CU-BCOM-SEM-III-Consumer Behavior-Second Draft

Figure 12.2 Product Life Cycle At later phases of the PLC, the firm may need to modify its market strategy. For example, facing a saturated market for baking soda in its traditional use, Arm ü Hammer launched a major campaign to get consumers to use the product to deodorize refrigerators. Deodorizing powders to be used before vacuuming were also created.It is sometimes useful to think of products as being either new or existing. Many firms today rely increasingly on new products for a large part of their sales. New products can be new in several ways. They can be new to the market none else ever made a product like this before. For example, Chrysler invented the minivan. Products can also be new to the firmanother firm invented the product, but the firm is now making its own version. For example, IBM did not invent the personal computer, but entered after other firms showed the market to have a high potential. Products can be new to the segmente.g., cellular phones and pagers were first aimed at physicians and other price-insensitive segments. Later, firms decided to target the more price-sensitive mass market. A product can be new for legal purposes. Because consumers tend to be attracted to “new and improved” products, the Federal Trade Commission (FTC) only allows firms to put that label on reformulated products for six months after a significant change has been made. The diffusion of innovation refers to the tendency of new products, practices, or ideas to spread among people. Usually, when new products or ideas come about, they are only adopted by a small group of people initially; later, many innovations spread to other people. 201 CU IDOL SELF LEARNING MATERIAL (SLM)

Figure 12.3 Adoption of innovations over time The bell shaped curve frequently illustrates the rate of adoption of a new product. Cumulative adoptions are reflected by the S-shaped curve. The saturation point is the maximum proportion of consumers likely to adopt a product. 12.10STAGES OF INNOVATION The stages in innovation are:  Innovators  Early adopters  Early majority  Late majority  Laggards Innovators (2.5%) – Innovators are the first individuals to adopt an innovation. Innovators are willing to take risks, youngest in age, have the highest social class, have great financial lucidity, very social and have closest contact to scientific sources and interaction with other innovators. Risk tolerance has them adopting technologies which may ultimately fail. Financial resources help absorb these failures. (Rogers 1962 5th ed, p. 282) Early Adopters (13.5%) – This is the second fastest category of individuals who adopt an innovation. These individuals have the highest degree of opinion leadership among the other adopter categories. Early adopters are typically younger in age, have a higher social status, have more financial lucidity, advanced education, and are more socially forward than late adopters. More discrete in adoption choices than innovators. Realize judicious choice of adoption will help them maintain central communication position (Rogers 1962 5th ed, p. 283). 202 CU IDOL SELF LEARNING MATERIAL (SLM)

Early Majority (34%) – Individuals in this category adopt an innovation after a varying degree of time. This time of adoption is significantly longer than the innovators and early adopters. Early Majority tend to be slower in the adoption process, have above average social status, contact with early adopters, and seldom hold positions of opinion leadership in a system (Rogers 1962 5th ed, p. 283) Late Majority (34%) – Individuals in this category will adopt an innovation after the average member of the society. These individuals approach an innovation with a high degree of skepticism and after the majority of society has adopted the innovation. Late Majority are typically skeptical about an innovation, have below average social status, very little financial lucidity, in contact with others in late majority and early majority, very little opinion leadership. Laggards (16%) – Individuals in this category are the last to adopt an innovation. Unlike some of the previous categories, individuals in this category show little to no opinion leadership. These individuals typically have an aversion to change-agents and tend to be advanced in age. Laggards typically tend to be focused on “traditions”, likely to have lowest social status, lowest financial fluidity, be oldest of all other adopters, in contact with only family and close friends, very little to no opinion leadership. 12.11SUMMARY  Consumers have different roles in purchasing products and services. Here, a role is defined as the expected behavior of an individual in a society. These roles can be as part of the consumer’s family, employment, or social status, among other things.  Families have a tremendous influence on consumer purchasing. Many factors influence purchasing. A consumer’s family is one of the most significant factors because a family helps shape an individual’s attitudes and behaviours.  Another aspect of understanding the impact of families on buying behavior is the family life cycle. Most, though certainly not all, individuals and families pass through an orderly sequence of life stages that can be used to understand their purchasing patterns.  A normative reference group influences your norms, attitudes, and values through direct interaction. Examples of your normative reference groups include your parents, siblings, teachers, peers, associates and friends.  Opinion leaders are people consumers look to for guidance in making purchase decisions, usually someone with more knowledge of the subject.  Marketers should understand that a person’s social class will have a major influence on the types and quantity of consumer goods purchased. 203 CU IDOL SELF LEARNING MATERIAL (SLM)

12.12KEYWORDS  Influencers: Influencers are people who have a relatively large audience in which to tout their beliefs. In the consumer world, influencers can impact the success or failure of a product by using it or shunning it.  Prosumers: a prosumer is usually a serious hobbyist, with similar interests and skills of professionals.  Reference groups: are groups that consumers will look to for help in making purchasing decisions.  Innovators: are willing to take risks, youngest in age, have the highest social class, have great financial lucidity, very social and have closest contact to scientific sources and interaction with other innovators.  Late Majority: are typically sceptical about an innovation, have below average social status, very little financial lucidity, in contact with others in late majority and early majority, very little opinion leadership. 12.13LEARNING ACTIVITY 1. Identify four individuals who have made purchases in the past month with which they have been dissatisfied. How did each person respond? If any of them contacted the company or store where the purchase was made, how did the company respond? How would you advise the company to respond in the future? ___________________________________________________________________________ _____________________________________________________________________ 2. What are the main competitive challenges facing firms in which understanding of diffusion of innovations might be useful? ___________________________________________________________________________ _____________________________________________________________________ 12.14UNIT END QUESTIONS A. Descriptive Questions 204 Short Questions 1. What is meant by influencer? 2. “Marketers often create a “persona” for their products and services”. Discuss 3. Write short note on reference group? 4. List the types of reference groups CU IDOL SELF LEARNING MATERIAL (SLM)

5. Mention the stages of innovation. Long Questions 1. Discuss on the influence of roles on consumer purchasing. 2. Explain the characteristics of opinion leaders 3. Explain the major influence on consumer behaviour 4. Explain the types of reference groups 5. Interpret the diffusions of innovation 6. Explain the stages of innovation B. Multiple Choice Questions 1. Consumer purchases are influenced strongly by cultural, social, personal, and __________ a. Psychographic characteristics. b. Psychological characteristics. c. Psychometric characteristics. d. Supply and demand characteristics. 2. As a form of a reference group, the _______________ are ones to which the individual wishes to belong. a. Secondary groups b. Facilitative groups c. Primary groups 3. Aspiration groups 4. The __________________ is a person within a reference group who, because of special skills, knowledge, personality, or other characteristics, exerts influence on others. a. Facilitator b. Referent actor c. Opinion leader d. Social role player 5. ____________ is the definition of reference groups. 205 CU IDOL SELF LEARNING MATERIAL (SLM)

a. Groups that an individual looks to when forming attitudes and opinions . b. Groups of people who have been referred to by someone they know c. Groups of office colleagues d. Chat groups on the internet 6. ______are the first individuals to adopt an innovation. a. Innovators b. Early adoptors c. Laggards d. Late majority Answers 1 – b, 2 – d, 3 – c, 4 – b, 5 – a 12.15REFERENCES References books  Engel, James F.; Blackwell, Roger D.; Miniard, Paul W., Consumer Behavior, 6th ed. Chicago.  Loudon, D.L. and Bitta A.J. Della, Consumer Behavior, Fourth Edition, 2002, Tata McGraw-Hill, New Delhi.  Peter, P.J. and Olson, J.C., Consumer Behavior and Marketing Strategy, Seventh Edition, 2005, McGraw-Hill Higher Education. Text books  Schiffman, L.G. and Kanuk, L.L., Consumer Behavior, Eight Edition, 2004, Prentice Hall, India.  Wells W.D. and Prensky, D., Consumer Behavior, 1996, John Wiley & sons, Inc.  Cr. S.L Gupta and Sumitra Pal., Consumer Behaviour, First Edition 2001. 206 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT - 13: MODELS OF CONSUMER BEHAVIOR STRUCTURE 13.0 Learning objectives 13.1 Models of consumer behavior 13.2 Consumer research process 13.3 Quantitative research designs 13.4 Data collection instruments 13.5 Data analysis and reporting research findings 13.6 Summary 13.7 Keywords 13.8 Learning Activity 13.9 Unit End Questions 13.10 References 13.0 LEARNING OBJECTIVES After studying this unit, you will be able to:  Discuss the models of consumer behavior  Explain about the consumer research process  Discuss on quantitative research designs  Explain the data collection instruments  Discuss on the findings of research report 13.1 MODELS OF CONSUMER BEHAVIOR There are various consumers’ models which help in the understanding of consumer behavior. These are listed below. 1. Economic Model 2. Psychological Model 3. Sociological Model 4. Howarth Sheath Model

5. Nicosia Model Figure 13.1 Models of consumer behavior 1. Economic Model In this model, consumers follow the principle of maximum utility based on the law of diminishing marginal utility. The consumer wants to spend the minimum amount for maximising his gains. 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 homo-genetic of the market, similarity of buyer behaviour and 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 208 CU IDOL SELF LEARNING MATERIAL (SLM)

factors. Thus, price is not the only factor influencing decision-making and the economic model according to scientists has shortcomings. 2. Psychological Model Psychologists have been investigating the causes which lead to purchases and decision- making. This has been answered by A.H. Maslow in his hierarchy of needs. The behaviour of an individual at a particular time is determined by his strongest need at that time. This also shows that needs have a priority. First they satisfy the basic needs and then go on for secondary needs. The purchasing process and behaviour is governed by motivational forces. Motivation stimulates people into action. Motivation starts with the need. It is a driving force and also mental phenomenon. Need arises when one is deprived of something. A tension is created in the mind of the individual which leads him to a goal directed behaviour which satisfies the need. Once a need is satisfied, a new need arises and the process is continuous. Figure 13.2 Maslow’s hierarchy of needs 3. Sociological Model This is concerned with the society. A consumer is a part of the society and he may be a memberof many groups in a society. His buying behaviour is influenced by these groups. Primary groups of family friends and close associates exert a lot of influence on his buying. A consumer may be a member of a political party where his dress norms are different. As a 209 CU IDOL SELF LEARNING MATERIAL (SLM)

member of an elite organisation, his dress requirements may be different, thus he has to buy things that conform to his lifestyles in different groups. A consumer's behavior may also be influenced by the people she associates with and the culture that her society exhibits. For instance, a manager and an employee may have different buying behaviors given their respective roles in the company they work for, but if they live in the same community or attend the same church, they may buy products from the same company or brand. Consumers will buy goods based on a number of different types of behavior. Knowing these behaviors is key when developing marketing strategies for your business. 4.Howarth Sheath Model This model is slightly complicated and shows that consumer behaviour is complex process and concepts of learning, perception and attitudes influence consumer behaviour. The first level describes extensive problem-solving. At this level, the consumer does not have any basic information or knowledge about the brand and he does not have any preferences for any product. In this situation, the consumer will seek information about all the different brands in the market before purchasing. The second level is limited problem-solving. This situation exists for consumers who have little knowledge about the market, or partial knowledge about what they want to purchase. In order to arrive at a brand preference, some comparative brand information is sought. The third level is habitual response behavior. At this level, the consumer knows very well about the different brands and he can differentiate between the different characteristics of each product, and he already decides to purchase a particular product. This model of decision-making is applicable to individuals. It has four sets of variables which are:  Input  Perceptual and learning constructs  Outputs  Exogenous or external variables. Input Some inputs are necessary for the customer for making decisions. These inputs are provided by three types of stimuli (a) Significative stimuli: These are physical tangible characteristics of the product. These are price, quality, distinctiveness, services rendered and availability of the product? These are essential for making decisions. 210 CU IDOL SELF LEARNING MATERIAL (SLM)

(b) Symbolic stimuli: These are the same as significative characteristics, but they include the perception of the individual, i.e., price is high or low. Quality is up to the mark or below average. How is it different from the other products, what services can the product render and what is the position of after sales service and how quickly or easily is the product available and from where. (c) Social stimuli: This is the stimulus provided by family, friends, social groups, and social class. This is important, as one lives in society and for the approval and appreciation of the society, buying habits have to be governed. Perceptual and learning constructs These constructs are psychological variables, e.g., motives, attitudes, perception which influence the consumer decision process. The consumer receives the stimuli and interprets it. Two factors that influence his interpretation are stimulus-ambiguity and perpetual bias. Stimulus ambiguity occurs when the consumer cannot interpret or fully understand the meaning of the stimuli he has received, and does not know how to respond. Perceptual bias occurs when an individual distorts the information according to his needs and experience. Output By output we mean the purchase decision. After purchase there is satisfaction or dissatisfaction. Satisfaction leads to positive attitude and increases brand comprehension. With dissatisfaction, a negative attitude is developed. The feedback shown by the dotted line and the solid lines shows the flow of information. Exogenous or external variables These are not shown in the model, and do not directly influence the decision process. They influence the consumer indirectly and vary from one consumer to another. These are the individual’s own personality traits, social class, importance of purchase and financial status. All the four factors discussed above are dependent on each other and influence the decision- making process. The model though complicated, deals with the purchase behaviour in an exhaustive manner. 211 CU IDOL SELF LEARNING MATERIAL (SLM)

Figure 13.3 Howarth Sheath Model Nicosia Model This model explains the consumer behaviour on the basis of four fields. The output of field one becomes the input of field two, and so on. 212 CU IDOL SELF LEARNING MATERIAL (SLM)

Figure 13.4 Nicosia Model The Nicosia model of Consumer Behavior is divided into four major fields: Field 1: The firm’s attributes and the consumer’s attributes. The first field is divided into two subfields. The first subfield deals with the firm’s marketing environment and communication efforts that affect consumer attitudes, the competitive environment, and characteristics of target market. Subfield two specifies the consumer characteristics e.g., experience, personality, and how he perceives the promotional idea toward the product in this stage the consumer forms his attitude toward the firm’s product based on his interpretation of the message. Field 2: Search and evaluation. The consumer will start to search for other firm’s brand and evaluate the firm’s brand in comparison with alternate brands. In this case the firm motivates the consumer to purchase its brands. Field 3: The act of the purchase. The result of motivation will arise by convincing the consumer to purchase the firm products from a specific retailer. Field 4: Feed back of sales results. This model analyses the feedback of both the firm and the consumer after purchasing the product. The firm will benefit from its sales data as a feedback, and the consumer will use his experience with the product affects the individuals attitude and predisposition’s concerning future messages from the firm. Field one consists of subfields one and two. Subfield one is the firm’s attributes and theattributes of the product. The subfield two is the predisposition of the consumer and his own characteristics and attributes, which are affected by his exposure to various information and message, and is responsible for the building of attitude of the consumer. 213 CU IDOL SELF LEARNING MATERIAL (SLM)

Field two is the reaction field, where the consumer goes on for research and evaluation and gets motivated to buy the product. It highlights the means and end relationship. FieldThree is the act of purchase or the decision-making to buy the product. The customer buys the Product and uses it. Field four highlights the post-purchase behaviour and the use of the product, its storage and consumption. The feedback from field four is fed into the firms attributes Or field one, and the feedback from the experience is responsible for changing the pre-disposition of the consumer and later his attitude towards the product.Nicosia Model is a comprehensive model of dealing with all aspects of building attitudes, purchase and use of product including the post-purchase behaviour of the consumer. 13.2 CONSUMER RESEARCH PROCESS Consumer research is a part of market research in which inclination, motivation and purchase behavior of the targeted customers are identified. Consumer research helps businesses or organizations understand customer psychology and create detailed purchasing behavior profiles.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. This will in turn help to boost business. The research process includes the following steps; 1.Developing Research Objectives This is the first and the most difficult step in the consumer research process. It is important for the marketing manager and the research manager to define and agree at the outset on the purposes and objectives of the study to ensure that the research design is appropriate. This can be done through a carefully thought- out statement of objectives, which helps to define the type and the level of information needed. The statement of objectives will help to determine whether the research will involve a qualitative or a quantitative study. For example, if the purpose of the study is to comeup with new ideas products or promotional campaigns, it will entail a qualitative study and if it is to find out how many people in the population i.e. the percentage of people that use certain products, then a quantitative study will be adopted. 2.Collecting Secondary Data After the statement of objectives, the next step is the search for secondary data. A secondary data is any information originally generated for some purpose other than the present research objectives (i.e. the original data performed by the individual researchers or organizations to meet specific objectives, which is referred to as primary data). Secondary data includes both internal and external data. Internal Secondary data consists of such information as data generated in-house by earlier studies as well as analysis of customer files, such as past customer transaction, letters from 214 CU IDOL SELF LEARNING MATERIAL (SLM)

customers, sales call reports and data collected via warranty cards. The use of internal secondary data by companies to compute customer lifetime value profiles has been on the increase. These profiles include: i. Customer acquisition costs (the resources needed to establish a relationship with the customer) ii. The profits generated from individual sales to each customer. iii. The costs of handling customers and their orders (some customers may place more complex and variable orders that cost more to handle) and iv. The expected duration of the relationship. External Secondary data consists of any data collected by an outside organization. The major source of these data is the federal government, which publishes information collected by a various government agencies about the economy, business and virtually all demographics of a country’s population. 3.Designing Primary Research The design of a research study is based on the purposes of the study. If descriptive information is needed, then a quantitative study is likely to be undertaken and if the purpose is to get new ideas, for example, for positioning or repositioning of a new idea, then a qualitative study is undertaken. Because the approach of each type of study differs in terms of method of data collection, sample design, and type of data collection instrument used, each research approach will be discussed separately. 13.3 QUANTITATIVE RESEARCH DESIGNS A quantitative research study consists of a research design, the data collection methods and instruments to be used. Three basic designs are used in quantitative research and these are: (a) Observation Research (b) Experimentation (in a laboratory or in the field e.g. a retail store) or (c) Survey (i.e. by questioning people) a. Observational Research This is an important method of consumer research because marketers recognize that the best way to gain an in-depth understanding of the relationship between people and products is by watching them in the process of buying and or using the products. Doing so enables observational researchers to comprehend what the product symbolizes to a consumer and provides greater insight into the bond between people and products that is the essence of brand loyalty. Many large corporations and advertising agencies use trained researchers or 215 CU IDOL SELF LEARNING MATERIAL (SLM)

observers to watch, note and sometimes videotape consumers in stores, shopping malls or their homes to study their responses to products. There are different types of observational research and these are: i. Mechanical observation - is a form of observation whereby mechanical or electronic devices are used to record customer behaviour or responses to a particular marketing stimulus. For example, government planners use data collected from electronic pass devices placed at toll gates to decide which roads should be expanded. ii. Psychological observation - marketers use psychological devices to monitor respondents’ pattern of information processing. For example an electronic eye camera may be used to monitor the eye movements of subjects looking at a series of advertisements for various products and electronic sensors placed on the subject’s heads can monitor the brain activity and attentiveness levels involved in viewing each advertisement. b. Experimentation Testing of the relative sales appeal of many types of variables such as package design, prices, promotional offers, or copy themes is made possible through experiments designed to identify cause and effect. In such experiments called causal research, only some variables are manipulated i.e. the independent variable, while the dependent or all other variables are kept constant. This is referred to as a controlled experimentand this type of experiment ensures that any difference in the outcome, the dependentvariable is due to different treatments of the variable under study and not to extraneous variable. Test Marketingis a major application of causal research, whereby elements such as package, price, and promotion are manipulated in a controlled setting in order to predict sales or gauge the possible responses to the product prior to launching the product. c. Surveys If researchers wish to ask consumers about their purchase preferences and consumption experiences, they can do so in person, by mail, by telephone or online. All of these are referred to as the survey method and each of these survey methods has certain advantages and disadvantages that the researcher might weigh when selecting the method of contact. i. Personal interview surveys – This usually takes place in the home or in retail shopping areas. However, retail shopping surveys or otherwise referred to as mall interceptsare used more frequently than home interviews due to the reluctance of people to allow strangers into their homes and the high incidence of working women as few women stay at home these days due challenging economic situations. ii. Telephone surveys – These are also used to collect consumer data; however evenings and weekends are often the only times to reach telephone respondents, who tend to be less responsive and sometimes even hostile to calls that interrupt their dinner, television viewing 216 CU IDOL SELF LEARNING MATERIAL (SLM)

or general relaxation after an otherwise hectic day at work. There is also the difficulty of reaching people with unregistered numbers. iii. Mail Surveys – These are conducted by sending questionnaires directly to individuals at their homes. One of the major problems of mail questionnaires is a low response rate, but researchers have developed a number of techniques to increase returns such as enclosing a stamped, self- addressed envelope, using a provocative questionnaire and sending pre- notification letters as well as follow-up letters. iv. Online surveys – These are sometimes conducted on the internet. Respondents are directed to the marketer’s or researcher’s web site by computer adverts or home pages. Because the sample’s respondents are self-selected, the results cannot be projected to the larger population. However, researchers who conduct computer polling believe that anonymity of the internet encourages respondents to be more forthright and honest than they would be if asked the same questions in person or by mail; others believe that the data collected may be suspect because some respondents may create new online personalities that do not reflect their own beliefs or behaviour. 13.4 DATA COLLECTION INSTRUMENTS The research data collection instruments are:  Quantitative research  Qualitative research Quantitative Research Data collection instruments are developed as part of a study’s total research design to regulate the collection of data and to ensure that all respondents are asked the same questions in the same order. Data collection instruments include: i. Questionnaires ii. Attitude scales. Data collection instruments are usually pretested and clarified to assure the validity and the reliability of the research study. A study is said to be validif it collects the appropriate data needed to answer the questions or the objectives stated in the first stage of the research process. A study is said to be reliableif the same questions asked of a similar sample produce the same findings. I. Questionnaires The primary data collection instrument for quantitative research is the questionnaire which can be sent through the mail to selected respondents for self-administration or can be administered by field interviewers in person or by telephone. In order to motivate respondents 217 CU IDOL SELF LEARNING MATERIAL (SLM)

to take the time to respond to surveys, researchers try to make the questionnaires interesting, objective, unambiguous, easy to complete and generally less burdensome. The questions can be disguised or undisguised as to its true purpose as disguised questionnaires sometimes yields more truthful answers. The questions can be open-ended or closed-ended. Open-ended questions tend to yield more insightful information. II. Attitude Scales Researchers often present respondents with a list of products or product attributes for which they are asked to indicate their relative feelings or evaluations. The instrument most frequently used to capture this evaluative data are called attitude scales and the most frequently used attitude scales are: a.Likert Scales b. Semantic Differential Scales c. Behaviour Intention Scales d. Rank-order Scale Likert Scales – it is the most popular, easy to read, interpret and simple for consumers to answer. They check or write the number corresponding to their level of agreement or disagreement. Its principal benefit is that it gives the researcher option of considering the responses to each statement separately or of combining the responses Semantic Differential Scales – This is easy to construct and administer. It consists of series of two different or contrary adjectives like cold / hot, good / bad, like /dislike etc anchored at the end of an odd-numbered for example, five or seven point continuum. Respondents are asked to evaluate a concept may be a product or a company on the basis of each attribute by checking the point on the continuum that best reflects their feelings or beliefs. Behaviour Intention Scales - This measures the likelihood that consumers will act in a certain way in the future, such as buying the product again or recommending it to a friend. The sc ales are easy to construct and customers are asked to make subjective judgments regarding their future behaviour. Rank–order Scales – Here, subjects are asked to rank items such as products or retail stores in order of preference in terms of criterion such as overall quality or value for money. Rank – order scaling procedures provides provide important competitive information and enable marketers to identify needed areas of improvement in product design and product positioning. Qualitative Research When it comes to selecting appropriate research format for a qualitative study, the researcher has to take into consideration the purpose of the study and the types of data needed. The research methods which may differ in composition all have roots in psychoanalytic and clinical aspect of psychology and they stress open-ended and free response type questions. 218 CU IDOL SELF LEARNING MATERIAL (SLM)

The key data collection techniques for quantitative studies are: i. Depth Interviews ii. Focus Groups iii. Projective Techniques and iv. Metaphor Analysis i. Depth Interviews In depth interviews, respondents are encouraged to talk freely about their attitudes, interest in addition to the product category or brand under study. The interview which is between a respondent and a highly trained interviewer is usually lengthy, lasting between 30minutes to an hour. The interviewer minimizes his or her participation in the discussion after establishing the general subject to be discussed and afterwards the interviewer carefully studies the transcripts, videotape or audiotape recordings of the interviews together with reports of respondent’s moods, gestures or body languages. These studies provide markets with valuable ideas about product design and insights for positioning or repositioning. ii. Focus Group This consists of 8 to 10 respondents who meet to with a moderator cum analyst for a group discussion focused on a particular product or any subject of research interest. Researchers are then encouraged to discuss their interests, attitudes, reactions, motives and feelings about the product, usage experience and so on. The interview with the focus groups are held in specially designed conference rooms and are taped and sometimes videotaped to assist in the analysis, this usually takes about 2hours to complete. The respondents are recruited on the basis of a carefully drawn consumer profile called Screener Questionnaire, which is based on specifications by the marketing management. iii. Projective Techniques These consist of a variety of disguised tests which are designed to tap the underlying motives of individuals despite their unconscious rationalization or efforts at conscious concealment. They may be in the form of incomplete sentences, untitled pictures or cartoons, ink blots and word association. They are sometimes administered as part of a focus group and are used for researching consumer needs and motivations. iv. Metaphor Analysis This emerged in the 1990s to counter the lapses that may arise in communication in the course of consumer research. The research method suggests that most communication is nonverbal and that people do not think in words but in images. Therefore if consumers’ thought processes consist of series of images or pictures in their minds, then it is likely that many respondents cannot adequately convey their feelings and attitudes about the research subject i.e. product or brand through the use of word alone. It is therefore important to enable 219 CU IDOL SELF LEARNING MATERIAL (SLM)

consumers to represent their images in an alternate, nonverbal form through the use of may be drawings, pictures or music. The use of any of these forms of expression to describe or represent feelings about another is referred to as Metaphor. 13.5 DATA ANALYSIS AND REPORTING RESEARCH FINDINGS In qualitative research, the moderator or test administrator usually analyzes the responses received. In quantitative research on the other hand, the other hand, researcher supervises the analysis; open ended responses are first coded and quantified by converting them into numerical scores and then all of the responses are tabulated andanalyzed using sophisticated analytical programs that correlate the data by selected variables. In both qualitative and quantitative research, the research report includes a brief executive summary of the findings. Depending on the assignment from of the marketing management, the research report may or may not include recommendations for marketing action. The body of the report included full description of the methodology used and, for quantitative research, also includes tables and graphics to support the findings. A sample of the questionnaire is usually included in the appendix to enable management to evaluate the objectivity of the findings 13.6 SUMMARY  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 homo-genetic of the market, similarity of buyer behaviour and concentrates only on the product or price.  A consumer is a part of the society and he may be a memberof many groups in a society.  Stimulus ambiguity occurs when the consumer cannot interpret or fully understand the meaning of the stimuli he has received, and does not know how to respond.  Perceptual bias occurs when an individual distorts the information according to his needs and experience.  The first subfield deals with the firm’s marketing environment and communication efforts that affect consumer attitudes, the competitive environment, and characteristics of target market.  The result of motivation will arise by convincing the consumer to purchase the firm products from a specific retailer.  Consumer research is a part of market research in which inclination, motivation and purchase behavior of the targeted customers are identified. 220 CU IDOL SELF LEARNING MATERIAL (SLM)

 Testing of the relative sales appeal of many types of variables such as package design, prices, promotional offers, or copy themes is made possible through experiments designed to identify cause and effect. 13.7 KEYWORDS  Social stimuli: This is the stimulus provided by family, friends, social groups, and social class.  Internal Secondary data: consists of such information as data generated in-house by earlier studies as well as analysis of customer files, such as past customer transaction, letters from customers, sales call reports and data collected via warranty cards.  External Secondary data consists of any data collected by an outside organization.  Mechanical observation - is a form of observation whereby mechanical or electronic devices are used to record customer behaviour or responses to a particular marketing stimulus.  Test Marketing: is a major application of causal research, whereby elements such as package, price, and promotion are manipulated in a controlled setting in order to predict sales or gauge the possible responses to the product prior to launching the product. 13.8LEARNING ACTIVITY 1. Select the product and prepare a questionnaire which can be sent through the mail to selected respondents for self-administration or can be administered by field interviewers in person or by telephone to identify the satisfaction level of the consumer. ___________________________________________________________________________ _____________________________________________________________________ 2. Neutrogena is a manufacturer of personal care products for young adults. The company would like to extend its facial cleansers product line. Design a qualitative and quantitative research design for the company to be focussed. ___________________________________________________________________________ _____________________________________________________________________ 13.9 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. List the basic models of consumer behavior. 221 CU IDOL SELF LEARNING MATERIAL (SLM)

2. Discuss the price effect and substitution effect in economic model of consumer behavior? 3. Mention the major fields in Nicosia model of consumer behaviour 4. Write shortnote on observational research? 5. What is metaphor analysis? Long Questions 1. Explain the models of consumer behavior 2. Explain about the consumer research process 3. Summarize the quantitative research designs in detail 4. Discuss on quantitative research data collection instruments 5. Discuss on qualitative research data collection instruments B. Multiple Choice Questions 1. In the ________ consumers follow the principle of maximum utility based on the law of diminishing marginal utility. a. Economic model b. Psychological Model c. Sociological Model d. Howarth Sheath Model 2. ________have been investigating the causes which lead to purchases and decision- making a. Sociologist b. Psychologists c. Anthropologist d. Physiologist 3. _______ are physical tangible characteristics of the product 222 a. Significate stimuli b. Symbolic stimuli c. Social stimuli d. Stimuli CU IDOL SELF LEARNING MATERIAL (SLM)

4. The first field is divided into ____ subfields. a. 5 b. 4 c. 3 d. 2 5. ________an important method of consumer research because marketers recognize that the best way to gain an in-depth understanding of the relationship between people and products is by watching them in the process of buying and or using the products. a. Experimentation b. Observation research c. Survey d. Testing Answers 1 – a, 2 – b, 3 – a, 4 – d, 5 – b 13.10 REFERENCES References books  Engel, James F.; Blackwell, Roger D.; Miniard, Paul W., Consumer Behavior, 6th ed. Chicago.  Loudon, D.L. and Bitta A.J. Della, Consumer Behavior, Fourth Edition, 2002, Tata McGraw-Hill, New Delhi.  Peter, P.J. and Olson, J.C., Consumer Behavior and Marketing Strategy, Seventh Edition, 2005, McGraw-Hill Higher Education. Text books  Schiffman, L.G. and Kanuk, L.L., Consumer Behavior, Eight Edition, 2004, Prentice Hall, India.  Wells W.D. and Prensky, D., Consumer Behavior, 1996, John Wiley & sons, Inc.  Cr. S.L Gupta and Sumitra Pal., Consumer Behaviour, First Edition 2001. 223 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT - 14: ONLINE CONSUMER BEHAVIOR STRUCTURE 14.0 Learning objectives 14.1 Online consumer behavior 14.2 Online consumer behavior process 14.3 Factors of online consumer behavior 14.4 Trends in online consumer behavior 14.5 How to meet modern online shopping expectations 14.6 Characteristics of online consumer behavior 14.7 Roles in purchase function 14.8 Impact of digital technologies on marketing strategies 14.9 The global consumer behavior 14.10 The global consumer market 14.11 Issues of privacy and ethics 14.12 Ethics in business and its relevance to consumer behavior 14.13 Ethical purchasing 14.14 Shopping tips for the ethical shopper 14.15 Deviant consumer behavior 14.16 Ethical shopping and ethical trade initiatives 14.17 Ethically questionable consumer behavior 14.18 Summary 14.19 Keywords 14.20 Learning Activity 14.21 Unit end questions 14.22 References 14.0 LEARNING OBJECTIVES After studying this unit, you will be able to:  Discuss about the process of online consumer behavior

 Explain the trends in online consumer behavior  Interpret the characteristics of online consumer behavior  Discuss the impact of digital technologies on marketing strategies  Discuss on the issues of privacy and ethics 14.1 ONLINE CONSUMER BEHAVIOR Online consumer behavior is consumer’s perspective and preference of purchasing goods and services through online. This might include online shopping experience of a consumer. It is totally different when it comes to physical purchase. There are different marketing strategies to learn consumer’s perspective and feedback when it comes to online shopping. Consumer behaviour has changed dramatically in the past decade. Today, consumers can order online many customized products ranging from foot wears, clothing to computers. In fact many have replaced their daily newspapers with customized, online editions of these media and are receiving information from online sources. The emergence of the online culture has made companies to adopt different marketing strategies there by recruiting more consumer or market analyst. These market analysts help the companies and the market in identifying the areas to improve and innovative ideas to sustain in the market. The study of online consumer behavior is the study of the intersection between online consumers and online businesses. These analysts look after how consumers respond to various aspects of an online business, and compare the factors that led to a consumer either making a purchase or leaving the website. Online consumer behavior can also be forward-looking. Behavior studies can tell businesses how consumers are responding to ads and site layouts, but they can also predict how consumers will respond to other future campaigns or web features. Market analysis in the online space often leads to innovation. Businesses develop new advertising campaigns, and come up with different ways to reach potential purchasers based on behavioral statistics. Sometimes,the way corporations use behavioral data are straightforward, such as sponsoring links on certain sites or optimizing home pages to appear more readily in search engines. Increasingly, however, market responses are more tailored to the consumer individually. Social networking promotions, interactive homepages, and special offers for subscribers of e- mail or messaging updates are all examples of ways in which online consumer behavior has influenced the modern retail world. The phrase “online consumer behavior” describes the process of online shopping from a consumer’s perspective. It is often described as the study of trends, including the influence of online advertising, consumer willingness to click on links, the prevalence of comparison 225 CU IDOL SELF LEARNING MATERIAL (SLM)

shopping, among others. The decision-making process of an online consumer is often very different from that of a consumer in a physical store. Companies are increasingly studying online consumer behavior in order to adapt their sales and marketing strategies to appeal to the Internet purchaser. With the evolution of online communication through internet, customers now see online advertisements of various brands. It is fast catching up with the buying behavior of consumers and is a major source of publicity for niche segments and also for established brands. This is the new way of digital revolution and businesses worldwide have realized their worth. Examples − Online catalogues, Websites, or Search engines. When customers have sufficient information, they will need to compare with the choices of products or services. Figure 14.1 Online consumer behaviour 14.2 ONLINE CONSUMER BEHAVIOR PROCESS According to the above figure, in the search stage, they might look for the product reviews or customer comments. They will find out which brand or company offers them the best fit to their expectation. During this stage, well-organized web site structure and attractive design are important things to persuade consumers to be interested in buying product or service. 226 CU IDOL SELF LEARNING MATERIAL (SLM)

Stage 1 The most useful characteristic of internet is that it supports the pre-purchase stage as it helps customers compare different options. Stage 2 During the purchasing stage, product assortment, sale services and information quality seem to be the most important point to help consumers decide what product they should select, or what seller they should buy from. Stage 3 Post-purchase behavior will become more important after their online purchase. Consumers sometimes have a difficulty or concern about the product, or they might want to change or return the product that they have bought. Thus, return and exchange services become more important at this stage. 14.3 FACTORS OF ONLINE CONSUMER BEHAVIOR The first elements to identify are factors that motivate customers to buy products or services online. They are divided into two categories − external factors and internal factors. The External Factors are the ones beyond the control of the customers. They can divide into five sectors namely demographic, socio-economic, technology and public policy; culture; sub- culture; reference groups; and marketing. Internal Factors are the personal traits or behaviors which include attitudes, learning, perception, motivation, self image. The Functional Motives is related to the consumer needs and include things like time, convenience of shopping online, price, the environment of shopping place, selection of products etc. The Non-Functional Motives related to the culture or social values like the brand of the store or product. Price – the consumer can use the price to assess the product, tocompare it to other products, to judge its relative value etc. Trust – the consumers usually focus on their own safety, and on their safety needs but also want to satisfy this necessity before making the purchase. Convenience – is a benefit in the eyes of the consumer and a quality that is derived from the purchase over the Internet. This element usually motivates the consumers, because they desire to buy from everywhere at any time 227 CU IDOL SELF LEARNING MATERIAL (SLM)

14.4 TRENDS IN ONLINE CONSUMER BEHAVIOR A recent research study by Linnworks identified five significant ecommerce trends that help drive online consumer behavior. And while these trends materialize at various points in the customer buying journey, they all have one constituent in common convenience. The key to success in ecommerce is understanding these new trends and adopting business strategies to meet the current expectations of a convenient buying journey. 1. Convenience is a top priority. One of the primary things consumers find convenient is the ability to browse an online store and check out as a guest. In addition, the fewer forms consumers have to complete the more convenient and better they find their overall customer buying journey (and the more likely they are to return). 2. Easy access across all devices The consumers can begin a buying journey on one device, such as a desktop, and end on another, like their mobile devicewithout interruption. This cross-device experience is also expected to include checkouts with personal details already completed on whichever device customers finalize their buying journey (even if they filled in these details on a different device). 3. Access to omnichannel shopping With access to multiple technology options, consumers are engaged in an ‘always-on’ shopping experience. Majority of the consumers shop while multitasking (for example, while scrolling social media platforms). And they’ve come to expect that their favorite brands are on the same channels where they spend the majority of their time. This maximizes convenience by ensuring they never have to leave their favorite and trusted platforms during the buying process. For retailers, this includes implementing an omnichannel model by focusing on various marketplaces where consumers spend their time and, more specifically, selling on social channels such as Facebook and Instagram. 4. Effortless payment When retailers are considering tips to keep up with consumer expectations and behaviors, it’s essential to focus on every aspect of the customer experience. Consumers seek convenience throughout the entire buying journey. As as part of that end-to- end buying convenience, they look to discover ecommerce online shops that have easy-to- setup payment gateways that also accept popular payment methods such as “buy now, pay later.” The simplicity of payment options drives most of the consumers to make purchasing decisions more quickly. 228 CU IDOL SELF LEARNING MATERIAL (SLM)

5. Fast and reliable delivery Fast and reliable delivery options are a must-have factor when shopping online. Shipping transparency is also highly expected of online retailers. In fact, consumers have abandoned their purchases over a lack of shipping transparency on ecommerce sites. 14.5 HOW TO MEET MODERN ONLINE SHOPPING EXPECTATIONS The key to success for retailing in ecommerce is understanding the evolving and complex trends set forth by consumers. For retailers, meeting and exceeding customer expectations defined by ever-evolving online shopping trends are antecedents to creating the best customer journey possible. Sell across multiple platforms Retailers aren’t going to find success online unless they meet consumers where they are. And in today’s marketplace, that means selling across multiple ecommerce platforms. Provide faster shipping With the rise of ecommerce conglomerates, like Amazon, able to ship items quickly, consumers have come to expect transparent and convenient expedited shipping options from all of their online retail shops. Plainly stated, consumers want their products quickly and cheaply. And they’re willing to prioritize retailers who can make these expectations a reality. Offer a simple return process The customer journey doesn’t end when a purchase is made. To keep customers loyal after they check out, post-purchase services and interactions need to be as frictionless as possible. This means offering a simple and convenient return process. Create a personalized buying experience Consumers want to conveniently see recommended products that fit their specific needs or solve a problem they’re experiencing without having to dig deep. To do this, marketers need to create a targeted and personalized buying experience based on data from search, viewed, and purchase history. Demographic data like location and email can also help determine customer needs or problems they need help solving. Then, this data collected should be analyzed and applied to create the most customized online shopping experience possible that meets the customer’s needs or solves the problem. Upgrade the mobile shopping experience Retailers need to ensure that their mobile channels both websites and apps rival that of the traditional desktop experience. The mobile shopping experience should offer convenience by the ease of use. And it should include frictionless touchpoints and positive micro-interactions throughout the buyer’s journey. 229 CU IDOL SELF LEARNING MATERIAL (SLM)

Include easy-to-locate product reviews Consumers want to know the quality of what they’re purchasing, and they don’t want to look far to find out. Retailers should display online reviews in easy-to-find locations for as many products as possible. The less searching a customer has to do, the better. If consumers have trouble finding reviews, they’re more likely to move on to another retail site where they can conveniently read reviews before making a purchase. Offer flexible payment options If the buying journey’s final steps are complicated and inconvenient, consumers will likely skip making a purchase altogether. To meet this expectation, retailers need to offer ”buy now, pay later” options and guest checkouts to make the customer buying journey as convenient as possible. 14.6 CHARACTERISTICS OF ONLINE CONSUMER BEHAVIOR The digital consumer searches before buying. For that reason, companies must provide information about the products/services clearly and in a transparent way. Moreover, when searching a solution, the costumer usually looks for other people’s opinions, who have bought the product/service. More connected The digital consumer is connected at any time and any place, mainly because of the growing use of mobile devices. Less impulsive The digital consumer is sensitive to price and the consume practises are more thoughtful and conscious. More exigent Digital consumers want the company to “talk” with them and clarify doubts as quick as possible, even at the same time the doubts are presented. More participative Digital consumer usually shares opinions and experiences: if the product is good or not, if there was any problem related to customer service, etc. Companies may think this habit is disruptive, but no; on the contrary! By knowing different opinions, negative or positive, companies will know if they are providing a good service, if the product matches what customers want or if it needs improvement. 230 CU IDOL SELF LEARNING MATERIAL (SLM)

14.7 ROLES IN PURCHASE FUNCTION Consumer buying behavior and factors influencing the decision making process of online consumer has shows similarities as well as d ifferences between online and offline customer. The uncontrollable factors are affecting behavior for both types of consumers. In case of offline consumer 4P's of the marketing mix are considered as the main controllable tools influencing the consumer behavior 1. Maintainer: Members who service or repair the product so that it will provide continued satisfaction is a maintainer. 2. Preparer: The preparer is the person who changes the product to a usable form for consumption. For example, in a typical family consumption of food items, the mother plays the role of the preparer. 3. User: The user is the person who actually uses or consumes the services or products. In most of the grocery product purchase, the entire family uses the product. In a typical purchase of a washing machine, the housewife plays the role of the user. 4. Buyer: The buyer is the person who actually purchases and pays for the purchase. In a typical family decision-making process, the father plays the role of the buyer who is involved in the economic transaction process. 5. Decider: A decider is a person who finally determines part or the whole of the buying decision, ie. all quantity like whether to buy, what to buy, how to buy, when to buy, or where to buy are considered. In the event of buying baby products, the mother plays the role of the decider. 6. Gatekeeper: A gatekeeper is a person who permits the flow of certain information and restricts the flow of some set of information. Parents play the role of a gatekeeper in the selection of movies for children. 7. Influencer: An influencer is a person who directly or indirectly has some influence on the final buying decision of others. The parents play the role of influencers in the purchase process of chocolate. 8. Initiator: 231 CU IDOL SELF LEARNING MATERIAL (SLM)

An initiator is a person who first gets the thought or gives the suggestion/idea of buying a particular product. A child might play the role of an initiator in the purchase process of chocolate. 9. Disposer: The disposer is the person who finally disposes of the package of the product. For example, the mother plays the role of a disposer after the product is consumed by the family. As online shopping became a standard part of people’s lives, the optimization of eCommerce stores turned out to be a must when providing a unique and expected customer experience. However, that is not an easy task at all – there are a lot of factors standing behind customer behavior and a lot of them aren’t so easy to figure out. It takes a lot of time, effort, and wrong moves to finally develop a strategy that is the most suitable for your business and customers. 14.8 IMPACT OF DIGITAL TECHNOLOGIES ON MARKETING STRATEGIES Online communication has introduced several dramatic changes into the business environment. Digital technologies allow much greater customization of products, services and promotional messages than older marketing tools. They enable marketers to adapt the elements of the marketing mix (company’s service/product offering to consumers and the methods and tools it uses to accomplish the exchange) toconsumer’s needs more quickly and efficiently and to build and maintain relationship with customers on a greater scale. The several impact online communication and digital technologies have made in the business environment include the following: 1. The empowerment of consumers Consumers have more power than ever before as they can use “intelligent agents” to locate the best prices for products or services, bid on various marketing offerings, bypass distribution outlets and middlemen and shop for goods around the globe and around the clock from the convenience of their homes. 2. Consumers have access to more information Consumers have access to more information than ever before, they can easily find reviews for products they are considering buying that have been posted by previous buyers, click a button to compare the features of different product models at the sites of online retailers. 3. Marketers are able to offer more services than ever before Digitization of information enables sellers to customize the products and services they are selling and still sell them at reasonable prices. It also allows marketers to customize the promotional messages directed at many customers. 232 CU IDOL SELF LEARNING MATERIAL (SLM)

4. The exchange between marketers and customers becomes more interactive and instantaneous Compared with traditional advertising which is one-way street, (i.e. the marketers pay a large sum of money to reach a large number of potential buyers via a mass medium) digital communication on the other hand enables a two-way interactive exchange in which consumers can constantly react to the marketer’s message for example, clicking on links within a given web or even by leaving the site. 5. Ability of marketers to gather more information about customers more quickly and easily Marketers are able to track consumers’ online behaviour and also gather information by requiring visitors to web sites to register and provide some information about themselves before they get access to the site’s features. Thus marketers can construct and update their consumer databases efficiently and inexpensively. This results to many marketers employing narrowcasting (a method that enables them to develop and deliver more customized messages to increasingly smaller marketers on a regular basis). All in all, the key influence of online shopping is consumer satisfaction. Positive customer experience might result in higher sales, and a negative one can result in a definite loss of a customer. So, it’s doubtless, better customer experience will increase the online shopping rates. 14.9 THE GLOBAL CONSUMER BEHAVIOR Firms that choose not to understand their customers’ purchasing behavior often lose out. An excellently engineered product may fail just because the customer does not identify himself or herself with it. It is therefore imperative that the firm understands the structural changes taking place in its market and also the long-term impact of these changes on its product and other elements of the marketing mix. The firm must also understand the buyer’s purchasing behavior. Specifically, it must understand how the buyer decides in favor of one brand or product, what motivates him or her to select an alternative, and who influences him or her to buy the brand or product. The marketer needs to focus on the “how” and “why” of the total experience consumers have with products and services. Unfortunately, most marketers tend to look at only a few aspects of experience and build the complete strategy around it. For example, one of the leading electrical appliances company crafted its strategy around customers’ experience at the dealer outlet. Hence the strategy was on developing dealer outlets, enhancing dealer productivity, and loyalty. It failed to understand other dimensions like service, price-performance relationship, and esteem values of the brand which are as important in the consumer’s mental space and hence influences his/her attitude towards the brand. Likewise, one of the dotcom companies failed to understand that the consumer valued security of transactions over all 233 CU IDOL SELF LEARNING MATERIAL (SLM)

other dimensions of web-based transactions. Hence marketers need to focus on discovering the ‘why’ of an experience. They also need to understand that large samples based survey is no guarantee of having discovered the “truth”. Quantity of data does not guarantee quality. What is needed is a deep understanding of consumer behavior. Without such an understanding, marketers cannot accurately anticipate consumer responses to product designs, features and marketing ideas. 14.10 THE GLOBAL CONSUMER MARKET a) Seamless Global Society The internet has today reduced the gap between different societies. This gap, which was on account of physical distance, information and knowledge, has now become redundant. Today we are seeing the emergence of a global society and universal values. One such universal value relates to the concept of time. It is no more perceived as infinite. And hence time is an indicator of opportunity. An organization’s competitiveness is greatly determined by itsability to respond within a given time frame., determined by market forces and not by its own competencies. The Hindu concept of time, which is eternal and continuing, seems to lose its meaning in this era of information superhighways. Another impact of the Net revolution is the new concept of value. More and more customers have and will come to expect global products and services at local prices. In other words organizations cost structures will have to be globally competitive. Only then will customers get their value for money. Thus, the mere fact that an organization is offering a premium quality product will not be a sufficient reason to motivate customers to buy it. Developments in telecommunications will further contribute to the emergence of these universal concepts, which will affect the customer’s definition of time and value. Mobile telephony has altered the concepts of space, time and location. b) Basis for Competitive Advantage The net is also likely to change the concept of nation state. It is not that these states will not exist but their role will change. The governments of these countries will continue to play a role in maintaining their cultural diversity and sovereignty. They will co-operate with other societies like security, taxation, censorship, and ownership. One of the direct outcomes of this seamless global society, therefore, will be the culture of openness and transparency. These technological changes are going to lead to significant shifts in competitive leadership. Future market leaders will use computers to create new businesses, change existing ones and even restructure many of today’s long established marketing practices. The basis for their sustainable competitive advantage will be knowledge management. In the ongoing war for competitive advantage, information technology has become the ultimate weapon. Hence creation, dissemination and protection of knowledge in the organization is perhaps going to be the most crucial armour for competitive survival. c) Business at the Speed of Thought 234 CU IDOL SELF LEARNING MATERIAL (SLM)

Today the internet give very little time to individuals and organizations to react and respond. We have to learn to conduct our business operations at the speed of the human mind. It should be possible for us to offer products and services even as these are conceived in the customer’s mind. This obviously means that conventional marketing management will no longer deliver. We are already seeing the emergence of online help, which in many cases, has made conventional forms of service redundant. Interactive technologies are already eliminating several roles in the marketing of products and services. Fro example, it is perceived that there will be no role for a service center of a consumer durable firm in the 21st Century if its competitor markets a totally reliable product and, in the extreme case of failure, provides online assistance through its own website or service portal created by a group of service engineers. The product life cycles will be far shorter. Products are further standardized, and hence, the opportunities to differentiate will also no longer exist. From the conventional generic tangible values of performance and reliability, the marketers focus will have to be on tangible and intangible values. Unfortunately the globalisation of products and markets will provide very little scope for differentiation in regard to these specific product or corporate values. The differentiator, therefore, will be the ability of the marketer to creatively customize them for the buyer. Interactive technologies will come to the marketers rescue. The key issues in these technologies will pertain to continuously updating the customer database and proactively creating research based product solutions and, in turn, moving the customer up the technology path.. The marketing challenge lies in enabling customers overcome their resistance to change. It will be the organisation’s ability to competitively pre-empt others and build volumes that will make it a market leader. d) Virtual enterprise The above changes, which have already made their presence felt emphatically in the global scene, have led to the creation of virtual enterprises. We have already seen the emergence of an era of Digital Darwinism. Amazon.com, Yahoo! Hotmail and Rediff.com, Indiatimes. com, like many others, are facilitators in the creation of a virtual enterprise. In this era of virtual reality , size and location of an enterprise will have very little or no role to play. e) Customer: Co-producer of products and services Another dimension of the new millennium, which we can see emerging today, is that the customer will be a co- producer of products and services. No longer will it be the responsibility of the manufacturer to produce the product in its finality as the customer may demand. The producer will take the product upto a certain level in the value chain and then leave it for the buyer to customize it to his/ her requirement. A classical case is that of the Asian Paints facility that lets the buyer have his choice of shade customized through the company’ outlets, de-ploying interactive technologies. Similar interactive technologies like the ATM have made the customer a co-producer of products and services. 235 CU IDOL SELF LEARNING MATERIAL (SLM)

f) Customer: A Warehouse of Information In the internet age, the customer has access to huge bank of information from various national and global resources. The challenge for the marketer will be how to use this information for developing the marketing mix. In business –to-business marketing, the challenge will be one of integrating organizational operations to the customer’s environment.e.g. an engineering company will have to tailor its design, engineering and operations to suit the changing requirements of the customer. Hence the era of standardization is today replaced by mass customization. g) The death of Business and consumer marketing The differentiation between business and consumer marketing, urban and rural marketing, and domestic and global marketing will get more blurred. This will also be the case with product and services marketing. The physical differentiation between the product and service will cease to exist mainly because of the standardization in manufacturing technologies. Hence, organizations will have to learn from the marketing practices of winning organizations, irrespective of the nature of their products and markets. h) The role of Distribution Channels The Conventional dealer and distributor will no longer viable. The intermediary’s role will no more be that of physical delivery, sharing risks and investment in stock movements. Rather, it will be service and customization of the offer that will make an intermediary succeed. i) The poor as a market segment Globalization has widened the gap between the rich and the poor. Today poor nations are making an all out effort to bridge the gap. Not only so, poor people all over the world are now a large segment. No marketer can afford to ignore it. So, whether it is customization of products/ services, or price reduction or enhancing accessibility, firms will have to come out with creative solutions for this segment. We have to keep in mind that the focus here is on the poor customers who may be located in urban or rural areas. Incidentally, this segment offers a much more attractive opportunity than just the rich. j) Environment Protection The biggest challenge for the new millennium marketer is protection of the environment. So whether it is in product development, use or disposal, the marketer will have to make a conscious effort to protect and maintain the environment. This has led to the development of eco friendly hotels, watches, food products and packaging material, etc., k) Diversity and Convergence Coexist Markets are diverse. This diversity is not just based on the demographic & geographical location of the consumers, but also on their response to changes especially to technological changes. While diverse markets are a reality, convergence of needs is also a fact. Given the 236 CU IDOL SELF LEARNING MATERIAL (SLM)

spread of internet and satellite television, it is not uncommon to see consumers all over the world demanding same products and services. Thus, the new millennium demands a paradigm shift from marketers to customers who are treated as a resource that has an access to global sources of information and purchase. In this environment, customer’s total experience with the brand and the organization will be the differentiator between winners and losers. This total experience is more than just product related. It is based on the organizations culture and systems and hence reflects organizational quality. 14.11 ISSUES OF PRIVACY AND ETHICS Consumer Privacy The word “Consumerism”, has many connotations, depending on who is using the term. Business, government, consumer groups and academic researchers have each developed their own definition of the term. These definitions span the gamut from challenging society’s goals for material goods to reflecting people’s desire for better values. One succinct definition is that “Consumerism is a social movement of citizens and government to enhance the rights and powers of buyers in relation to sellers. One of the consumer rights relates to privacy, information, data banks, and similar emerging issues. Consumer information collected, merged, and exchanged through computer and communication technologies has become the main resource that business and government use to facilitate the millions of daily transactions engaged in by consumers. Timely, accurate, and complete consumer information is needed by a variety of organizations, direct response marketers, advertising agencies, insurance companies, and private utilities. The purposes of consumer information may include such things as approving or denying credit, issuing credit cards, writing insurance policies, selecting people for direct mail solicitation, preventing fraud, determining eligibility for government aid, investigating and law enforcement purposes and many other activities. To obtain the benefits of technology without losing basic privacy rights, six basic computer – age privacy rules were formulated:  Only relevant and socially approved personal information should be collected by private or public organizations to determine people’s access to rights, benefits and opportunities.  Individuals should be informed what information about them is to be collected and how it will be used.  Individuals should have practical procedures for inspecting their records and for raising issues as to the accuracy, completeness, and propriety of information used to make evaluative decisions about them. 237 CU IDOL SELF LEARNING MATERIAL (SLM)

 Sensitive personal information should be circulated within the collecting organization only to those with a need to see it for legitimate purposes.  Disclosures of identified personal information should not be made by collecting organizations to others outside the original area of activity unless agreed to by the individual or required by legal process.  Organisations must create and apply effective data security measures so that they can keep the promises of confidentiality that they have made to individuals whose information they are holding in a trustee relationship. But new consumer privacy issues have surfaced recently. For instance:  Feature stories in magazines, newspapers, and on TV informed the public that information given for one purpose – credit, insurance, employment, organizational memberships, publication subscriptions, charitable donations, etc., - was being widely used for other commercial purposes without the individual’s knowledge or consent.  When the Society of Consumer Affairs Professionals in industry polled ten leading consumer advocacy organizations in 1989 as to the issues they believed would be consumer action priorities in the ‘90’s, a majority cited better “ Consumer privacy protection”. A major survey of consumers and industry leaders in the privacy – intensive sector ( eg., banks and thrifts, insurance companies, direct marketers, credit bureaus, etc., ) made the following conclusions regarding consumer privacy in the information age:  The general concern over threats to privacy by 79 percent of the public reflects the low trust in institutions that has become a hall mark.  Despite these high general concerns over privacy invasion, the public is prepared to provide personal information for consumer services when convinced that fair information practices are observed.  Concern about privacy varies by race, religion, political philosophy, information level, age and computer use. For instance blacks, Jews, liberals and those aged 30 – 49 are most pro-privacy.  Lowering general public concern over threats to privacy will not be easy but there Are three important ways to enhance consumer privacy interests: a. Update consumer privacy laws such as the Fair Credit Reporting Act. b. Create new information property rights for consumers whereby they could opt in or out of particular consumer-profile information systems and receive some kind of compensation if they participate. 238 CU IDOL SELF LEARNING MATERIAL (SLM)

c. Develop more proactive consumer privacy protection policies by business and consumer advocacy groups. This topic would be of continuing concern to the marketers because of the potential for a consumer backlash on privacy issues. More education of consumers will be required about why certain information is being collected and about their consumer rights. 14.2 ETHICS IN BUSINESS AND ITS RELEVANCE TO CONSUMER BEHAVIOR Understanding of consumer Behavior gives a clear advantage to the marketer who would know all that is there to know about the target consumers personality and choices. In fact almost all companies producing or marketing continuously gather and update their information about their target consumers and form strategies. In many circles it is felt that in depth understanding about the behavior of the consumers gives scope to the marketer to manipulate the market itself and that strategies are formed without regard to fundamental ethics of being honest, truthful and fare. The principal aim of the strategies is to somehow overcome the resistance of the consumers and sell more. This leads to a situation where cleverness in the market place and selling success become prized qualities of a market man when viewed from the angle of his employer or the company. Unless the company draws the line and encourages the employees to be within certain limits, ethics becomes the first casualty. In the long run it does immense damage to the relationship between the company and its customers. Therefore, more than anyone else companies doing marketing have to make ethics their way of life not be compromised even under grave provocation or threat from competition. Without ethics there can be no business. Ethics is not a Matter of Choice It is difficult to precisely define what ethics is. However most people have no difficulty in understanding the spirit of ethics. Most people do not question or argue about the axiom that ethics is not a matter of choice. Just as you do not question the right of other people to live you do not question their right to expect ethical behavior from you. Having said that we must however admit that unethical practices are seen and put up within every area including marketing. In marketing- be it product design, packaging, pricing, promotion, distribution or quality assurance, ethics gets a go-by many times. Seemingly honest business persons educated and respectable sometimes allow unethical practices by the companies to go on. Common explanations that they are caught up in a competitive situation and therefore helpless is not acceptable. The real reason could be that in their quest for commercial superiority they are closing an eye and allowing unethical practices to continue. In short they are subverting what should have been their fundamental 239 CU IDOL SELF LEARNING MATERIAL (SLM)

principal and philosophy. The society cannot accept such business because it affects the very fabric of life. Ethics Flow From the Top A business place dishonesty or rot has described above could not be taking place without some knowledge of the management. Management are in any case expected to be constantly on the alert to detect and stem any rot at the first instance. They are to educate their employees and pro actively install all policies that would prevent unethical practices. Ethical practices should be instituted by the companies to flow from the top and percolating to all levels below. Including lofty statements about ethics in the company’s vision statement is good but not enough. The corporate management should understand that Junior executives constantly look upward their supervisors and top management for moral guidance. Absence of guidance is taken by the working levels as a signal that the company is not serious about ethics. In such company’s commercial success becomes the paramount policy. All means, fare or foul, that brings success will be viewed as strategies. One company’s unethical practices will induce the other company’s to follow suit in the name of the competition. Using trick for trick, fighting fire with fire, the competitors bring down the general image of the industry. All because few managements did not have the foresight or gutts to stand up and stick to ethics even at the cost of some short term set backs. However history has shown that those company’s stand erect and instill ethics in their employees get notices by consumers and become leaders. Ethics is a Journey Ethics is not a destination. It is a journey. Company’s and persons should continuously practice it, question themselves periodically and take course corrections to travel in correct directions. Induction of the code of ethics and their maintenance should be proactively supervised by the entire organization be it a government, business or a group on a continuous basis. Appreciation and reward for followers of ethical codes is important and so also punishments for breaking these codes. 14.13 ETHICAL PURCHASING Ethical purchasing put simply is buying things that are made ethically by companies that act ethically. Ethical can be a subjective term both for companies and consumers, but in its truest sense means without harm to or exploitation of humans, animals or the environment. Understanding Buying Ethically The ways in which you can act as an ‘ethical consumer’ can take on a number of often subtle forms. 240 CU IDOL SELF LEARNING MATERIAL (SLM)

 Positive buying is favoring ethical products, be they fair trade, organic or cruelty free. This option is arguably the most important since it directly supports progressive companies.  Negative purchasing means avoiding products you disapprove of such as battery eggs or polluting cars.  Company-based purchasing involves targeting a business as a whole. For example, the Nestlé boycott targets all its brands and subsidiaries in a bid to force the company to change its marketing of baby milk formula in the Third World.  The fully screened approach is a combination of all three and means looking at all the companies and products together and evaluating which brand is the most ethical . 14.4 SHOPPING TIPS FOR THE ETHICAL SHOPPER 1. Local shops 2. Health food shops 3. Fair trade 4. Products not tested on animals 5. Vegetarian products 6. Organic produce 7. Non-genetically altered food 8. Ethical money 9. Recycling & second hand 10. Wood Products 14.15 DEVIANT CONSUMER BEHAVIOR The deviant consumer behaviors include negligent and fraudulent behaviors. Negligent Consumer Behavior: COMPULSIVE BUYING Most consumers engage in buying as a normal and routine part of their everyday lives. But when the buying becomes compulsive the goal shifts from obtaining utility from the purchased item to achieving gratification from the purchasing process itself. Compulsive buying is chronic. Repetitive purchasing that becomes a primary response to negative events or feelings. It becomes very difficulty to stop and ultimately results in harmful consequences to individuals or others. 241 CU IDOL SELF LEARNING MATERIAL (SLM)

Compulsive buying is undesirable because it has sever consequences such as amassing huge amounts of debt that are difficult to retire and feelings of remorse, lowered self esteem, and weekend inter personal relationships. Shopaholics are addicted to purchasing and use it as a fix to offset emotional deprivation. And when they are confronted over their spending habits they will often switch to another type of chronic destructive habits such as over eating, work holism or over exercising. Studies show that as much as 10 percent of the American population can be classified as hard core shoppers who shop for shopping sake rather that to fill real needs. One factor facilitating the process is the easy availability of the credit cards. It is probably no coincidence that there has been a rapid growth in the bank cards issued during the rise in the problem of compulsive consumption. One consumer was even able to obtain 1199 different types of credit cards to win a bet with a friend. The result of easy credit can be staggering debt. Support groups have been established to fight this type of addiction by helping people who are trying to stop their compulsion to spend beyond their means for things they don’t need. Fradulent Consumer Behavior Shop lifting is an example of fraudulent or a criminal type of deviant consumer behavior that involves the theft of retail merchandise during the store hours by someone who is shopping or pretending to shop. Shop lifting rose 35 per cent between the mid – 1980’s – 1990 and equals about two per cent of all retail sales excluding gas and car purchases. Thus, it must be emphasized that consumers, just as business and other organizations, have an obligation to act responsibly in the marketplace in exchange relationships. 14.16 ETHICAL SHOPPING AND ETHICAL TRADE INITIATIVES Every day we choose between different products. Our purchase decisions do not only affect us ourselves. The way the products have been produced can make a big difference to other people, to nature, the environment and to animals. Ethical purchase behavior is about taking responsibility for the influence which we control ourselves. 14.17 ETHICALLY QUESTIONABLE CONSUMER BEHAVIOR The more one equals ethics with moral criticism and moral self-criticism, the more natural it is to start with looking at unethical rather than ethical consumer behavior. In addition to potential theory-traditional reasons, there are good practical and economic reasons for explaining, influencing and prohibiting ethically questionable consumer behavior. A red thread in this consumer ethics research tradition has been it’s the development, validation and frequent replication of the “consumer ethics scale” (often referred to as CES. This CES scale offers a list of more or less ethically questionable consumer activities for a vote. 242 CU IDOL SELF LEARNING MATERIAL (SLM)

The activities can be grouped into four categories, ranging from clearly questionable to little controversial categories: Actively benefiting from illegal activity  Changing price tags on merchandise in a retail store.  Drinking a can of soda in a supermarket without paying for it.  Reporting a lost item as “stolen” to an insurance company in order to collect the money.  Giving misleading price information to a clerk for an un-priced item.  Returning damaged merchandise when the damage is your own fault. Passively benefiting at the expense of others  Getting too much change and not saying anything.  Lying about a child’s age in order to get a lower price.  Not saying anything when the server miscalculates the bill in your favor. Actively benefiting from questionable behavior  Breaking a bottle of salad dressing in a supermarket & doing nothing about it.  Stretching the truth on an income tax return.  Using an expired coupon for merchandise.  Using a coupon for merchandise that you did not buy.  Not telling the truth when negotiating the price of a new automobile. No harm/no foul  Tasting grapes in a supermarket and not buying any.  Using computer software or games that you did not buy.  Recording an album instead of buying it.  Spending over an hour trying on different dresses and not purchasing any.  Taping a movie off the television.  Returning merchandise after trying it and not liking it. 14.18 SUMMARY  Online consumer behaviour is consumer’s perspective and preference of purchasing goods and services through online. 243 CU IDOL SELF LEARNING MATERIAL (SLM)

 Consumers can order online many customized products ranging from foot wears, clothing to computers.  Post-purchase behaviour will become more important after their online purchase. Consumers sometimes have a difficulty or concern about the product, or they might want to change or return the product that they have bought.  The consumers can begin a buying journey on one device, such as a desktop, and end on another, like their mobile devicewithout interruption.  Retailers aren’t going to find success online unless they meet consumers where they are. And in today’s marketplace, that means selling across multiple ecommerce platforms.  A gatekeeper is a person who permits the flow of certain information and restricts the flow of some set of information. Parents play the role of a gatekeeper in the selection of movies for children. 14.19 KEYWORDS  Online consumer behaviour: describes the process of online shopping from a consumer’s perspective.  Internal Factors: are the personal traits or behaviors which include attitudes, learning, perception, motivation, and self-image.  Price:the consumer can use the price to assess the product, to compare it to other products, to judge its relative value etc.  Less impulsive: The digital consumer is sensitive to price and the consume practises are more thoughtful and conscious.  Preparer: is the person who changes the product to a usable form for consumption.  Decider: is a person who finally determines part or the whole of the buying decision. 14.20 LEARNING ACTIVITY 1. One strategy used in decision making occurs when consumers use country of origin as an anchor. Your task is to examine country-of-origin effect. Create a profi le for a new laptop computer (you may alter a profile that already exists online). Increase the storage space and processor speed and decreasuree the weight in order to make the laptop more appealing to the consumer. At the beginning of the product description, add the line ‘Made in x’. Create three descriptions where the only difference is the country where the product is made. Use three countries, one in South America, one in Western Europe and another in Asia. Ask three different individuals to rate the quality of each laptop. Assess 244 CU IDOL SELF LEARNING MATERIAL (SLM)

the likelihood of their purchasing the laptop. Record their responses. Use one description per person. Did consumers respond differently to the laptop depending on its origin? What does this tell you about country-of-origin effects? ___________________________________________________________________________ _____________________________________________________________________ 2. What was the last item you purchased in a store? Did you go shopping specifically to look for it? Why did you buy it? Who was involved in you purchasing decision? Were you happy with the decision you made? ___________________________________________________________________________ ___________________________________________________________________________ 14.21 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. Discuss on the online consumer behavior 2. List the process of online consumer behavior 3. Discuss the internal and external factors 4. Explain the roles in purchase function 5. Explain about Seamless Global Society Long Questions 1. Explain the process of online consumer behavior 2. Discuss the factors of online consumer behavior. 3. Summarize the trends in online consumer behavior 4. Explain the characteristics of online consumer behavior 5. Discuss the impact of digital technologies on marketing strategies B. Multiple Choice Questions 1. Online companies create a ________: consumers gain information that turns them into sophisticated customers, opportunities to customize products easily, and entertainment content; marketers gain information about consumers that allows them to be more efficient and precise when marketing their products. a. Value vacuum b. One-sided transaction c. divestment opportunity 245 CU IDOL SELF LEARNING MATERIAL (SLM)

d. Value exchange 2. The adoption of digital technologies has introduced drastic changes into the business environment, including which of the following? a. Customers are forced to deal with distribution outlets and middlemen in order to obtaingoods. b. The exchange between marketers and customers is less interactive than in the past. c. Consumers face more barriers to accessing information. d. Marketers can offer more products and services than ever before. 3. Emerging digital technologies are allowing consumers to have more power than ever before.This means that now customers ________. a. Are required to buy goods and services from local vendors b. Are limited in the time of day that they are able to buy products c. Can locate the best prices for products or services d. Are more limited in the range of products that they can purchase 4. As consumers spend more time online and have more technological tools that enable them toavoid exposure to TV ads, marketers are ________. a. Investing in flashier television advertisements to attract attention to themselves b. Buying more air time in an attempt to crowd out their competitors' advertisements c. Lobbying for legislation that will prohibit the sale of devices that allow consumers to avoid advertising on the basis that such devices are anti-competitive d. Shifting dollars from traditional display advertising to sites like facebook that can deliver huge audiences. 5. Cookies are used to track who is interested in what online and sold on exchanges like ________ to other companies who are interested in targeting people based on their interests. a. eXelate and BlueKai b. cheapair.com and Hilton c. Amazon.com 246 CU IDOL SELF LEARNING MATERIAL (SLM)

d. informationex.com Answers 1 – d, 2 – d, 3 – c, 4 – d, 5 – a 14.22 REFERENCES References books  Engel, James F.; Blackwell, Roger D.; Miniard, Paul W., Consumer Behavior, 6th ed. Chicago.  Loudon, D.L. and Bitta A.J. Della, Consumer Behavior, Fourth Edition, 2002, Tata McGraw-Hill, New Delhi.  Peter, P.J. and Olson, J.C., Consumer Behavior and Marketing Strategy, Seventh Edition, 2005, McGraw-Hill Higher Education. Text books  Schiffman, L.G. and Kanuk, L.L., Consumer Behavior, Eight Edition, 2004, Prentice Hall, India.  Wells W.D. and Prensky, D., Consumer Behavior, 1996, John Wiley & sons, Inc.  Cr. S.L Gupta and Sumitra Pal., Consumer Behaviour, First Edition 2001. 247 CU IDOL SELF LEARNING MATERIAL (SLM)