaged in when evaluating, acquiring, using or
disposing of goods and services. - Loudon and Bitta

• The behaviour that consumers display in searching for, purchasing, using, evaluating and
disposing of products and services that they expect will satisfy their needs.- Schiffman and
Kanuk

• The mental and emotional processes and the physical activities of people who purchase and
use goods and services to satisfy particular needs and wants. – Bearden

• Those actions directly involved in obtaining, consuming, and disposing of products and
services including the decision processes that precede and follow these actions. -Engel,
Blackwell, Miniard

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 DIMESIONS / SCOPE OF CONSUMER BEHAVIOUR

Consumer Behaviour deals with the buying behaviour of individuals. The study of consumer
behaviour deals with understanding consumption patterns and behaviour of the consumers. Consumer
buying behaviour studies various situations such as what do consumers buy, why do they buy, when
do they buy, how often do they buy, for what reason do they buy, and much more. An example can
be a consumer research to know why women buy moisturizers (to reduce skin problems), the most
preferred brand (Olay, L’Oréal), how often do they apply it (twice a day, thrice a day), where do the
women prefer to buy it (supermarkets, online) and how many times do they buy it (weekly, monthly).

Consumer behaviour covers the following dimensions under its scope:

1. Why and why doesn’t a consumer buy a product?

Every customer shows inclination towards particular products and services. Consumer interest is
nothing but willingness of consumers to purchase products and services as per their taste,
need/mind set and their ability to spend.
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2. When does a consumer buy a product?

Consumers purchase products and services as and when need arises. These needs may arise
during festival seasons, marriages, or other special occasions. During these times, the buying
tendencies of consumers increase as compared to other months. Fluctuations in the financial
markets and recession decrease the buying capacity of individuals. The main catalysts which
triggers the buying decision of an individual are- need for a particular product/service, social
status, gifting to others etc.

3. How does a consumer buy a product?

There are several factors which influence buying decision of a consumer such as psychological,
social, cultural factors etc. Whenever the need arises, a consumer searches for information which
help him in his purchase. The sources of information may be friends, family, print and visual
media, social groups etc. Past experiences also play an important role in influencing the buying
decisions of the consumers. On the basis of these factors, a consumer selects the products and
purchases them.

4. Where do they buy it from?

The place from where the customer decides to buy is the place from where the actual purchase
is made from. Sometimes the place is pre-decided, sometimes he make a spontaneous decision
at the store only. So retailers display the goods in an attractive manner with the help of in-store
advertising or attractive window displays etc, to attract the customers towards their offerings.

5. Who makes the buying decision and who buys?

Who makes the buying decision in a family or a group, who is the actual buyer, who uses the
product? The study of consumer behaviour looks for finding answers to these questions. The
scope of consumer behavior includes not only the actual buyer but also the various roles played
by him and other individuals in a buying decision.

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 NATURE/ CHARACTERISTICS OF CONSUMER BEHAVIOUR

The main characteristics of consumer behaviour are as follows:

1. Consumer behaviour is a Systematic process:

Consumer behaviour is a systematic process relating to the buying decisions of a customer. This
means that consumer behaviour consists of a series of steps which are followed by every
consumer.
These steps are:
i. Identification of need for the product
ii. Search for information relating to the product
iii. Evaluating the alternative products/ brands available
iv. Purchase decision
v. Post purchase evaluation

2. Consumer behaviour as a subject is interdisciplinary in nature:

Consumer behaviour has borrowed heavily from psychology (the study of the individual:
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individual determinants in buying behavior), sociology (the study of groups: group dynamics
in buying behavior), social psychology (the study of how an individual operates in group/groups
and its effects on buying behavior), anthropology (the influence of cultural and cross-cultural
issues in buying behavior), and economics (income and purchasing power).

3. Consumer behaviour is influenced by various factors:

Consumer behaviour is affected by a number of factors. These can be demographic factors,
social factors, personal factors or cultural factors.

4. Consumer behaviour is different for different consumers:

The consumers are unique in themselves, i.e. all consumers behave differently from each other
when they are making purchase decisions. This is due to the different factors which affect their
behaviour differently.

5. Consumer behaviour is different for different products:

Behaviour of a consumer differs for different products. Consumers may buy different quantities
of different products depending on their needs for those products. They may devote less time
to the purchase of certain items and on the other hand, a lot of time in buying some other
products.

6. Consumer behaviour varies across regions:

Consumer behaviour varies across states, regions and countries. For example, behaviour of an
urban consumers is different from that of a rural consumer.

7. Consumer behaviour undergoes a change overtime:

Consumer behaviour undergoes a change overtime depending upon changes in age, education
and income level of a consumer. For example, children may prefer brighter clothes but as they
grow up they tend to prefer more subtle colours.

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 8. Consumer behaviour leads to spread-effect:
Consumer behaviour causes a spread-effect. This means that buying behaviour of one person
influences the purchase behaviour of another person. For example, people get influenced by
what their friends and colleagues purchase and tend to copy them.

9. Consumer behaviour is vital for marketers:

For the growth and sustenance of their business, it is very important that the marketers have a
good knowledge of consumer behaviour. This enables the marketers to design appropriate
marketing strategies for their customers.

IMPORTANCE OF CONSUMER BEHAVIOUR

Consumer behaviour or buying behaviour broadly refers to the process consumers go through before
and while buying, consuming or disposing of any goods or services. It starts with a need or want and
ends with a satisfaction level for the offered product or services. The study of consumer behaviour
involves understanding what, when, why, where, how of all the products, services and parties are
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involved. The study of consumer buying behaviour is most important for marketers as it helps them
to understand the expectation of the consumers. It helps them to understand what makes a consumer
buy a product. Marketers can understand the likes and dislikes of consumers and design their
marketing efforts based on the findings.

Below mentioned are some of the points highlighting the importance of the study of consumer
behaviour.

1. Helps in new product development:

The knowledge of consumer behavior helps the marketer to understand and predict the
consumption patterns and consumption behaviour of people. The study of consumer behaviour
discovers the habits, tastes and preferences of consumers and such discoveries enables the
marketers to plan and develop new products according to required specifications.

2. Helps in capturing new markets:

A study of consumer behaviour helps the marketers to understand the consumers’ needs,
aspirations, expectations, etc. This knowledge is useful to the marketers in exploiting new market
opportunities and meeting the challenges of the markets.

3. Helps in formulating price policies:

The study of consumer behaviour is equally important in designing pricing policies. The buyers
purchase certain items only because these articles are cheaper than the competitor’s products in
the market. In such a case, the price of such products cannot be raised. On the other hand, some
other products are purchased because they enhance the prestige and social status of people. The
price of such products can easily be raised or fixed higher. Some products are purchased under
particular emotions such as khadi garments. Prices of articles purchased under emotional motives
can also be raised.

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 4. Helps in decisions regarding channels of distribution:
The methods which are used by marketers for distributing their products also depend upon the
consumer demand and buying habits. For example, the goods which are sold and purchased
solely on the basis of low price must have cheap and economical distribution channels. Articles
which require after-sale service such as tv sets, refrigerators etc., must have different channels
of distribution. Thus, decisions regarding channels of distribution are taken on the basis of
consumer behaviour.

5. Helps in designing production policies:

The study of consumer behaviour affects production policies of a business. It is necessary for a
business to be in continuous touch with the changes in consumer demand and requirements so
that necessary changes in the product and production volume may be made.

6. Helps in decisions regarding sales promotion:

A study of consumer behaviour is also vital in making decisions regarding sales promotion. It
enables the marketers to know what motives prompt the consumers to make purchases and the
same are utilized in advertising media to awaken desires to purchase. The marketers take
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decisions regarding brand, packaging, discounts, gifts etc. on the basis of consumer behaviour
for promoting sales of the products.

7. Helps in understanding changes:

Consumer preferences are changing and are becoming highly diversified. This shift has occurred
due to availability of more choices. Thus, study of consumer behaviour is important for
understanding the changes occurring in the preferences of the consumers.

8. Helps in making innovations in existing products:

Rapid introduction of new products with technological advancements has made the job of
studying consumer behaviour more vital. For example, the information technologies are
changing very fast in personal computer industry as well as mobile handset manufacturing
industry. The study of changing consumer choices makes it easier for the marketers to undertake
research and development in order to make innovative changes in their existing products.

FACTORS AFFECTING CONSUMER BEHAVIOUR

What we buy, how we buy, where and when we buy, in how much quantity we buy depends on our
perception, social and cultural background, our age and family cycle, our attitudes, beliefs values,
motivation, personality, social class and many other factors that are both internal and external to us.
While buying, we also consider whether to buy or not to buy and, from which source or seller to buy.
There are several factors which influence the buying decision of consumers, cultural factors being
one of the most important factors.

The major factors affecting the consumer decision-making process are:

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 1. Demographic Factors
2. Cultural Factors
3. Social Factors
4. Personal/ Psychological Factors

Demographic Factors Cultural Factors Social Factors Personal Factors

➢ Age and Life Cycle ➢ Culture ➢ Reference Groups ➢ Lifestyle

➢ Gender ➢ Sub-Culture ➢ Family ➢ Personality
➢ Income ➢ Relatives and Friends ➢ Perception
➢ Education ➢ Role in Society ➢ Attitudes
➢ Occupation ➢ Social Status ➢ Motivation
➢ Learning

DEMOGRAPHICAL FACTORS:
Demographics describe the population characteristics in terms of its size, distribution, or personal
characteristics of individual buyers such as age, education, economic conditions. These are most often
used as the basis for market segmentation because these characteristics usually influence consumer
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choice and decision-making.

i. Age and Life Cycle: Age and human lifecycle influence the buying behaviour of consumers.
People buy different goods and services over their lifetime. Buyer’s choices and preferences
are also age related. Each age group represents a significant volume of buyers. Moreover, as a
person passes through different stages of his life, he needs different sets of products. For
example: Teenagers would be more interested in buying bright colours as compared to a
middle-aged or elderly individuals who would prefer decent and subtle designs.

ii. Gender: Gender is another important variable to distinguish between choices of male and
female consumers. According to many authors, some decision are male dominated, some are
female dominated and other are joint in nature. The consumption patterns have also changed
in the recent decades because of the upsurge in the number of working women.

iii. Income: Income has been an important variable for determining buyer behaviour. The buying
tendency of an individual decides how much he spends and on which products. Individuals with
high income would buy expensive and premium products as compared to individuals from
middle and lower income groups who would spend mostly on necessary items.

iv. Education: The levels of education achieved by a buyer also influence his buying behaviour.
Education levels usually determine occupational differences and thereby income. Education
may also affect skills and expertise and therefore income. Literacy affects consumer markets in
many ways. It also indirectly indicates the general awareness of the consumer and likely
sophistication of information search and evaluation. It also determines the consumer’s choice
of modes of information search and the media and content communicated by the marketer.

v. Occupation: The occupation of an individual plays a significant role in influencing his/her

buying decision. An individual’s nature of job has a direct influence on the products and brands

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 he picks for himself/herself. The type of work one does and the types of individuals one works
with, also directly influence one’s values, lifestyle and all aspects of the consumption process.
Differences in consumption between occupation classes have been found for many products
and services.

CULTURAL FACTORS:
Cultural factors comprise of set of values and ideologies of a particular community or group of
individuals. Cultural factors have a significant impact 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.

The cultural Factors are:

i. Culture: It is the culture of an individual which decides the way he/she behaves. In simpler
words, culture is nothing but values of an individual. What an individual learns from his parents
and relatives as a child becomes his culture. Culture determines what people wear, eat, and where
they live and travel. Culture affects what people buy, how they buy and when they buy. For
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Example - In India, people still value joint family system and family ties. Children in India are
conditioned to stay with their parents till they get married as compared to foreign countries where
children are more independent and leave their parents once they start earning a living for
themselves.

ii. Subcultures: Each culture further comprises of various subcultures such as religion, racial
groups, etc. For Example: Male members of different religious communities would prefer
buying different clothes during auspicious ceremonies. People in North India prefer to eat bread
(roti) over rice, which is a favourite with people in South and East India.

SOCIAL FACTORS
Social factors play an essential role in influencing the buying decisions of consumers. Human beings
are social animals. We need people around to talk to and discuss various issues to reach to better
solutions and ideas. We all live in a society and it is important for individuals to adhere to the laws
and regulations of society.

Social Factors influencing consumer buying decision can be classified as under:

i. Reference Groups: Reference groups comprise of groups of people that individuals compare
themselves with. These groups may be informal or formal. Reference groups share a direct or an
indirect relationship with the consumer and may or may not interact with the consumers on a
regular basis. Example - Religious associations, sports groups, political parties, clubs etc.
ii. Family: Family members can strongly influence a buyer’s behaviour by restricting their choices
of products or influencing their consumption behaviour. Marital status also influences the buying
behaviour of an individual. A married individual would show strong inclination towards buying
products which would benefit not only him but also his family members as compared to a
bachelor. For example: An individual who is married would be more interested in buying a house,
car, household items, furniture and so on.
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 iii. Relatives and Friends: Every individual has some people around who influence him/her in any
way. These include his relatives and friends. All of these influence the buying decisions of
consumers because they have used the product or brand earlier. They know what the product is
all about i.e. they have complete knowledge about the features and specifications of the product
and therefore the buyers tend to pick up products their friends recommend. For example: A
student may purchase a specific brand and model of laptop because his friends may be using the
same model and are quite satisfied with the product.

iv. Role in the Society: Each individual plays some role in the society depending on the group he
belongs to. The buying tendency of individuals depends on the role he plays in the society. For
example, the lifestyle and purchase decisions of a politician will be entirely different from that
of an actor. Also, an individual working as CEO with a reputed firm is also someone’s husband
and father at home. His choice of products and services may differ at both places depending upon
what role he is playing at a specific time.

v. Social Status: An individual from an upper middle class family would spend on luxurious items
such as expensive gadgets, cars, dresses etc, whereas an individual from middle to lower income
group would generally buy items required for his/her basic needs. A person who finds it difficult
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to make ends meet would rather prefer spending on items necessary for survival. Individuals
from middle class segment generally are more interested in buying products which would make
their future secure.

PERSONAL/ PSYCHOLOGICAL FACTORS

Personal Factors play an important role in affecting consumer buying behaviours.

Following are some of them:

i. Personality: An individual’s personality affects his buying behaviour. Every individual has his/
her own characteristic personality traits, which reflect in their buying behaviour. For example, a
person may be an introvert or an extrovert, he may be sociable or a loner. And his choice of
products depend upon his personality. A fitness conscious person would always look for fitness
equipment’s whereas a music lover would happily spend on CDs, concerts, musical shows etc.

ii. Learning: Learning comes from information and through experience. An individual comes to
know about a product and service either after he/she uses the same or they have come across
some information about them. An individual who have positive information or experience about
a particular product/service will show a strong inclination towards buying that product.
Consumers purchase products/services based on their opinions which they form towards a
particular product or service. A product might be really good but if the consumer feels it is
useless, he would never buy it.

iii. Perception: What an individual thinks about a particular product or service is his/her perception
towards it. Individuals think differently and their perceptions do not match. For someone a Dell
Laptop might be the best laptop while for others it could be just one of the good brands available.
Individuals with the same needs might not purchase similar products due to differences in
perception.
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 iv. Beliefs and Attitude: Beliefs and attitude play an essential role in influencing the buying
decision of consumers. Attitude is the feeling of favourableness or unfavourableness towards
something. Individuals create a certain image of every product or service available in the market.
Every brand has an image attached to it, also called its brand image. Consumer attitudes toward
a firm and its products greatly influence the success or failure of the firm's marketing strategy.

v. Lifestyle: Lifestyle, a term proposed by Austrian psychologist Alfred Adler in 1929, refers to
the way an individual stays in the society. It is really important for some people to wear branded
clothes whereas some individuals are really not brand conscious. An individual staying in a posh
locality needs to maintain his status and image.

vi. Motivation: Buyers get motivated to buy products which they need and want. There are several
factors which motivate individuals to purchase products and services. An individual who is
thirsty would definitely not mind spending on soft drinks, packaged water, juice and so on.
Motivation determines whether and when the consumer will buy a product, even when he has a
positive attitude towards it.
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CONSUMER RESEARCH

CONCEPT
An organization that has an in-depth understanding about the customer decision-making process, is
most likely to design a product, put a certain price tag to it, establish distribution centres and promote
a product based on consumer research insights such that it produces increased consumer interest and
leads to more purchases. For example, a consumer electronics company wants to understand the
thought process of a consumer when purchasing an electronic device, which can help the company to
launch new products, manage the supply of the stock, etc.

Consumer Research is a part of market research in which inclination, motivation and purchase
behaviour of the targeted customers are identified. It uses research techniques to provide systematic
information about what customers need. Using this information brands can make changes in their
products and services, making them more customer-centric, thereby increasing customer satisfaction.
Consumer research helps businesses or organizations understand customer psychology and create
detailed purchasing behaviour profiles. This in turn, helps to boost business.

OBJECTIVES OF CONSUMER RESEARCH

Consumer behaviour research is conducted keeping in mind the following objectives:

• When a brand is developing a new product, consumer research is conducted to understand

what consumers want or need in a product, what attributes are missing and what are they
looking for.

• Consumer research is conducted to improve brand equity. A brand needs to know what
consumers think when buying a product or service offered by the brand. Every good business
idea needs efficient consumer research for it to be successful. Consumer insights are essential
to determine brand positioning among consumers.
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 • Consumer research is conducted to boost sales. The objective of consumer research is to look
into various territories of consumer psychology and understand their buying pattern, what
kind of packaging they like and other similar attributes that help brands to sell their products
and services better.

• The identification of consumer needs, as well as their preferences, allows a business to attract
more customers, set the best price for their products and create the right marketing message.

METHODS OF CONSUMER RESEARCH

Consumer behaviour research is based on two types of research methods:

1. Qualitative Consumer Research

The purpose of qualitative research is to go deeper into understanding the customer motivation
and emotion. Qualitative research is descriptive in nature, It’s a method that uses open-ended
questions, to gain meaningful insights from respondents. This approach can be useful for
revealing aspects such as why customers like or dislike a brand, why they like particular
marketing messages and dislike others, and what motivates actual consumer behaviour.
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Qualitative research is conducted through the following research methods:

i. Focus Groups:
Focus groups, as the name suggests, is a small group of subject experts who come together
to analyse a product or service. Focus group comprises of 6-10 respondents. A moderator
is assigned to the focus group, who helps facilitate discussions among the members to draw
meaningful insights.

ii. One-to-one Interview:

This is a conversational method where the researcher asks open-ended questions to collect
data from the respondents. This method heavily depends on the expertise of the researcher
as to how much the researcher is able to probe the respondent with relevant questions to
get maximum insights. This is a time-consuming method and can take more than one
attempt to gain the desired insights.

iii. Content/ Text Analysis:

Text analysis is a qualitative research method where researchers analyse the information
from consumers by decoding words and images from the documents available. Social
media is an example of text analysis. In the last decade or so, inferences are drawn based
on consumer behaviour on social media. Another example is feedbacks provided by the
customers regarding the products.

2. Quantitative Consumer Research

Quantitative research is all about numbers and statistic. Quantitative research refers to the
process of collecting large amounts of data through surveys, questionnaires, and polling methods.
Data that is obtained from consumers is then statistically, mathematically and numerically
evaluated to understand consumer preference. Organizations are dependent on quantitative
analysis for the statistical evaluation of data because it gives systematic, detailed information
about the choices of target audience.
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 PROCESS OF CONSUMER RESEARCH
The consumer research process can be broken down into the following steps:

1. Develop research objectives:

The first step to the consumer research process is to clearly define the research objective, the
purpose of research, why is the research being conducted, to understand what? A clear
statement of purpose can help emphasize the reason for undertaking the research.

2. Collect Secondary data:

Collecting secondary data first helps in understanding if research has been conducted earlier
and if there are any pieces of evidence related to the subject matter that can be used by an
organization to make informed decisions regarding consumers.

3. Primary Research:
In primary research, organizations or businesses collect their own data or employ a third party
to collect data on their behalf. This research makes use of various data collection methods
(qualitative and quantitative) that helps researchers in collecting first hand data.
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4. Collect and analyze data:

Collected data is then analysed and inferences are drawn to understand consumer behaviour
and purchase pattern.

5. Prepare report:
Finally, a report is prepared for all the findings by analysing the collected data so that
organizations are able to make informed decisions. By putting the study into practice,
organizations can become customer-centric and manufacture products or render services that
will help them in achieving excellent customer satisfaction.

The process of consumer research can also be depicted as hereunder:

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 CUSTOMER SATISFACTION, CUSTOMER LOYALTY AND CUSTOMER
RETENTION

Customer satisfaction, customer loyalty, and customer retention are related concepts in the realm of
business and customer relationship management, but they each refer to distinct aspects of the
customer-business interaction.

i. Customer Satisfaction: Customer satisfaction is the degree to which customers' expectations

regarding a product, service, or experience are met or exceeded. It's a short-term evaluation of
a customer's experience with a specific transaction. Satisfied customers are content with their
purchase or interaction, but this does not necessarily guarantee their long-term loyalty. Customer
satisfaction can be influenced by factors like product quality, customer service, ease of use, and
overall experience. Consumer satisfaction can be measured in different ways, such as through
customer surveys, feedback forms, online reviews, or social media interactions.

ii. Customer Loyalty: Customer loyalty goes beyond satisfaction. It refers to the emotional
attachment and commitment that customers have towards a brand or business. Loyal
customers consistently choose a particular brand over its competitors, even if there are other
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options available that might be more convenient or cheaper. Loyal customers are more likely to
be repeat buyers, recommend the brand to others, and remain engaged with the brand over time.

iii. Customer Retention: Customer retention refers to the rate at which customers stay with a
business in a given period of time. Customer retention focuses on maintaining the existing
customer base and preventing customers from leaving for competing brands. It's a strategy that
aims to keep customers engaged and satisfied so they continue doing business with the company.
Retaining existing customers can be more cost-effective than acquiring new customers, as loyal
customers tend to provide a steady source of revenue.

Relation between Customer Satisfaction, Customer Loyalty And Customer Retention

In essence, the relationship among these concepts can be summarized as follows:

❖ Satisfaction can lead to Loyalty: A satisfied customer is more likely to become a loyal
customer, but satisfaction alone may not ensure loyalty.

❖ Loyalty enhances Retention: Loyal customers are more likely to continue doing business
with a company over the long term, contributing to customer retention.

❖ Retention and Loyalty work together: Strategies to retain customers, such as personalized
experiences, loyalty programs, and exceptional customer service, can foster loyalty and
increase the likelihood of repeat business.

Businesses should strive for a balance between all three aspects. While customer satisfaction is a
critical starting point, the ultimate goal is to cultivate loyal customers and retain their business over
time. To achieve this, businesses need to focus on delivering high-quality products and services,
building emotional connections, and consistently exceeding customer expectations.

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 CUSTOMER SATISFACTION

Customer satisfaction is a term used to describe the level of contentment or fulfilment that a
consumer experiences after purchasing a product or service. It is an important metric that businesses
use to measure the success of their products or services and the overall performance of their
organization. High levels of customer satisfaction are important for businesses because satisfied
customers are more likely to become repeat customers and recommend the product or service to
others. On the other hand, low levels of customer satisfaction can lead to negative reviews and damage
the reputation of the business.

Customer satisfaction can be measured in different ways, such as through customer surveys, feedback
forms, online reviews, or social media interactions. The feedback received from consumers can help
businesses identify areas where they need to improve their products or services, as well as areas where
they are performing well. Businesses can improve consumer satisfaction by focusing on factors such
as quality, customer service, pricing, and convenience. By addressing the needs and preferences of
their customers, businesses can improve their overall performance and increase customer loyalty.
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DEFINITIONS OF CUSTOMER SATISFACTION

Consumer satisfaction refers to the positive emotional state or feeling that a consumer experiences
when they perceive that a product or service has met or exceeded their expectations.

Here are some other definitions of consumer satisfaction:

❖ According to Kotler, customer satisfaction is "a person's feelings of pleasure or disappointment

that result from comparing a product's perceived performance in relation to his or her expectations."

❖ Zeithaml and Bitner define customer satisfaction as "the customer's evaluation of a product or
service in terms of whether that product or service has met their needs and expectations."

❖ Oliver defines customer satisfaction as "a cognitive-affective state representing the degree of
consumer's fulfilment resulting from a product or service's appraisal that fulfils or surpasses
expectations."

❖ Anderson and Fornell describe customer satisfaction as "the consumer's overall evaluation of the
product or service based on the difference between expected and perceived performance."

IMPORTANCE OF CUSTOMER SATISFACTION IN CONSUMER BEHAVIOUR

Consumer satisfaction is a critical factor in consumer behaviour, as it has a significant impact on
consumer decisions, attitudes, and behaviour.

Customer satisfaction is essential in consumer behaviour due to the following reasons:

1. Loyalty and Repeat Purchase: Customer satisfaction plays a critical role in building customer
loyalty and repeat purchase behaviour. When consumers are satisfied with a product or service,
they are more likely to continue buying from the same company. Satisfied customers are also
more likely to recommend the product or service to their friends and family, increasing the
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 chances of repeat purchase. Loyal customers not only increase revenue but also serve as
advocates for the company, promoting the brand further.

2. Positive Word-of-Mouth: Satisfied customers are more likely to share their positive experiences
with others, leading to positive word-of-mouth. Positive word-of-mouth can be a powerful
marketing tool, as people tend to trust recommendations from their friends and family more than
traditional advertising. This can lead to increased sales, improved brand reputation, and customer
acquisition without additional marketing expenditure.

3. Brand Reputation: The level of customer satisfaction has a direct impact on a company's
reputation. High levels of satisfaction can lead to a positive brand image, while low levels of
satisfaction can damage the company's reputation. A strong brand reputation is essential for
building trust with consumers and can lead to increased sales and customer loyalty.

4. Reduced Marketing Costs: Satisfied customers are more likely to continue buying from the
same company without the need for extensive marketing campaigns. This can significantly
reduce marketing costs for the company, as they can rely on the loyalty and advocacy of their
satisfied customers to drive sales.
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5. Increased Customer Lifetime Value: A customer's lifetime value refers to the total revenue
generated by the customer during their relationship with the company. Satisfied customers are
more likely to remain customers for longer, increasing their lifetime value to the company. This
can be particularly important for companies with high customer acquisition costs, as it can be
more cost-effective to retain existing customers than to acquire new ones.

6. Competitive Advantage: A company that consistently delivers high levels of satisfaction can
gain a competitive advantage over its competitors. By providing better products, services, and
customer experiences, the company can increase customer loyalty and market share. This can
ultimately lead to increased profitability and long-term success.

Customer satisfaction is critical in consumer behaviour, as it has a significant impact on customer

loyalty, positive word-of-mouth, brand reputation, marketing costs, customer lifetime value, and
competitive advantage. Companies that prioritize consumer satisfaction and continuously strive to
improve it are more likely to succeed in the long run.

CUSTOMER LOYALTY

Customer loyalty refers to a situation where a customer develops a long standing preference or loyalty
towards a particular product or service. It refers to the emotional attachment and commitment that
customers feel towards a particular brand, product, or service. Customer loyalty is reflected in the
repeated purchases the customer makes of a particular product and his favourable nature towards a
product or service. It goes beyond simple repeat purchases; loyal customers have a strong preference
for a specific company and often choose that company over its competitors, even when other options
might be more convenient or cheaper.

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 When a customer is loyal to a specific brand, they are not easily influenced by availability or pricing.
They are willing to pay more as long as they get the same quality product or service they are familiar
with and love.

Other characteristics of a loyal customer include the following:

• They are not actively searching for different suppliers;
• They are willing to refer a brand to their family and friends;
• They are not open to pitches from competing companies;
• They are open to other goods or services provided by a particular business;
• They are more understanding when some issues occur and trust a business to fix them;
• They offer feedback on how a brand can improve its products or services;
• As long as there is a need, they will keep purchasing from a business.

Building customer loyalty is crucial for the long-term success of a business, as loyal customers can
become brand advocates, provide consistent revenue, and contribute to positive word-of-mouth
marketing

IMPORTANCE OF CUSTOMER LOYALTY

DR. TABASSUM ALI

Regardless of the size of a company, customer loyalty is essential. First-time customers are harder to
convince because they do not have any experience with the services or goods offered by a business. As
such, the brand needs a comprehensive marketing strategy to get them to purchase. However,
customers who have already shopped from a particular store are more accessible to sell to because they
know what to expect.

Some reasons why customer loyalty is essential are:

1. Repeat customers spend more than first-time customers. Existing customers have a way
higher average order value that increases with the duration they have been purchasing a brand.
2. Loyal customers produce higher conversion rates. Existing customers have way
higher conversion rates than new ones. The average conversion rate of a loyal customer is 60%
to 70%, while that of a new one is 5% to 20%
3. It boosts profits. To enjoy better profits, brands need to foster customer loyalty. Business profits
go up by 25% to 95% when customer retention rates are increased by only 5%.
4. Retaining an existing customer is cheaper than acquiring a new one. It is cheaper to keep an
existing customer than to bring a new one on board. Studies show that getting a first-time
customer is 5 times more expensive than retaining a loyal one.
5. Customer loyalty helps in effective planning. Customer loyalty enables businesses to predict
growth more effectively, thus helping in financial planning. Marketing teams can identify
committed customers who can be relied upon hence making it easier to make anticipatory
decisions based on their budget.
6. Loyal customer shop regularly. Given their good experience with a brand, repeat customers
have higher chances of returning. Moreover, their likelihood of making future purchases
increases as they make more transactions.
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 STEPS TO INCREASE CUSTOMER LOYALTY
To increase customer loyalty, businesses can take several steps:
1. Deliver High-Quality Products and Services: The foundation of customer loyalty is providing
products or services that consistently meet or exceed customer expectations. Quality should
always be a priority.

2. Exceptional Customer Service: Offering excellent customer service can make a significant
difference in customer loyalty. Responding promptly to inquiries, resolving issues efficiently,
and making customers feel valued and heard can go a long way in increasing customer loyalty.

3. Personalization: Tailoring the products, services, and communications to individual customer

preferences and needs can create a strong emotional connection and show that the business
understand and care about them.

4. Loyalty Programs: Implementing loyalty programs that offer rewards, discounts, exclusive
offers, and other incentives to repeat customers can encourage them to continue choosing the
brand.
DR. TABASSUM ALI

5. Consistent Communication: Businesses should stay engaged with the customers through
regular, relevant communication. This can include newsletters, social media updates, and other
forms of interaction that keep the brands in their minds.

6. Feedback and Improvement: Businesses should actively seek feedback from their customers
and use it to enhance their offerings. Customers appreciate it when they see their suggestions
leading to positive changes.

CUSTOMER RETENTION

Customer retention refers to the rate at which customers stay with a business in a given period of
time. Customer retention is a metric that measures customer loyalty, or the ability of an organization
to keep its customers over time. In addition to identifying the number of loyal customers, customer
retention can reflect or predict customer satisfaction, repurchase behaviour, customer
engagement and emotional ties to a brand. Customer retention is critical because the cost of acquiring
new customers is much higher than retaining existing customers. Retained customers are also more
likely to engage in word-of-mouth marketing or become brand ambassadors.

If an organization does not focus on customer retention but instead focuses solely on expanding its
customer base, it is potentially losing out on repeat customers. While the process of gaining new
customers, or customer acquisition, is important, it is also much more expensive. Maintaining
customers and transitioning them into recurring customers is just as important of a process as gaining
new ones.

MEASURING CUSTOMER RETENTION RATE

Customer retention is typically measured in terms of retention rate and should be monitored
continuously.
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 Calculating Customer Retention Rate (CRR) can be done in the following way:

1. Determine the period that is to be measured. This could be a year, a quarter, a month, etc.

2. Calculate the total number of customers at the start of the period. These are customers
who have purchased in the past and are familiar with the brand.

3. Calculate the total number of customers at the end of the time period. The customers at
the end are eventually divided by the starting number to get the retention rate.

4. Subtract the number of net new customers gained. Next step is to subtract the number of
new customers from the number of customers at the end of the time period.

5. Divide the total number of customers at the end of the period by the number of
customers at the start. This will give a result that can be multiplied by 100 to determine the
customer retention rate.

Customer Retention Rate Formula:

DR. TABASSUM ALI

Let's say a firm had 100 customers at the start of the year and earned 20 new customers. It also lost
10 customers by the end of the year. Then the customer retention rate would be 90%.

CUSTOMER RETENTION STRATEGIES

Some best practices and strategies to follow when considering customer retention include the
following:

1. Offer personalized service. Personalizing services to the customer can improve a customer's
experience and lead them to become repeat customers.

2. Use data to provide personalized support interactions. Data gathered about customers can
help aid organizations in knowing their preferences, enabling them to build more personalized
services.

3. Use social media. Social media sites such as Twitter, LinkedIn and Facebook can help an
organization reach out to its customers, build relationships and trust, and even respond
to customer support queries.

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 4. Build trust. Building relationships with customers will help increase brand loyalty and trust.

5. Incentivize loyalty. This can be done through customer loyalty programs or by offering
discounts or credit.

6. Gather customer feedback. Gathering feedback from customers enables an organization to

further personalize experiences.

7. Improve customer support services. Implementing a live chat or help desk tool, putting an
emphasis on responding to customer support queries quickly and encouraging customers to
create accounts can all help increase customer retention.

All these customer retention strategies together can help build more trust between an organization
and a customer, which can help to increase the chances of current customers becoming repeat
customers.

CONSUMER DECISION MAKING

DR. TABASSUM ALI

INTRODUCTION
A decision is defined as choosing an option from the available options. Decision making is the
process of choosing between two or more alternatives; it is the selection of an alternative out of the
few/many choices that are available. In other words, in order to make a decision, there must be a
choice of alternatives available.

Consumer Decision Making refers to making decisions regarding product and service offerings. It
may be defined as a process of gathering and processing information, evaluating it and selecting
the best possible option to solve a buying problem or make a buying choice.

Consumer Decision Making refers to the following decisions:

a) What to buy: The decision to buy any product is the most important task. Until and unless if a
decision is made a consumer cannot buy anything. Then the consumer takes a decision about
which brand to buy. This can be attached with the price and features of the product.

b) How much to buy: The next decision the consumer has to make is to how much of the product
is to be purchased. It depends on the type of the product.

c) Where to buy: Another decision the consumer has to make is where the product should be
bought from. Consumers usually will go to a place where the services offered are excellent.

d) When to buy: The consumer also has to decide the time when the purchase has to be made.
This also is influenced by the availability of the products. Usually the purchase made by a
consumer is very high during the festive season, due to large volume of discount.

e) How to buy: Under this the consumer has to decide whether to pay cash or by credit payment.
Also the instalment facility offered in online purchases may boost the sale of the products.

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 PROCESS OF CONSUMER DECISION-MAKING

All the consumers have their own needs in their daily lives and these needs lead them to make
different decisions. The effort put into each decision making is different. These decisions can be
complex depending on the consumer’s opinion about a particular product, evaluating and comparing,
selecting and purchasing among different types of products. The buyers rapidly change their
preferences and are affected by multiple factors at a given point of time. Sometimes the decisions are
taken on the spot or after evaluating various alternatives available and reassurance from those who
have already purchased the good or service. Consumer buying decision process refers to the series
of steps which a consumer follows in order to make a purchase decision. There are five stages in
the consumer decision making process. These are:

1. Need recognition and problem awareness

2. Pre-purchase information search
3. Evaluation of alternatives /Information evaluation
4. Purchase decision
DR. TABASSUM ALI

5. Post-purchase evaluation

1. NEED RECOGNITION AND PROBLEM AWARENESS:

This is a stage of identifying a deficiency/need. Need is the difference between the desired state and
the actual condition A need could be triggered off by an internal stimulus or an external stimulus.

A need is recognized in any of the following situations:

• Depletion or inadequate stock of goods: Here the consumer uses up the assortment of goods
he has and must repurchase in order to re-supply his needs.
• Discontentment with the stock of goods: When a consumer becomes discontented with the
products they own, and this lead to problem recognition.
• In case of changing financial circumstances of the consumer, a need arises for better options
of the current products he owns.
• Marketing stimulus: The marketers frequently attempts to stimulate needs through
promotional efforts. Such as an advertisement for a new pair of shoes stimulates a consumer’s
need recognition that he/she needs a new pair of shoes.

2. INFORMATION SEARCH:
After a need is recognized, the consumer goes for information search, so as to be able to make the
right purchase decision. According to Belch and Belch, whenever need arises; a consumer searches
for information from several sources which would help him in his purchase. Generally, a consumer
gathers information about the Product category, various alternatives available, and various brands.
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 Sources of Information:
The information sources are of two types:

• Internal Sources: This includes the consumer and his own perceptions. He recalls
information that is stored in his memory. Internal sources usually are personal experience
from handling, examining, using the product in the past, and internal sources seem sufficient
when it is a routine purchase and the product is of low involvement.
• External Sources: Here the consumer seeks information from the external environment.
External sources are used in cases where past knowledge and experience is insufficient, the
product is of high involvement and the risk of making a wrong decision is high. External
sources of information include: Personal sources: family, friends, neighbours, work peers;
Commercial sources: advertising salespersons, retailers, dealers and; Public sources: radio,
newspaper, television, magazines, internet etc.

Types of Search Activity:

The information search activity may be of various types:
DR. TABASSUM ALI

i. Specific: This type of search activity is specific to the problem and/ immediate purchase; it
is stimulated as the need arises, and the consumer actively seeks information.
ii. Ongoing: Here the search activity is a gradual process that could span over time. For
example: a student has been thinking of purchasing a laptop since the past three years, and
has been gathering information specific to the laptop as a product category and also about
the various brands available.
iii. Incidental: This is a by-product of another search activity or experience. Consumers absorb
information from their day to day routine activities and experiences. For example: a person
goes to a mall to buy a microwave oven; there in the store, he attends a demonstration of a
new laptop that is being launched.

3. EVALUATION OF ALTERNATIVES:
Once the consumer has gathered information and identified the alternatives, he compares the
different alternatives available on certain criteria. The evaluation criteria may vary from consumer
to consumer. For example, while purchasing running shoes; brand name, quality, price and comfort
may be considered differently by different buyers. The consumer evaluates the different alternatives
on one or few or many of these features and then makes a final choice. They are features that a
consumer considers in choosing among alternatives; these could be functional/utilitarian in nature,
or emotional.

The Evaluation Process

The evaluation process involves the following 2 steps:

i) Generation of choice alternatives;
ii) Identification of evaluative criteria: Attributes and benefits

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 i. Generation of choice alternatives:
While generating set of alternatives, a consumer moves from an evoked set towards the choice
set.
The various choice alternatives are:

• Evoked set/Consideration set: This is the set of alternatives that he actively considers
while making a purchase decision; these exist either in his memory or feature prominently
in the environment. The consumer perceives them to be acceptable.
• Inept set: These are those alternatives from the evoked set that the consumer excludes from
further consideration, as he perceives them to be inferior and unacceptable.
• Inert set: These are those alternatives from the evoked set that the consumer excludes
from further consideration, as he is indifferent towards them and perceives them as ones
without much advantages or benefits.
• Choice set: This comprises the final set of one or two brands from which he finally decides.

ii. Identification of Evaluative Criteria: Attributes and Benefits:

These are objective and subjective parameters of the brand that the consumer regards as
DR. TABASSUM ALI

important, and uses as standards to discriminate among the various alternatives. The consumer
evaluates the different alternatives on one or few or many of these features and then makes a
final choice.
The major evaluative criteria are:
• Economic: price, product attributes, brand image & features etc.
• Behavioural: need/motivation, personality, self-concept, lifestyle etc.
• Social influences: group influences, environmental issues etc.

4. PURCHASE DECISION:
After the consumer has evaluated the various alternatives, he selects a particular brand. Consumer
purchases may be trials/first purchases or repeat purchases.
i. Trials/First purchase: Trials could be elicited through promotional tactics such as free
samples, coupons, etc.
ii. Repeat purchases: If the consumer is satisfied, he would buy the brand again. Repeat purchases
lead to brand loyalty.

The consumer may further have to make decisions on buying alternative including:
i. Where to buy from?
ii. Whom to buy from?
iii. When to buy?

5. POST-PURCHASE BEHAVIOUR- OUTCOME AND REACTIONS:

The post purchase outcome and reactions contains two stages;
• Stage I : Post purchase Cognitive Dissonance, and
• Stage II : Product usage and reaction.

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 Stage I: Post purchase Cognitive Dissonance:
This is a feeling of tension and anxiety that a consumer experiences after the purchase of a product.
The consumer begins to have a feeling of uncertainty with respect to the performance of the product
and begins to doubt his purchase decision. He begins to ask himself if he has made the right choice.

Cognitive dissonance generally occurs in cases where:

• The decision making and purchase relates to a high involvement product;
• The purchase activity is irrevocable i.e., The consumer cannot return the product;
• The various other alternatives also have desirable features;
• The alternatives are also unique in some way or the other.

Consumers try to reduce this dissonance by:

• Gaining more product information;
• Discussing with other satisfied customers who have bought the same product/brand;
• Going back to the dealer and asking for reassurances.
• Referring to data (printed/audio visual) that supports and recommends the chosen
product/brand.
• Make others buy the same product/brand to reassure their choice.
DR. TABASSUM ALI

Marketers also make strategies to reduce dissonance such as providing guarantees, warranties, and
memberships to consumer forums and communication and follow up with the customers.

Stage II: Product usage and reaction:

After the purchase, the consumer uses the product and re-evaluates the chosen alternative in light
of its performance viz-a-viz the expectations. This phase is significant as it acts as an experience
and gets stored in the memory, affects future purchase decisions and acts as a feedback.

There could be three situations that can arise:

• Performance meets expectations: This leads to a neutral feeling; Customer may think of
more suitable alternatives next time.
• Performance exceeds expectations: The customer is satisfied and this leads to a positive
feeling. He would tend to repeat purchase and it would lead to brand loyalty. He would also
spread positive word of mouth.
• Performance falls short of expectations: Here, the customer is dissatisfied and this leads to
a negative feeling. The customer would search for other alternatives, express grievances,
spread negative word of mouth and may even resort to legal action.

It is important to note that the five-staged decision making process is not so simple; it is a complex
process. The decision making process is an interplay of reactions amongst a consumer and his
cognition, affect and behaviour on the one hand, as well as the environmental forces on the other
hand. Further, the procedure may not always follow a linear order, and the decision making may not
always proceed through all the five stages; it would vary across the nature of the product (high and
low involvement); the purchase situation (emergency or planned or routine); and the personal
characteristics of the consumer.

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 MODELS OF CONSUMER DECISION MAKING

The influences of social science have prompted marketing experts to propound certain buying
behaviour models for explaining buyer behaviour. These models are divided into distinct categories.
Several models have been put forward which shows that social sciences like Economics, Psychology,
Sociology and Anthropology have an influence on the buyer behaviour studies. A consumer
behaviour model is a theoretical framework for explaining why, when and how customers make
purchasing decisions. The goal of consumer behaviour models is to outline a predictable map of
customer decisions. By applying the models the marketers can accurately predict who will buy their
product and they can target the right customers at the right time.

The consumer behaviour models are broadly classified into Traditional and Modern Theories.
Traditional theories concerning consumer behaviour were based on economic theory whereas later
researches discovered that consumers purchase impulsively and are influenced not only by family,
friends, role models and advertisers, but also by their mood, emotions and situations. All the models
reflect both the cognitive and emotional aspects of consumer decision making.

Some of these theories/ models are discussed below:

DR. TABASSUM ALI

1. Traditional Consumer Behaviour Theories

Traditional behaviour models were developed by economists and were focussed on
understanding what customers purchase based on their wants and needs. Traditional models
include the following:
i. Economic Model or Economic Man Model
ii. Psychological or Learning Model
iii. Psychoanalytical Model
iv. Sociological Model

2. Contemporary/ Modern Consumer Behaviour Models

Contemporary models of consumer behaviour focus on rational and deliberate decision-making
processes rather than emotions or unconscious desires. The contemporary models include:
i. Nicosia Model
ii. Howard-Sheth Model
iii. Engel-Kollat-Blackwell Model
iv. Webster and Wind Model

TRADITIONAL CONSUMER BEHAVIOUR MODELS

1. THE ECONOMIC MODEL:

The model highlights that the buyers are usually unwilling to engage in extensive decision-making
activities and satisfied with utility or benefits of a product. According to economic model, a buyer
is a rational man and his buying decisions are fully governed by the concept of utility. According
to this model, consumers follow the principle of maximum utility based on the law of diminishing
marginal utility. The consumer wants to spend minimum amount for maximum gains. This means
that if the buyer has the purchasing power of choosing a set of goods/services to meet his need, he
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 will allocate this amount over a set of goods/services in a very rational manner with the intention
of maximising the utility or benefits.

The Economic Man model is based on:

❖ Price effect: Lesser the price of the product, more will be the quantity purchased.
❖ Substitution effect: Lesser the price of the substitute product, lesser will be the utility of
the original product bought.
❖ Income effect: When more income is earned, or more money is available, more will be the
quantity purchased.

This model, according to behavioural scientists is, not complete as-

❖ It assumes the homogeneity of the market.
❖ It assumes the similarity of buyer behaviour.
❖ Concentrates only on the product or price.
❖ It ignores all the other aspects such as perception, motivation, learning, attitudes,
personality and socio-cultural factors. It is important to have a multi-disciplinary approach,
as human beings are complex entities and are influenced by external and internal factors.
DR. TABASSUM ALI

2. PSYCHOANALYTICAL MODEL
Sigmund Freud is the father of psychoanalysis. The psychoanalytical model draws from his
theories and says that individual consumers have deep-rooted motives, both conscious and
unconscious, that drive them to make a purchase. These motives can be hidden fears, suppressed
desires, or personal longings.

This model explains that a business's appearance and marketing may appeal to a consumer's
conscious and unconscious motives, such as their social values or personal opinions about their
appearance. For example, a luxury clothing brand may publish ad campaigns that show attractive
people wearing their clothing. A consumer may have a desire to feel attractive, so viewing this
advertisement could appeal to those desires and influence the consumers to visit the company's
store. Marketing and business development professionals who work with companies that
emphasize their brand or image may benefit from using this behaviour model. Business can
consider using this model in advertisements or for in-store marketing campaigns.

3. THE SOCIOLOGICAL MODEL:

The Sociological Model of consumer behaviour says that purchases are influenced by an
individual's place within different societal groups: family, friends, and workgroups, etc. An
individual will essentially purchase items based on what is standard or norm of the groups they’re
in. This also means that a person typically buys items that align with a group's values or
expectations. For example, a member of a community hiking group may purchase active wear and
healthy snacks, while a business executive may spend on buying professional attire and office
supplies. According to the sociological model the individual buyer is influenced by society,
intimate groups as well as social classes. Buyers buying decisions are not totally governed by
utility; consumer has a desire to follow and fit it with his immediate environment.

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 Intimate groups comprising of family, friends and close colleagues can exercise a strong influence
on the lifestyle and the buying behaviour of an individual member. The peer group plays a very
important role in acting as an influencing factor especially in adopting particular lifestyles and
buying behaviour patterns. Similarly, depending on the income, occupation and place of residence
etc., each individual member is recognised as belonging to a certain social class. Each class has its
own lifestyle and buying behaviour pattern. So an individual member will adopt the role suitable
to conform to the style and behavioural pattern of the social class to which he/she belongs. The
marketers, through a process of market segmentation, can work out on the common behaviour
patterns of a specific class and group of buyers and try to influence their buying behaviour.

CONTEMPORARY/ MODERN CONSUMER BEHAVIOUR MODELS

1. THE NICOSIA MODEL:

Professor Francesco Nicosia, an expert in buyer behaviour and motivation, proposed his model of
buying behaviour in 1966. The model tries to establish a relationship between a firm and its buyers.
It argues that the company’s marketing messages determines whether customers will buy or not.
DR. TABASSUM ALI

The Nicosia model is divided into four major fields as depicted by the model diagram:

The Nicosia Model

25
 i. Field One: The business’ characteristics and the customer’s characteristics

There are two subfields in this field.

❖ Subfield 1 includes aspects of the firms marketing environment and communication
efforts that affect buyer attitudes.
❖ Subfield 2 includes buyer’s predisposition (bias, inclination) towards the product as
well as the firm.

ii. Field Two: Search and evaluation:

The second field of the Nicosia Model deals with the search for relevant information and
evaluation of firm’s brand in comparison with alternative brands. The output of this stage is
motivation to purchase the specific brand.

iii. Field Three: Purchase decision:

In the third field the consumer’s motivation toward the firm’s brands results in purchase of
the brand from a specific retailer.
DR. TABASSUM ALI

iv. Field Four: Feedback:

The final field consists of two important types of feedback from the post purchase
experience;
❖ One to the firm, in the form of sales data and other,
❖ To the consumer in the form of experience (satisfaction or dissatisfaction).
Experience of consumer with the product/service affects their attitudes and
predispositions concerning future message from the firm.

According to the model,

❖ The firm produces some type of communication that the consumer is exposed to.
Attributes of the messages and the buyer determine the nature of the buyer’s exposure
to it and its influence on him. The message from the firm first influences the
predisposition (bias, inclination) of the buyer towards the product and services.
❖ Depending on the situation, he develops 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. The buyer will probably become motivated to gain information at this
point and search activity will involve searching internal memory for relevant
information about the communication. External search may also occur.
❖ If the buyer processes relevant information and begins to favour the firm’s brand he will
be motivated toward it. If nothing intervenes, this motivation leads to a decision to buy,
otherwise the reverse may occur.
❖ At this point a number of outcomes can occur. One outcome is that the firm receives
feedback and another is that the buyer’s attitude toward the brand may change because
he gains experience. This experience is feedback to the buyer’s predispositions.

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 2. HOWARD AND SHETH MODEL:

This model was proposed by John Howard and Jagdish Sheth in 1969 in their publication entitled
‘The theory of Buyer Behaviour’. The Howard Sheth model of consumer behaviour theorises that
“the buyer’s journey is a highly rational and methodical decision-making process and
customers involves in problem-solving at every step; with different variables influencing the
course of decision making”.

According to this model, there are three successive levels of decision-making:

❖ Extensive Problem-Solving: In this kind of problem-solving, customers know nothing

about the product they’re seeking or the brands that are available to them. The consumer is
unfamiliar with the product/ service category; he is not informed of the product or service
offering, and thus, the situation requires extensive information search and evaluation.

❖ Limited Problem-Solving: Limited Problem solving occurs when the consumer is familiar
with the product or service offering; but he is unaware of the various brands. The consumer
is aware of some brands and also of the various criteria used to evaluate the product or
service offering but is unaware of the new brands that have been introduced. He has to gather
DR. TABASSUM ALI

knowledge to add to or modify the existing knowledge that he has in his memory.

❖ Habitual Response Behaviour: Customers are fully aware of all the choices they have and
know which brands they prefer. The result is that the purchase process involves no effort on
part of the consumer. It is simple and the process is completed quickly; purchases are routine
and made out of habit.

A simplified version of the basic Howard-Sheth model consists of four major sets of variables

i. Input variables are stimuli in the environment. These refer to the marketing messages a
consumer receives while her is going through the decision-making process. Inputs also refers
to any perceptions and attitudes that come from the consumer’s social environment, such as
their friends, family, and culture.

There are 3 types of stimuli:

❖ Significative stimuli (displayed information) The marketer furnishes physical brand
characteristics in the form of product or brand information.
❖ Symbolic Stimuli (Marketing message) verbal or visual product characteristics
defined through the marketing message/ advertisement.
❖ Social Stimuli provided by the consumer’s social environment (family, reference
group, and social class).

ii. Perceptual and learning construct are central component of the Howard and Sheth model.
These are the customer’s psychological variables including his needs, preferences, and goals,
which are assumed to operate when the consumer is contemplating a decision.

iii. Output variables: After inputs and perceptual and learning constructs are mixed together,
we get the output. The output is the customer’s resulting action under the influence of

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 marketing messages, social stimuli, and internal psychological attributes.

The output variables are arranged in an order from attention to actual purchase, as
follows:
❖ Attention- the magnitude of the buyer’s information intake,
❖ comprehension- the buyer’s store of information about brands,
❖ Attitude- the buyer’s evaluation of a particular brand’s potential to satisfy his motives,
❖ Intention- the buyer’s forecast of which brand he or she will buy,
❖ Purchase behaviour- the actual purchase act which reflects the buyer’s s
predisposition to buy as modified by any inhibitors.

iv. Exogenous variables are not directly part of the decision making process relevant exogenous
variables include the importance of the purchase, consumer personality traits, time pressure
and financial status.
The model can depicted as hereunder:
DR. TABASSUM ALI

Howard and Sheth Model

3. WEBSTER AND WIND MODEL OF ORGANIZATIONAL BUYING BEHAVIOR

Organizational behaviour refers to the buying behaviour of organizations that buy products for
business use, reselling or to make other products. Organizations consist of businesses, industries,
retailers, governments, and non-government organizations. Organizational buying behaviour is a
complex decision-making and communication process involving selection and procurement of
product and services by organisations.

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 The Webster and Wind Model is a comprehensive B2B buying behaviour model. According to the
model, there are four sets of variables which affect the buying-decision making process in a firm.
These are environmental, organizational, buying centre variables, and individual variables.
These variables are explained as hereunder:

i. Environmental Variables:
Environmental variables refer to any external factors that could affect a purchase decision. The
environmental variables include physical, technological, economic, political, legal, labour
unions, competition and suppliers. These environmental factors influence the buying decisions
of individual organisations. For example, in a recessionary economic condition, industrial firms
minimize the quantity of items purchased.

ii. Organizational Variables: The model may be depicted as hereunder:

Organizational variables refer to internal
factors that could influence a purchase
decision. The organizational variables include
objectives, goals, organisation structure,
purchasing policies and procedures, degree of
DR. TABASSUM ALI

centralization in purchasing, and evaluation

and reward system. These variables
particularly influence the composition and
functioning of the buying center, and also, the
degree of centralization or decentralization in
the purchasing function in the buying
organisation.

iii. Buying Centre Variables:

Buying centres are the purchase departments
of organisations. The centre or department
consists of members from different
departments who have a sound knowledge of
different items that are purchased in the firm.
The members may be senior or junior
managers, engineers, supervisors, clerical
staff etc. They make the purchase decisions
for the organisation as a whole. But who
makes the final purchase decision in the
buying centre? Who has the authority to sign
the contract, and who influences the buying
process? Buying centre variables take all of
this into account. The functioning of buying
centre is influenced by the organizational
variables, the environmental variables and the
individual variables. Webster and Wind Model

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 iv. Individual Variables:
These variables refer to the demographic and psychographic characteristics of the individual
members of the buying centres in the organisation. These variables include their demographic
information such as education level, attitude to risk, creativity, competitiveness, and style of
problem solving. All these variables are unique in each individual. The individual’s personal
goals, past experience and training will influence their way of operating. Each individual will
influence the purchase decisions to a greater or lesser extent.
DR. TABASSUM ALI

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