Consumer Behavior Is Essential For Effective Marketing Marketing Essay

Consumer Behavior Is Essential For Effective Marketing Marketing Essay Introduction: A Consumer is somone who acquires goods or services for direct use or ownership rather than for resale or use in production and manufacturing process. (Investor words, 2010). We can classify consumers in two categories: (i) personal consumers / retail consumers, and (ii) organisations as consumers. In each case bahaviour is analysed differently. I will concentrate in this essay on personal consumers and their behaviour and its implications for effective marketing. Consumer behaviour is the process individuals or groups go through in recognizing needs, finding ways to solve these needs, making purchase decisions (e.g., whether or not to purchase a product and, if so, which brand and where), interpret information, make plans, and implement these plans. Understanding customer perception and motivations has tremendous implications for selling and marketing, process improvement and, in turn, reaching targetted consumers and make rewarding profit. With the Consumer-Centered era long gone, in the New Era orentation to enable long-term bonds with consumers it is essential to study consumer behaviour and to understand more of the customers psychology, their internal and external motivations, preferences, limitations, and actions to be able to provide a tailored value proposition. As a discupline, this is referred to as customer relationship management (CRM). Diagram showing consumer behavior, measures, and marketing actions. (graph from: Norton, 2005)Consumer attitude: The process of purchase is largely influenced by consumer attitudes. In the context of marketing, it is towards: product, brand, place (eg retail store), etc.  Consumer attitudes are a composite of a consumers (1) beliefs about, (2) feelings about, (3) and behavioural intentions.   These components are viewed together since they are highly interdependent and together embrace the forces that influence how the consumer will react to the object.(Perner, 2008) Beliefs: Consumer beliefs can be positive (e.g. chocolate tastes good) as well as negative (e.g., chocolate makes me fat).   In addition, some beliefs may be neutral (chocolate is a treat), and some may differ depending on the person or the situation (e.g., dark chocolate gives a lot of energy and stimulatesgood when you need to study or boost your energy level, but not good just before sleep time).  Often consumer believes can be inaccurate (e.g. pork is healthier than chicken). Feelings/Affect- is the consumers feelings toward a brands product or service.   Sometimes these feelings are based on the beliefs (e.g. a person feels nauseated when thinking about a hamburger because of the amount of fat it contains), but there may also be feelings which are relatively independent of beliefs (e.g.  I like ice cream) Behavioural intention.   Is what the consumer plans to do with respect to the object (e.g., buy or not buy the brand).   This can be a logical consequence of beliefs (or affect), or may reflect other circumstancese.g., although a consumer does not really like a bar/restaurant, he or she will go there because it is a hangout for his or her friends. (Perner, 2008) Changing behaviour of customers can be challenging because people like to believe that their behaviour is rational; thus, once they use our products, chances are that they will continue unless someone is able to get them to switch (Perner,2010). Consumer Choices: The comonly accepted and studied path of consumer choices, also illustrted in Elliot (1997), includes 5 main steps: Need/ opportunity recognition 2. Information Search 3. Evaluation of alternatives 4. Purchase 5. Outcome of purchase/feedback Need/opportunity recognition. Consumers recognize a need for a product/service when they percive a gap between their current state and their desired state. This can be either because of a change for the worse in their current state (need recognition) or when the desire seem to be further away (opportunity recognition). ( Elliot, 1997). That can be as easy as concluding that we need milk because we have just run out and cant make a cake without it. Or when a mother decides that buying an Armani top for her son would probably make her family more recognisable and admirred. Information Search. After identifying a product which will satisfy the need or opportunity gap, it is assumed that a customer will search for information to help him make a decision. Here it has been established that there are two ways in which information search takes place. Those are internal and external searches. Internal vs. External Search(Perner,2008) Internal search involves the consumer identifying alternatives from his or her memory/experience. Internal search is influenced by motivations, attitudes, personality, age, lifestyle, perception and learning/ experience.   This is often the only search method used for low involvement products or fast moving consumer goods (FMCGs), thus building top of mind awareness is crucial task for marketing communications especially in hose low-involvement products categories (Elliot, 1998). External search involves information from environment that influences the purchase decisions. Those external factors influencing decision process include situational influences, such as, physical environment and time, and social influences such as advertising as well as culture, subculture, social class, group membership, family, friends, work/school peers, co-workers, people from the same sports/hobby clubs, neighbors etc. There are various referent groups that people consciously or unconsciously consider during their search. Those include; membership, aspiration, avoidance, word of mouth, opinion, leadership. Despite consumer interests and beliefs, they will strive to conformity and thus usually the internal search has to compete with their external influences because they want to belong to, and be accepted by, people from their direct environment. Consumers are more likely to use an external search for high involvement products.   For instance before buying a house, the consumer is more likely to ask friends opinions, read reviews in Consumer Reports, consult several web sites, and visit several property offices.   Thus, it is extremely important that firms that offer products that are selected predominantly through external search invest in advertising and marketing to ensure having information available to the consumer in need-e.g., through brochures, web sites, or news coverage. Evaluation of choices: The evaluative criteria are the product attributes, functional, symbolic and emotional, on which the relative performance of the competing alternatives will be compared (Elliot 1998). Decision rules can be: I. Compensatory, when a poor performance on one attribute can be offset by good performance on other attribute. (e.g. one car is not as fast as other but its cheaper.   If the price is sufficiently inexpensive, the consumer may then select it over a car with better acceleration that costs more) II. Non-compensatory, when only one standard is used and alternatives which dont measure up are eliminated. (e.g. when a customer wants to have a UK-branded product, lets say cereal, although there will be many other cereals with same ingredients and good taste they wont be considered) Considering that human beings seek to reduce cognitive efforts, often the way for choice evaluation are rules of thumb, e.g. cheapest is best, or known brand is always better than unknown, etc. Unfortunately this type of thinking often lead to systematic bias when compared with the rational decision making model of economic theory. Those would be believes that e.g. if an item is on sale it must be a good deal, or all branded products are of the same quality. Purchase: Purchased is often influenced by time, the more time between the intention to buy and the purchase the more opportunity for change in original intention. But in many instances a conscious purchase intension is not formulated prior to the purchase act and in this case a display of product may trigger impulse purchase. US studies show that 83% decisions to purchase of snack foods take place in the supermarket itself rather than prior to shopping. Obviously higher involvement products are more likely to be pre planned than lower involvement products. (Elliot, 1998) Outcomes of Purchase: These have important implications for the future purchase decisions. The cognitive approach points to importance of prior expectations as a determining how well consumer will evaluate the purchase experience. The lower the expectations the less dissatisfaction on poor product performance, and the more satisfaction on good product performance is seen. Consumer Involvement: The amount of effort a consumer puts into searching depends on a number of factors. There is a classical model to measure consumer involvment in purchase decision. This model shows that involvmnet depends largly on: price, type of product, frequency of purchases, symbolic meaning, social visability, time commitment, potentiality for harm, potentiality for poor performance of product/service etc. (Elliot, 1998) In practice the price or high significance will mostly effect the involvement of consumers. E.g if we buy boat or house we are more likely to put more effort in research than when we buy washing powder. The same is true for highly life significant products such as computer or medications, which tend to be given more attention than lets say notepad or pen. (where you shop, ease / proximity of parking, ambience, safety, provision of child care, etc) Influences on Consumer Behavior(Perner 2008) The Life Cycle. Individuals and families tend to go through a life cycle: The simple life cycle goes from    http://www.consumerpsychologist.com/images/cb/Simple_FLC.png (Perner 2008) In real life however, there are many more complications possible, such as couples undergo divorce, single parents run house or remarry or become involved in other non-marital relationships, or stay on their own etc. Integrating all the possibilities gives a depiction of the Family Life Cycle to the one below: http://www.consumerpsychologist.com/images/cb/Family_Life_Cycle.png (Perner 2008) Obviously young singles with still little cash and highly influenced by their peer environment will have different needs, and make different purchases to young couples, and young couples will greatly vary in their customer behaviours to full nest families. Then again there is a significant difference in amount, type and variety of products purchased between Nest I, Nest II and III families, since different age of children in the family will have various demands / needs, and the older the children the more influence they will have on parents and their purchase decisions themselves. Empty nest family with no children in the house often can afford more luxurious items than before. They will frequently look for comfort and durability and high quality of goods. Older singles will have similar needs, but if retired or lonely may not be able to afford as high standards of products as empty nest and thus minimalistic approach can be seen in their purchase behaviour. Apart from differences in customer behaviour arising from Family Life Cycle it is also important to mention that behaviour changes with age, health, career and financial status. Older people tend to have greater income but also greater obligations such as mortgages, children, and spouse. Different ages are concerned with different financial rewards and obligations. That often leads to different consumer behaviour. Figure 2.5 Consumer life events Understanding the life event triggers behind the big decisions that consumers make, assists information providers in targeting information at the times and places in peoples lives when they most need it. (Australian government, 2010) Family decision making model: Another relevant consideration includes the Family decision making model. It is important to realise that it is not only the decision maker(s) in the family that count during the decisions processes of the family. Although they decide where and which product, brand to buy, there are also initiator, ultimate users, the information gatherers/holders- who seek out information about products of relevance, Influencers- who do not ultimately have the decision power, but they may make their wishes known by asking for specific products or causing embarrassing situations if their demands are not met. And then again all those have different role to that of the purchaser. (Perner, 2008) It was measured that parents under childrens (age 4 -12years) influence in US purchase products worth apporximately $4,400 per year per child. This comprises nearly $150 billion annually in US market alone. (McNeal,1997). This statistic is even more prominent if we look at China and heir one child policy and the six-pocket syndrome (where all 4 grandparents and parents can cherish and spoil 1 child only (Goll,1995) From the marketing point of view, family decision-making model introduces some problems since the purchaser can be targeted by point-of-purchase (POP) marketing efforts that cannot be aimed at the decision maker, or influencer. It should also be noted that family decisions are often subject to a great deal of conflict. The reality is that few families are wealthy enough to avoid a strong tension between demands on the familys resources. (Perner, 2008) Family decision making model can be observed in nearly any shop. This will take place when a family is out and about maybe doing grocery shopping and then suddenly one of the children will point to a toy or Christmas tree that courts its attention (that will be the initiator). There will be various criteria to consider: maybe some information provided on the spot about this particular Christmas tree; the fact does the family have already one or not and in what condition it is, also time of the year will have influence on the decision making process. The user or a Christmas tree is the whole family but especially children. Mother of the family will often be the decider who will try to satisfy the whole family and purchase something that is practical and safe a s well as will look representative in the home surrounding. Father will often pay for the tree and make the purchase thus in this scenario will be the buyer. This issue is addressed by many shops by offering extensive displays o f child-attractive items, together with parent-satisfying product descriptions to fulfil needs of the decision maker, and not infrequent value deals to finally convince the ultimate buyer. The Means-End Chain. Is another model of consumer behaviour where consumers buy products not because of their attributes per se but rather because of the ultimate benefits that these attributes provide, in turn leading to the satisfaction of ultimate values. An important implication of means-end chains is that it is usually most effective in advertising to focus on higher level items. (Green Book, 2005) This can be illustrated on example of UHT milk. A consumer may not be interested in the process and chemistry of ultra high temperature process of milk preservation, but might reason as follows: Self satisfaction/esteem Kids will continue to get all calcium and vitamins required for growth and strong bones, and he milk is there whenever needed Children can safely use the milk when they need it without a need to go back to a shop for weeks at a time. Milk can be stored longer without taste and properties change, Long life properties of UHT milk UHT milk producers use this model and emphasise the long life properties of milk, and thus in consumer perception this is the main focus point. They often dont make further investigation to find out that UHT milk has sufficiently less vitamins and minerals then fresh milk, and frequently make decision to buy long life milk instead of fresh milk. Diffusion Curve Model: And last but not least we should note that not all consumers will choose to buy new products at the same time. Dependingly on their education, experience, capacity to purchase and desires we will be able to identify Innovators who buy first but comrpise less than 5% of consumers, e.g. people who follow the latest releases of technology/fashion engineering and will purchase the products as soon as they reach the market even if they dont necessary need it, and it means paying premium price for those goods. After the first purchases by Innovators, the Early adpoters will show their interest. They benefit form using the product and want to maintain an edge over the rest of their peer group / consumers at large. However the vast majority of the curve ignores most marketing efforts at the earliest stages until they are convinced that the product or idea is not a fad. Successful new products, the hits, are most sought by Innovators and Early Adopters soon after introduction: and then Early majority will follow the trend to purchase. After some time the later majority will make the decision to buy, and then when the products/ services are no longer considered new by majority of population the laggards will come to belive it is ecessary for them to aquire this product. Possibly that will take place after the older model they owned is no longer functioning and it is necessary for them to replace it. Those clients frequently benefit from large discounts, since new more desirable models are often already available on the market. The described above model is commonly known as Diffusion Curve model or 5 segments model, and can be illustrated as bellow (actual percentages will vary according to the product / sector / consumer mix): Viral Marketing and Consumer Behavior (Graph from; Braziel, 2007) This model doesnt equally apply to all products, it is mostly used for electronics, computers, fashion clothing, house appliances such as AGD (white goods) and RTV (audio / visual electronics) products. Thats because we cant really talk about innovative products when it comes to FMCGs like bread, milk, butter. Also it would be hard to talk about laggards when the product of concern was something everyone needs in day to day life. Knowing about the diffusion curve model and the fact that new products are usually initially adopted by a few consumers and only spread later, and then only gradually, to the rest of the population, companies learned that to introduce new products they must be well financed so that they can stay afloat until their products become a commercial success by generating self-sustainable profit. They also realize that it is very important to please initial customers, since they will in turn influence many subsequent customers brand choices. That is why many brands use post-purchase evaluation forms and ensure quick response to any dissatisfaction, so consumers feel understood, respected and powerful. This helps in creating good overall impression about the product or brand, which is likely to be passed on to Early adopters and beyond. Discussion: There are two main applications of consumer behavior in marketing: (Perner 2005) Using consumer behavior to make better marketing campaigns. For example by understanding that consumers are more receptive to food advertising when they are hungry, food/snack companies learned to schedule snack advertisements late in the afternoon. As a result of increased receptiveness consumers are more likely to memorize the items and either buy there and then or next time when they see the product on the supermarket shelf. by understanding that new products are usually initially adopted by a few consumers and only spread later, and then only gradually, to the rest of the population, companies learned that (1) to introduce- new products must be well financed so that they can stay afloat until their products become a commercial success. (2) it is very important to please initial customers, since they will in turn influence many subsequent customers brand choices. Social marketing involves getting ideas across to consumers rather than selling something. E.g. To reduce the incidence of transmission of diseases through illegal drug use the best solution, obviously, would be if we could get illegal drug users to stop. This, however, was deemed to be infeasible. It was also determined that the practice of sharing needles was too ingrained in the drug culture to be stopped. As a result, using knowledge of consumer attitudes, Dr. Fishbein created a campaign that encouraged the cleaning of needles in bleach before sharing them, and this marketing campaign was hugely successful (Syed, 2009) Attitude research has shown that consumers often tend to react more favorably to advertisements which either: Admit something negative about the sponsoring brand (e.g., the Volvo is a clumsy car, but very safe), this approach makes consumer perceive the advert more reliable, and will pay off by their better attitude towards brand/product advertised. OR Admits something positive about a competing brand (e.g., a competing supermarket has slightly lower prices, but offers less service and selection).   Two-sided appeals must, contain overriding arguments why the sponsoring brand is ultimately superior-that is, in the above examples, the but part must be emphasized. (Perner, 2008)   Again this two side appeal gives consumer perception of rational, reliability and this type of advert is more likely to be listened, believed in and remembered. Knowing it is generally very difficult to change beliefs that people hold, some companies try to change the importance of beliefs by decreasing them or by strengthen them by advertising e.g. milk company can emphasise on the importance of milk ingredients such as; calcium and iron for the health being of people, and thus increase the perception of importance for milk in consumer eye, which will then lead to increased milk sales. Companies can also add to consumer beliefs, e.g. Cereal makers can add beliefs that their cereal are more convenient and healthy than other cereals, which sounds quite plausible to some people if the advert uses enough credible terms for ingredients. Thus consumer perceive those cereals more appropriate for breakfast than others and are more likely to purchase them when next time see them in the shop. Using consumer choices model described in the introduction, some companies will seek to create in the eyes of target consumers a perception of need of e.g cooking spice, by advertising it as a miracle mix which will make every dish you make tasty and desirable by all family members. That perception of opportunity may trigger the consumer purchase decision. Knowing that information search for FMCGs is mostly internal, food producers try to make impression on the consumer e.g by making tomatoes look more healthy and appealable to potential consumers e.g we can see tomatoes with green stems or big organically grown sign on the packaging that will trigger the consumer desire to eat healthy and even though those tomatoes may not be any healthier than the other 5 types that sit on the shelf. The perception of healthy / organic will arise in consumer mind and thus he will be more likely to purchase them. In relation to purchase decisions of consumers, many companies, especially those selling low involvement goods, use a marketing strategy which is directed at one of humans basic motivation:- curiosity. By packaging a product with interesting and/or innovative pictures and images, they try to wake up consumer curiosity and in this way win the consumer interest and encourage impulse to buy. Knowing that fulfilling original expectations of consumer will often lead to repeat purchase some products e.g Heinz Ketchup by introducing a claim of great thickness and delivering on it better compare to other brands, can win consumer because consumer attention is drawn towards thickness only and satisfying this attribute alone give consumer overall perception of good performance. Emphasising consumer brand loyalty, many shops introduce loyalty cards, which give additional credits for shopping in particular shop, such as entitlement to discounts and promotions. Loyalty cards databases on the other hand enable understanding the clients better and give offers that best suit their behavior/habbits. Its a win-win situation for seller and buyer: the consumer has a perception of being special/appreciated and can see the reward for loyalty, while the shop has more information about the customers. For example, it was established that a buyer of full fat milk is 2.5 times more likely to purchase children orientated products. That is because a lot of parent buy full fat milk for their kids, and having kids means we buy for them more than just milk. Knowing that, a shop/company can send kids products brochures only to those people buying full fat milk rather than spend money on approaching adults who dont have kids and are unlikely to purchase childrens products. All the models described above are important to know and consider; to help spot emerging patterens and trends relative to the marketing and branding process. However they seem to be slightly overcomplicated and we need to realise that every day consumer patterns as well as practical marketing often varies from the theoretical models. To support this view we dont need to look far, we read from countless articles e.g McCole (2004) suggests that there exists a sizable gap between the worldviews of academics and practitioners. And Brennen (2004, p. 492), in his editorial comments in a special issue that explored the nature of the academic-practitioner divide, notes that a consensus seems to be emerging that much, or perhaps most, of work done by academics is of limited relevance to practitioners. (Syed H. Akhter, 2009). Also there are numerous studies which show that a large percentage of consumers dont research their purchases or limit the research to minimum, e.g. on average 52% of peo ple in US obtained no independent information on products/services purchased and even for purchase of a new car, more than 30% of people visit only one car dealer.(Elliot, 1998). A lot of those theoretical models, together with practical / anecdotal experience, indicate that decisions made by customers are mostly emotion-driven or impulse driven. The purchase decisions often depend on curiosity, value perception (an approximation of reality), brand loyalty or rules of thumb , rather than research, and that is why marketing, branding and advertising need to enhance value perception for the customer and take care of a good purchase experience rather than just focusing on the purchase product/service. Conclusion: To conclude this paper on dynamics of consumer behaviour in practical marketing, I decided to look into Early Learning Center (ELC) brand and their marketing strategies. With their consumer base largely being 0-6 year old children, specifically I sought evidence of ELCs marketing efforts reflecting a sound understanding of the behavior of their target customers, the adults who buy those goods on childrens behalf Early Learning Centre (ELC) ~ Toy Sale Now On Early Learning Centre (ELC) is essentially a marketing and distribution company, but one that also designs and commissions the manufacture of its own-branded products.It was established in 1974 as a mail order firm, and was an early adopter of direct sales through the Internet the website www.elc.co.uk was first launched in 1999 and proved to be successful in its first year in terms of profit generated on internet-driven purchases.. In 2007 Mothercare plc acquired Early Learning Centre for  £85m ( £49m plus  £36m debt). Mothercare is one of the most familiar names in UK retailing, and is probably the first store that comes to mind when thinking of the needs of pregnant women, babies and children up to the age of 10. There is a lot of overlap with ELC in the post-natal market and so their merger and co-location of stores makes sense from a business perspective. Today there are over 225 ELC stores in the UK, and 115 stores internationally operated by franchise partners in locations including UAE, Hong Kong, Australia, New Zealand, Malaysia Ireland, and Poland. Catalogues sales have remained a core part of the business. [Early Learning Centre prints and distributes over 4 million catalogues in the UK alone each year.] Over 80 percent of the products sold by Early Learning Centre are own brand. ELC operate through three distinct channels to market; UK stores, Direct (internet-based businesses and catalogue mai l order), and International.(ELC, 2008) The Early Learning Centre brand provides eight major categories of toys and games primarily for children in the 0-6 year age range. They segregate their items based on sex and age of children for whom the toys are designed. This approach helps greatly during customers search through the products. As a result customers can put less effort into the search process and it adds to their overall shopping experience. Knowing that changing attitude of consumer is generally very difficult. Instead ELC try to influence feelings, either by advertising itself to create pleasant, warm feeling about products, and hope that will be enough to make customer like the product, or they use classical conditioning by e.g. showing happy, stress free children playing with ELC toys. the great outdoors!!! acctive play and fresh air fun! (pictured copied from: http://www.kidstart.co.uk/partner/ELC.aspx) Another strategy of ELC involves exposure effect. By providing advertisement and pictures outside the store and in magazines known to be popular amongst parents of 0-6 year old children and those adults likely to buy presents for such children, ELC ensures customers are more familiar with the product and thus more likely to purchase it. Aware that changing behaviour of customers can be challenging, one strategy employed by ELC is to introduce seasonal price discounts to justify in consumer minds the switch, based on a good deal principle. After the switch if a customer was more satisfied with the ELC product than with a previously used brand, there is a large likelihood that he or she will stick with the ELC products for future purchases even when the price goes back to normal. Another marketing strategy employed by ELC is engaging the convenience mindset of their target audience. ELC stores are usually located in big shopping malls, specifically in those locations in the mall that are frequently used/passed by customers on their way in or out. Not only are toys displayed, many toys at the entrance, but also throughout the store, are out of their packaging to enable better investigation of product prior to purchase. This is also a great way to attract the children of passing shoppers mothers, families into the shop to play. When this happens parents will be forced to come into the shop and during that time possibly will purchase one or more of the toys that their children were attracted to, or indeed other