Consumer Behaviour Part I

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Consumer Behaviour Part I by Mind Map: Consumer Behaviour Part I

1. Learning Outcomes

1.1. explain why the study of consumer behavior is so important to marketing

1.2. explain why economics differs from social psychology in its explanation of consumer behaviour

1.3. identify some different characteristics of consumers' social networks and the impact of these on buyer behaviour

1.4. discuss the differences between cognitive and behavioural theories of consumer behaviour

1.5. outline the types of consumer behaviour based on the concepts of setting, involvement, information gathering and perceived brand differences

2. 1. Definition

2.1. Consumer behaviour is individual purchasing or simply the consuming decision of an individual or household whom buys goods and services for personal consumption

2.2. As pointed out by Kotler and Armstrong, consumer purchases are influenced by forces such as:

2.2.1. Coffee-sip Cultural set of values, wants, beliefs, perception and behaviour learned by an individual from being a member of society Social influences of social factors such as the consumer's relation to small groups, family and social roles individual Characteristics of the individual such as demographic factors, economic situation etc psychological the motivation, perception and beliefs, attitudes of the consumer, learning

3. 2. Economic Interpretations of Consumer Behaviour & its implications on marketing decisions

3.1. 3 steps Economists (If asked) would explain using Utility Theory

3.1.1. Step 1: Examine consumer preferences. What consumer would prefer disregarding prices and income

3.1.2. Step 2: Consumers have Budget constraints.

3.1.3. Step 3: put the preference and constraints tgt to determine choices, assuming that people maximize their satisfaction by combining a set of gds and svcs

3.1.4. Economic Assumptions: individuals are rational In reality, we are not as rational as the Utility Theory predicts they are able to rank their preferences more is preferred to less even if U1>U2 by a tiny little bit, U1 is still ranked on top of U2 by ordinal utility

3.2. Economist view of Consumer Behaviour

3.2.1. can be explained looking at constraints in terms of prices and income, and preferences

3.2.2. non-economic constraints are translated into costs

3.2.3. Implications for marketing Two famous economists, Gary Becker and George Stigler, have even argued that 'tastes neither change capriciously nor differ importantly between people'

4. 3. Social Psychology Interpretation

4.1. Prospect theory

4.1.1. Behavioural economics, from evolutionary, neural activity, and experimental studies, better describes how customers make purchasing decisions

4.1.2. Prospect theory offers various insights into the anomalies and contradictions in buyer behaviour and in particular about decision-making under conditions of risk

4.2. Consumers in reality are irrational

4.2.1. 4 Characteristics of an Irrational behaviour 1 Attach more weight to loss People overvalue losses compared to gains - demonstrating loss aversion 2 Reliance in perceived value rather than objective value the effect of ending a price in nines also extends beyond the last, rightmost digit 3 Gain or Loss compared against reference point reference point - price of a laptop compared to different set of packages with different prices 4 current ownership or endowment effect Marketers can offer a trial period for a product - to leverage on endowment effect as customers are unlikely to return goods after owning it for some time Current good become reference point, consumer will compare losses or gain against this

5. 4. Differences in Approach

5.1. Economic View

5.1.1. uses extrinsic motives such as prices and costs

5.2. Social-Psychological view

5.2.1. use intrinsic motives such as preferences and attitudes

6. Consumer Behaviour Part II

6.1. Cognitive Vs Behavioural

6.1.1. Cognitive theories that emphasis internal mental processes mental constructs emphasis how people store, process and use information, how they create beliefs and form attitudes and values view on freedom is that humans are autonomous, independent agents of action has a closer resemblance with a new branch of economics called quasi-rational economics, which attempts to integrate the ways in which consumer process information into economic models

6.1.2. Behavioural an effect on consumer behaviour due to environmental factors observable E.g. Pavlov rang a bell each time he gives his dog a snack. The dog salivates each time the bell is rung even when no snack is given. view of freedom: all behaviour is controlled by environmental factors similar to the strict economic interpretation with its emphasis on external factors

6.2. Applications in Marketing

6.2.1. concept of perceived risk individuals tend to define a situation as risky when they have a lot to lose when they make a poor decision in particular if this loss will have an impact on their financial situations reducing perceived risk when there is uncertainties can be done through:

6.2.2. Decision-Making Process Problem/need recognition Information Search motivation behind information search is that it helps to reduce perceived risks Evaluation of alternatives Purchase Post-purchase behavior

6.2.3. Search and experience attributes Search goods able to assess the product quality without interaction focus on objective facts which are usually true and unbiased Experience goods unable to assess product quality without interaction, need to use product to know more subjective and is based on individual judgement

6.3. Alternative-based and Attribute-based strategies

6.3.1. Alternative-based comparing trade-offs between attributes where compensation for weakness on one dimension is made up by the strength of another therefore conflict confronting and requires more cognitive effort since tradeoffs cause cognitive and emotional difficulties final decision depends on each alternative's balance of values on all attributes considered chosen alternative is superior to all other options in the total sum of weighted average utilities of all attributes regarded as more rational as it seeks the best choice (optimising)

6.3.2. Attribute-based where alternatives are eliminated based on attributes even though it may have the highest additive-sum value among all options less cognitive effort chosen alternative is superior to the other options only by virtue of its most important attribute(s) regarded as less rational as it seeks the good enough choice (satisficing)

6.4. Information Control

6.4.1. refers to the degree which an information seeker can decide what information content to read, how long to read and in what order to read it information control varies by the type of media television has lower information control than newspaper, which allows users to freely chose the order they read the news and when to read it television has lower information control than newspaper, which allows users to freely chose the order they read the news and when to read it there are different levels of information on the internet High level of information control Low level of information control Application of information control How can they be properly applied to generate better service for different customers on the internet?

6.5. Types of Buying Behaviour

6.5.1. Complex buying behaviour

6.5.2. Variety seeking buying behaviour

6.5.3. Dissonance-reducing

6.5.4. Habitual buying

7. 5. Self-Concept

7.1. Definition: Cognitive and affective understanding of who and what we are

7.1.1. can be Actual Self (who and what i think i am now) or Ideal Self (who we would like to be)

7.1.2. Consumers achieve self-congruence by consuming a brand with a personality representing either the actual or ideal self Eg. Gym membership for my ideal self

7.2. Self concept and Brand attachment

7.2.1. the bond that connects consumers with a specific brand and incolves feelings towards that brand

7.3. Processes and feedback loop (discovering self-concept)

7.3.1. Basic feedback loop This is where a person has a well-defined self-concept and makes choices or undertakes action based on this set of psychological characteristics know what she wants>Take action>then reinforce her self-concept again to form a loop process

7.3.2. Dissonance theory feedback loop This is where the person does not know what he wants. so he took the action first, realises he likes it and know what he want then he will buy more and reinforce the self-concept

7.3.3. Influence of social pressure on the feedback loop This is where culture and social forces play a big role on individual's personality and actions.

7.4. Self-concepts on young can still be influenced

7.4.1. which is why marketers spend so much time and energy trying to target advertisements to the young rather than old

8. 6. The Role of Social Networks

8.1. 'Social Influence can occur through the transmission of information that reduces uncertainty and search effort, through normative and social pressure, or as a result of network externalities.'

8.2. Mechanisms of social effect

8.2.1. Tie Strength refers to the idea that consumers may be more affected by people with whom they have closer relationships

8.2.2. Homophily Similarity (beliefs, education, occupation) between consumers and others is referred to as homophily Consumers are more likely to trust the opinions of people whom preferences they share, while people who recommend products are more likely to share their opinions with people who are similar to them

8.2.3. Degree Centrality refers to someone's degree of connectivity, which is the no. of people directly related to the focal individual Highly connected customers have more opportunities to affect others' behaviour and more strongly affected by the baheviour of others