ISL460U-CONSUMER BEHAVIOR
Chapter 1: Consumption and Understanding Consumers
Introduction
A classification scheme is developed in an attempt to explore the different ways that products and experiences can provide meaning to people. This scheme identified four distinct types of consumption activities (Solomon et al. 2006, p.15-16):
1. Consuming as experience–when consumption is an emotional or aesthetic goal in itself, a consumer may find meaning in it. 2. Consuming as integration–using and manipulating consumption objects to express aspects of the self. 3. Consuming as classification–the activities that consumers engage in to communicate their association with objects, both to self and to others. 4. Consuming as play–consumers use objects to participate in a mutual experience.
In this chapter, consumption will be our primary focus. By focusing on consumption, we will try to grasp the importance of understanding consumer behaviour for companies. Next, we will proceed to the questions of “how consumers find meaning in life”, and “how they perceive life that requires consuming products, services, brands, ideas, time, etc.”, and “how companies can help their consumers through their marketing strategies and marketing mix that are designed in the light of perception theories”.
The Definition of Consumer Behaviour
Consumer behaviour is the totality of consumers’ decisions with respect to the acquisition, consumption, and disposal of offers.
The term need is the intersection between companies and consumers. A product is anything a consumer acquires or might acquire to meet a perceived need. Consumers generally buy need satisfaction, not physical product attributes. Most products satisfy more than one need. The need set is the blend of needs that is expected to be satisfied by consuming a product.
Consumer vs Customer
Customer is the person who regularly buys from a particular shop, brand, restaurant. Consumer is the one who engages in any activities of searching, purchasing, using or disposing of offers.
The term “customer” is typically used to refer to someone who regularly purchases from a particular shop or store. The term “consumer” refers to anyone engaging in any activities of searching, purchasing, using or disposing of goods or services. Consumers include not only the purchasers of economic goods and services but also buyers of time (parking space, hotel room, movies, TV programmes etc.), ideas (political ideas, education, putting on a mask during Covid 19 etc.).
Consumer Roles
As you may guess, the terms “customer” and “consumer” reveal that there are different roles that a consumer can play in different consumption settings, such as school, home, gym or airport.
In a consumption process there are four main steps to take: searching, buying, using and disposing. During these four main steps and the sub-steps within the main steps, different roles that different agents (father, mother, teacher etc.) play impose some important information for companies to understand their target and potential consumers. These household roles include the following;
• Influencer: Influencers can affect the outcome of the decision-making process through their influence on others. • Gatekeeper: Gatekeepers have some control over the decision-making process. • Decider: Deciders have the authority to make the decision • Buyer: The person in this role is responsible for engaging in the actual transaction or purchase. • Preparer: The person in this role is responsible for preparing the goods for use. • User: The person in this role is responsible for using the product that has been purchased. • Maintainer: The person in this role is responsible for maintaining the purchased product • Disposer: The person in this role chooses when and how to dispose of the product.
The Importance of Understanding Consumer Behaviour Perceptions
The purpose of a company is to get and keep customers. Being knowledgeable about how consumers make buying and consuming decisions, understanding how they use products and services are critical foundations of successful marketing efforts. In order to compete in a dynamic market place, companies need to know their consumers’ needs and wants, need sets, the roles they play in consumption processes, and their actions after consumption.
Gathering knowledge on the factors that affect both current and future needs and preferences of consumers is called market intelligence. Marketing managers collect market intelligence in a variety of ways such as by reading books, newspapers, and trade publications. Not only gathering knowledge but also using accumulated knowledge in designing successful strategies is required in order to be successful. This brings another important marketing term to the agenda: market orientation. It is “the companywide generation of market intelligence pertaining to current and future consumer needs, dissemination of the intelligence across departments, and companywide responsiveness to it (Arnould et at. 2002). Being market oriented creates a competitive advantage, so that companies will be able to convert their customers to
loyal customers who regularly purchase the brand and have an expressed preference for it with strongly positive feelings.
Customer Loyalty
Customer loyalty can be defined as “a commitment to rebuy or re-patronage a preferred product, service, or brand”. There are three indicators of customer loyalty:
1. Behavioural indicators, 2. Emotional indicators, and 3. Cognitive indicators.
Briefly, loyalty can be operationalized as;
• Repeat of patronage or buying frequency Duration of patronage, or commitment to the same brand • Sequence of purchases (at the same store, from the same brand) • Proportion of purchase or expenditure (at the store, for the same brand)
It is commonly known that there is a positive correlation between customer loyalty and company profitability. It is found that when a company retains just 5 percent more of its customers, profits increase by 25 percent to 125 percent (Bowen and Chen, 2001) due to following(Bowen and Chen, 2001; Schiffman et al. 2012):
1. Loyal customers buy more products. 2. Loyal customers are less price sensitive. 3. Serving loyal customers costs less. 4. Loyal customers may act as voluntary sales staff.
In sum, the increased profit from loyalty comes from reduced marketing costs, increased sales and reduced operational costs.
Satisfaction is the deviation between customer’s perceived product/service/shop/brand performance and his/her expectations (Barış, 2006). In order for a customer to be satisfied, the deviation between the perceived product/service performance and his expectations has to be positive. If an extreme form of satisfaction occurs, it is referred to as customer delight. There is one more important point to mention: Perceived product/ service performance is relative and subjective, and it is related with the value company offers.
Providing Value
Value is defined as the ratio between the customer’s perceived benefits (economic, functional and psychological) and the resources (monetary, time, effort, psychological) used to obtain those benefits.
Perceived value is also relative and subjective. For example, dinner at an exclusive Michelin-star-awarded restaurant, where a meal with drinks may cost €250 per person, may expect unique and delicious food, immaculate service, and beautiful decor. Some diners may receive even more than they had expected and will leave the
restaurant feeling that the experience was worth the money and other resources expended (such as a month- long wait for a reservation). Other diners may go with expectations so high that they leave the restaurant disappointed.
Both customer satisfaction and perceived value are relative and subjective, since they are in the eye of consumers.
Perception
Perception is the process of selecting, organising and interpreting information inputs to produce meaning. Perception gives us knowledge of the surrounding world. Perception of what a picture depicts depends on both the picture and the perceiver. Perception process that consumers select, organise and interpret stimuli serves consumers to create a coherent and meaningful picture of the world around them, and to make satisfactory buying decisions that fits that coherent picture.
Information inputs are sensations perceived through sight, taste, hearing, smell and touch (Pride and Ferrell, 2016). Human beings have five senses given above to govern sensory perception. Sensory receptors are eyes, mouth & tongue, ears, nose, and skin.
The Process of Perception
A perception process consists of five steps which are:
1. Exposure; 2. Selecting stimulus; 3. Organizing stimulus; 4. Interpretation; and 5. Response.
Exposure:
Perception starts with an exposure to a stimulus. Exposure happens when a stimulus is in sufficient proximity to the sensory receptors, and the receptors are able to sense it. Attention means focusing on one or more environmental stimuli while potentially ignoring others. Attention is highly selective in nature and has three important characteristics: Attention is selective, divided and limited. The factors that affect consumer attention can be divided into two categories:
1. Factors related with the stimulus and 2. Factors related with the perceiver.
Stimulus related factors are; Intensity (e.g., loudness, brightness, length), Position, Contrast, Colour, Isolation, Novelty, Repetition, Movement.
Perceiver related factors are: Needs, wants and motives, Involvement and Values.
Please pay attention to the two different value definitions given in this chapter. The first one previously mentioned regards the ratio between the customer’s perceived benefits (economic, functional and psychological) and the resources (monetary, time, effort, psychological) used to
obtain those benefits. The second definition of value given Interpretation and Response; in the upper paragraph refers to consumers’ general The last stage is the interpretation, where consumers shape priorities and beliefs about the world and life. their perception and reflect them through responses they
Selecting Stimulus; give to a stimulus. They can respond emotionally (liking, enjoying, trusting), cognitively (positive or negative) or by Threshold is defined as the lowest intensity of a stimulus an action (trying, buying, examining products/brands or that can be registered on a sensory channel. When a speaking about them). consumer is exposed to a stimulus through his/her senses, some factors determine if the stimulus is going to be proceeded to the consumer’s perception process or not. Selecting stimulus is the second step of a perception process in which a consumer focuses his/her attention on certain incoming sensory information inputs.
Since our brain’s capacity to process information is limited, we tend to be very selective about what we pay attention to. We apply the following selection process (Barış, 2018):
Selective exposure: our eyes and minds seek out and notice only information that interests us.
Selective perception: we screen out or modify ideas, messages and information that conflict with previously learned attitudes and beliefs.
Selective retention: we remember only what we want to
remember.
Organizing Stimulus;
Gestalt theory offers a deep knowledge on the organizations of stimuli. Important terms in this theory are figure and ground, closure, similarity and proximity.
Figure-ground principle is a simple concept whereby one part of a stimulus appears to stand out as a solid and well- defined object(figure), whereas the rest of a stimulus is seen as less prominent (the ground).
Closure is the tendency for a person to perceive an incomplete picture as complete, either consciously or subconsciously. People like to fill in missing pieces when a puzzle is incomplete.
The key to use the principle of closure is to provide consumers with an incomplete stimulus. For example, putting a well-known television ad on the radio is an effective way to get consumers to think about a message.
Similarity refers to the fact that we often group stimuli to form a unified picture or impression, making it easier to process them. We view similar objects as belonging together. This principle is referred to as grouping in some of the consumer behaviour books. Grouping is the tendency to arrange stimuli together to form well- organized units.
Stimuli that are close to each other tend to be grouped together. For example, if two people stand together near each other and a third person stands 50 cm away from the other two, the third person is perceived as a stranger to the other two (Jansson-Boyd, 2010, p. 40).