Consumer Behavior

Module 1
Consumer behavior
Lecture Notes
Mwangi Ateka (consumer Behavior) AFI 2204 January-April (2018) 1

1.1 Introduction to Consumer behavior
Refers to behavior that consumers display in searching for, purchasing, using, evaluating, disposing
of products and services. The focus is on how individuals make decisions to spend their available
resources (time and money) o n the consumption of products.
This include answers to questions like;
 What to buy
 Why they buy
 Where they buy
 How often they buy
 How often they use it
 How they evaluate its use
 Impact of such evaluation
 How they dispose
The course therefore seeks to analyze what informs the decisions that consumer make with regard
to the above choices.
One "official" definition of consumer behavior is "The study of individuals, groups, or
organizations and the processes they use to select, secure, use, and dispose of products, services,
experiences, or ideas to satisfy needs and the impacts that these processes have on the consumer
and society." Although it is not necessary to memorize this definition, it brings up some useful
points:

 Behavior occurs either for the individual, or in the context of a group (e.g., friends
influence what kinds of clothes a person wears) or an organization (people on the job make
decisions as to which products the firm should use).
 Consumer behavior involves the use and disposal of products as well as the study of how
they are purchased. Product use is often of great interest to the marketer, because this may
influence how a product is best positioned or how we can encourage increased
consumption. Since many environmental problems result from product disposal (e.g.,
motor oil being sent into sewage systems to save the recycling fee, or garbage piling up at
landfills) this is also an area of interest.
 Consumer behavior involves services and ideas as well as tangible products.
 The impact of consumer behavior on society is also of relevance. For example, aggressive
marketing of high fat foods, or aggressive marketing of easy credit, may have serious
repercussions for the national health and economy.
1.2 Why is Consumer behavior is Important
There are several units in the market that can be analyzed (sellers, producers, brokers, facilities etc.
Our main thrust in this course is the consumer.
Note in looking at consumer behavior, there are 2 types of consuming entities –
personal and organizational consumer’s e.g (schools, churches, NGOs). We shall
however in this course focus more on the individual consumers- who are end users
i.e those who purchase for own use. This is most pervasive because it involves
everybody (young and old)

1. The study of consumers helps firms and organizations improve their marketing strategies
by understanding issues such as how
 The psychology of how consumers think, feel, reason, and select between different
alternatives (e.g., brands, products);
 The the psychology of how the consumer is influenced by his or her environment
(e.g., culture, family, signs, media);
 The behavior of consumers while shopping or making other marketing decisions;
 Limitations in consumer knowledge or information processing abilities influence
decisions and marketing outcome;
 How consumer motivation and decision strategies differ between products that
differ in their level of importance or interest that they entail for the consumer; and
 How marketers can adapt and improve their marketing campaigns and marketing
strategies to more effectively reach the consumer.
2. A second application is public policy. The decisions we make as consumers affect the overall
economy
3. As a final benefit, studying consumer behavior should make us better consumers. Common
sense suggests, for example, that if you buy a 64 liquid ounce bottle of laundry detergent,
you should pay less per ounce than if you bought two 32 ounce bottles. In practice,
however, you often pay a size premium by buying the larger quantity. In other words, in this
case, knowing this fact will sensitize you to the need to check the unit cost labels to
determine if you are really getting a bargain.

1.3 Origin, development and Diversity of consumer behavior as discipline
Consumer behavior as a discipline has its origin in the marketing concept. But Before the
evolution of the marketing concept we had what was called;
a) Production concept –This was built n the assumption that people want is availability of
products at low cost –puts focus on mass production.
b) Product concept –Assumes that consumers will buy the product that offers them highest
quality, performance and most features. This leads the company to strive to strive to improve
quality.
c) Selling concept –The focus is to sell the product. The thinking is that consumers are
unlikely to purchase the product unless they are persuaded.
Marketing concept is based on the realization by marketers that you can sell more goods more
cheaply/easily; if they produce only the goods they had determined that consumers would buy.
The focus therefore is to produce the goods that consumers need.
The determination of what consumers need is done through a process called consumer research
The key assumptions of the marketing concept is that to be successful , a company must
determine the needs and wants of specific target markets and deliver the desired satisfaction
better than the competition.
A key distinction between the selling and marketing concept is that selling concept focuses on
profits through sales volumes, while the marketing concept focuses on profits through customer

satisfaction. The realization is that companies that focus on understanding the needs
of their consumers are ones that continue to grow. {Barclays and equity]
While trying to implement the marketing concept , companies realized that consumers are highly
complex individuals and are subject to a variety of psychological and social needs- quite a part
from their survival needs. Therefore the identification of unsatisfied consumer needs- requires
extensive marketing research. Since the needs of the different consumers differ greatly.
Therefore for companies to design products and strategies that would meet the various needs
of different consumers , they had to study consumers and the consumption behavior. Therefore
the adoption of the marketing concept provided the ground work for the application of consumer’s
behavior principles in marketing strategy.
As a discipline, CB is an applied discipline That borrows from every discipline
that contributes to understanding the consumers psychology, economics,
sociology and anthropology.
1.4 Key / Important Concepts in Consumer Behavior
a) Market segmentation – The marketing concept puts a lot emphasis on meeting
customer needs. Consumer needs are characterized by great diversity. Market
segmentation is a process of dividing a market into sub sets of consumers with common
needs and characteristics. This is discussed later in detail.

b) Marketing mix – This consist of the company’s service/product offering to consumers
including the tools and methods its selects to accomplish the exchange. It consists of 4
elements -4ps.
i. Product/service –features interms of design, brands, packaging
ii. Price – including discounts and allowances
iii. Place - distribution of product or service
iv. Promotion-advertisement, sales promotion and public relations
Customer satisfaction is delivered in the form of the marketing mix in the so called -4Ps
c) Customer value – Successful competiion will need to put emphasis on culture that view
exchange as relationship not transaction. Customer value is one of the key drivers of
successful relationship. The others are customer value, customer satisfaction and
customer retention. Customer’s perceived benefits [economic, functional or
psychological]/Resources used to obtain the benefits [time, money or effort]
d) Customer satisfaction -It is the individual perception of the performance of the product
or service in relation to his expectation. CB studies usually give the following
categorization
 Completely satisfied customers - loyal
 Hostages –dissatisfied but cant leave
 Mercenaries- they are satisfied but can leave

e) Customer retention – the objective of meeting customer needs is to customer
retention. The strategy is to make consumers feel it is more in their interest to be with
the company than switch.
f) Marketing ethics and social responsibility
The Marketing concept puts emphasis on satisfaction of consumer needs. This focus can be
unethical from society’s perspective. Examples is drugs, under age sex etc
There is need therefore for marketers to adhere to principles of social responsibility in the
marketing of their goods and services {sunshine kericho).
1.5 Emerging Trends in Trends in consumer behavior
Consumer behavior has undergone a lot transformational changes driven among others by:
 Urbanization, Globalization
 Education, ICT
 Growth in agro processing and value addition
 Growth in the supermarket and value chain concepts
a. Consumers have more power than ever before
b. Consumers have access to more information than ever before
c. The exchange between marketers and consumers is increasingly becoming more interactive
(notice boards)
d. Consumer are accessible to a wide variety of goods than before (value addition e.g pay tv
e. The emergence of Consumer lobby groups

f. The increased reliance on internet for purchase and post purchase activities e.g Online
purchase of on line edition of books , journal
1.6 Consumer Research Methods
The marketing concept put focus on satisfaction of consumer needs. Since needs are specific to
individual consumers, marketers must invest effort in trying to understand the specific needs of the
different groups of consumers
The field of consumer research was developed as an extension of marketing research to enable
marketers understand the decision making process of consumers for instance it enables marketers
predict how consumers will respond to promotional messages and also understand why they
make the purchase decisions they do .
Consumer research enables marketers to study and understand consumer s needs and wants and
how and why they make consumption decisions. Research is often needed to ensure that we
produce what customers really want and not what we think they want.
1.6.1 Approaches to Consumer Research
There are two main approaches to marketing research.
 Secondary research involves using information that others have already put
together. For example, if you are thinking about starting a business making clothes
for ladies, you don’t need to question people about how tall they are to find out
how many tall people exist—that information has already been published.

 Primary research, in contrast, is research that you design and conduct yourself.
For example, you may need to find out whether consumers would prefer that your
soft drinks be sweater or bitter or astringent. Several tools are available to the
market researcher—e.g., mail questionnaires, phone surveys, observation, and
focus groups. There are 2 different types of primary research designs;
1.6.2 Qualitative and quantitative research Designs
 Quantitative research is descriptive in nature and is used by researchers to
predict the effects of promotional activities. The main research tools include
experiments, survey techniques and observations. findings are descriptive,
empirical and if randomly collected can be generalized for the entire population .
 Qualitative research – They are primarily used for obtaining new ideas for
promotional programs or products. They are administered by highly trained
interviewers or analysts who are also able to analyze the finding. The main research
techniques are in-depth interviews, projective techniques, and focus group
approaches
Table: comparison between The Quantitative and qualitative research Designs
Qualitative research Quantitative research

Study purpose Studies are designed to provide Studies designed to describe a target

insights about new product ideas or market (characterize). results used
repositioning strategies for strategic marketing decisions
Types of questions and data collection Open ended, unstructured and Closed ended questions with
methods probing by interviewer predefined possible responses
- in-depth interviews and focus - data collection methods are mainly

groups are used surveys or experimentation
Sampling methods Small non probabilistic and therefore Large and probabilistic
not representative
Data analysis Data collected is analyzed b by the Analysis is done using statistical tools
researchers who are qualified or
experienced in behavioral sciences
Quantitative Research Designs
a) Experimentation – for this can be used to test the relative sales appeal of many types of variables e.g
effect color of package on appeals
b) Observation –Watching them in the process of buying or and using the product. There are also electronic
options for carrying out observations
Observation of consumers is often a powerful tool. Looking at how consumers select
products may yield insights into how they make decisions and what they look for. For
example, observation may help us determine how much time consumers spend comparing
prices, or whether nutritional labels are being consulted.
A question arises as to whether this type of “spying” inappropriately invades the privacy of
consumers
c) Surveys are useful for getting a great deal of specific information. Surveys can contain open-
ended questions (e.g., “In which city and state were you born? ____________”) or closed-

ended, where the respondent is asked to select answers from a brief list (e.g., “__Male ___
Female.” Open ended questions have the advantage that the respondent is not limited to the
options listed, and that the respondent is not being influenced by seeing a list of responses.
However, open-ended questions are often skipped by respondents, and coding them can be
quite a challenge. In general, for surveys to yield meaningful responses, sample sizes of over
100 are usually required because precision is essential. For example, if a market share of
twenty percent would result in a loss while thirty percent would be profitable, a confidence
interval of 20-35% is too wide to be useful.
Surveys come in several different forms.
I. Mail surveys are relatively inexpensive, but response rates are typically quite low—
typically from 5-20%.
II. Phone-surveys get somewhat higher response rates, but not many questions can be
asked because many answer options have to be repeated and few people are willing to stay
on the phone for more than five minutes.
III. Personal interviews e.g Mall intercepts are a convenient way to reach consumers,
but respondents may be reluctant to discuss anything sensitive face-to-face with an
interviewer.
IV. Online surveys
The Internet now reaches the great majority of individuals and thus, online research provides
new opportunity and has increased in use.
One potential benefit of online surveys is the use of “conditional branching.” In conventional
paper and pencil surveys, one question might ask if the respondent has shopped for a new car

during the last eight months. If the respondent answers “no,” he or she will be asked to skip
ahead several questions—e.g., going straight to question 10 instead of proceeding to
number 9. If the respondent answered “yes,” he or she would be instructed to go to the
next question which, along with the next several ones, would address issues related to this
shopping experience.
Conditional branching allows the computer to skip directly to the appropriate question. If a
respondent is asked which brands he or she considered, it is also possible to customize brand
comparison questions to those listed. Suppose, for example, that the respondent considered
Ford, Toyota, and Hyundai, it would be possible to ask the subject questions about his or
her view of the relative quality of each respective pair—in this case, Ford vs. Toyota, Ford
vs. Hyundai, and Toyota vs. Hyundai.
There are certain drawbacks to online surveys. Some consumers may be more
comfortable with online activities than others—and not all households will
have access- especially in developing countries (Questions).
Online search data and page visit logs provides valuable ground for analysis. It is possible to
see how frequently various terms are used by those who use a firm’s web site search feature
or to see the route taken by most consumers to get to the page with the information they
ultimately want. If consumers use a certain term frequently that is not used by the firm in
its product descriptions, the need to include this term in online content can be seen in search
logs. If consumers take a long, “torturous” route to information frequently accessed, it may
be appropriate to redesign the menu structure and/or insert hyperlinks in “intermediate”
pages that are found in many users’ routes.

The students should be able to evaluate the effectives of each based on cost,
speed, convenience response rate, geographical flexibility, interview bias and
quality of response
Survey Bias
Surveys, as any kind of research, are vulnerable to bias. The wording of a question can influence
the outcome a great deal. For example, more people answered no to the question “Should
speeches against democracy be allowed?” than answered yes to “Should speeches against democracy
be forbidden?”
For face-to-face interviews, interviewer bias is a danger, too. Interviewer bias occurs when the
interviewer influences the way the respondent answers. For example, unconsciously an
interviewer that works for the firm manufacturing the product in question may smile a little when
something good is being said about the product and frown a little when something negative is being
said. The respondent may catch on and say something more positive than his or her real opinion.
Finally, a response bias may occur—if only part of the sample responds to a survey, the
respondents’ answers may not be representative of the population.
Qualitative Research Designs
a) Focus groups
Focus are useful when the marketer wants to launch a new product or modify an existing one. A
focus group usually involves having some 8-12 people come together in a room to discuss their
consumption preferences and experiences. The group is usually led by a moderator, who will start
out talking broadly about topics related broadly to the product without mentioning the product

itself. For example, a focus group aimed at sugar-free cookies might first address consumers’
snacking preferences, only gradually moving toward the specific product of sugar-free cookies. By
not mentioning the product up front, we avoid biasing the participants into thinking only in terms
of the specific product brought out. Thus, instead of having consumers think primarily in terms of
what might be good or bad about the product, we can ask them to discuss more broadly the
ultimate benefits they really seek. For example, instead of having consumers merely discuss what
they think about some sugar-free cookies that we are considering releasing to the market, we can
have consumers speak about their motivations for using snacks and what general kinds of benefits
they seek. Such a discussion might reveal a concern about healthfulness and a desire for wholesome
foods. Probing on the meaning of wholesomeness, consumers might indicate a desire to avoid
artificial ingredients. This would be an important concern in the marketing of sugar-free cookies,
but might not have come up if consumers were asked to comment directly on the product where
the use of artificial ingredients is, by virtue of the nature of the product, necessary.
Focus groups are well suited for some purposes, but poorly suited for others. In general, focus groups
are very good for getting breadth—i.e., finding out what kinds of issues are important for consumers in
a given product category. Here, it is helpful that focus groups are completely “open-ended:” The
consumer mentions his or her preferences and opinions, and the focus group moderator can ask the
consumer to elaborate. In a questionnaire, if one did not think to ask about something, chances are
that few consumers would take the time to write out an elaborate answer. Focus groups also have
some drawbacks, for example:
 They represent small sample sizes. Because of the cost of running focus groups, only a few
groups can be run. Suppose you run four focus groups with ten members each. This will

result in an n of 4(10)=40, which is too small to generalize from. Therefore, focus groups
cannot give us a good idea of:
 What proportion of the population is likely to buy the product.
 What price consumers are willing to pay.
 The groups are inherently social. This means that:
 Consumers will often say things that may make them look good (i.e., they watch public
television rather than soap operas or cook fresh meals for their families daily) even if that is
not true.
 Consumers may be reluctant to speak about embarrassing issues (e.g., weight control,
birth control).
b) Personal interviews
This involves in-depth questioning of an individual about his or her interest in or experiences
with a product. The benefit here is that we can get really into depth (when the respondent
says something interesting, we can ask him or her to elaborate), but this method of research is
costly and can be extremely vulnerable to interviewer bias.
To get a person to elaborate, it may help to try a common tool of psychologists and
psychiatrists—simply repeating what the person said. He or she will often become
uncomfortable with the silence that follows and will then tend to elaborate. This approach
has the benefit that it minimizes the interference with the respondent’s own ideas and
thoughts. He or she is not influenced by a new question but will; instead, go more in depth
on what he or she was saying.

Personal interviews are highly susceptible to inadvertent “signaling” to the respondent.
Although an interviewer is looking to get at the truth, he or she may have a significant interest
in a positive consumer response. Unconsciously, then, he or she may inadvertently smile a
little when something positive is said and frown a little when something negative is said.
Consciously, this will often not be noticeable, and the respondent often will not consciously
be aware that he or she is being “reinforced” and “punished” for saying positive or negative
things, but at an unconscious level, the cumulative effect of several facial expressions are
likely to be felt. Although this type of conditioning will not get a completely negative
respondent to say all positive things, it may “swing” the balance a bit so that respondents are
more likely to say positive thoughts and withhold, or limit the duration of, negative thoughts.
1. Why did you decide to use your current mobile service provider?
2. How long have used it?
3. Have you ever switched service provider?
4. What do you think are the overall quality of your current service provider?What
are the important criteria in selecting a service provider
c) Projective techniques
These are used when a consumer may feel embarrassed to admit to certain opinions, feelings,
or preferences. For example, many older executives may not be comfortable admitting to
being intimidated by computers. It has been found that in such cases, people will tend to
respond more openly about “someone else.” Thus, we may ask them to explain reasons why

a friend has not yet bought a computer, or to tell a story about a person in a picture who is or is
not using a product. The main problem with this method is that it is difficult to analyze
responses.
Projective techniques are inherently inefficient to use. The elaborate context that has to be
put into place takes time and energy away from the main question. There may also be real
differences between the respondent and the third party. Saying or thinking about something
that “hits too close to home” may also influence the respondent, who may or may not be able
to see through the ruse.
1.6.3 The Research Process/sequence
1. Define the research objectives e.g determine the knowelege, attitudes and practices
(KAPs ) on GMO in Nairobi
2. Define the scope of the study and study area including the research sites
3. Collect secondary data
4. choose the appropriate primary research design ( primary research design)
a. Quantitative primary research designs
b. Qualitative research
5. Conduct the research / collection of data
6. Analyze data
7. Prepare reports – The report should normally include an executive summary. The body of
the report will include a full description of the methodology used and finding including tables
and graphics to support the findings. a recommendations . a sample of the questionnaire the
objectives and finding.

1.6.4 Ethical considerations in Consumer Research
i. Some cautions should be heeded in marketing research. First, in general, research should only
be commissioned when it is worth the cost. Thus, research should normally be useful in
making specific decisions (what size should the product be? Should the product be launched?
Should we charge $1.75 or $2.25?)
ii. Secondly, marketing research can be, and often is, abused. Managers frequently have their
own “agendas” (e.g., they either would like a product to be launched or would prefer that it
not be launched so that the firm will have more resources left over to tackle their favorite
products).
iii. Mistreating respondents - avoid long interviews
iv. At the start of all survey , interviewers must clearly identify themselves and the company
they are working for
1.7 Marketing Strategy
Marketing strategy involves plan to meet the needs and desire of specific target markets by
providing value to the target segment better than the competition. There are four critical phases in
successfully carrying out a marketing strategy.
1. Market analysis – identification of the market environment
2. market segmentation
3. Marketing mix strategies (4ps)
4. Implementation in the market place

Marketing Strategy
Market analysis
(Consumer analysis)
Implementation in the
market place
Consumer
Market
segmentation
Marketing mix Selection of one or more market segments

Strategies (4ps) to target
1) Market Environment (Market Analysis)
Marketers must examine the conditions of the overall market/business/economic environment
into which a product or service will be introduced. This should take into account;
 The state of the economy
 Government regulations
 Physical conditions
 Population
 Tarrifs and trade agreements
 Political stability
 Infrastructural reliability including ICT, electricity etc
The above factors create both problems and strategic opportunities for firms. The above factors
(elements of the market environment) affect the consumer needs and their ability to buy

2) Market Segmentation
If all consumers were alike, had the same needs , wants and desires and same background- then
mass marketing (undifferentiated marketing) would be a logical strategy. However, diversity in
consumer needs makes market segmentation an attractive approach in an attempt by marketers to
meet consumer needs.
Market segmentation is a process of dividing the market into distinct sub sets of consumers with
common needs and characteristics. It also involves the selection of one or more segments to target
with a distinct marketing mix.
MS is important because, when marketers provide a range of products and services (choices) to
meet diverse consumer needs, consumers are better satisfied and their overall happiness and quality
of life is ultimately enhanced.
Through MS, producers or marketers are also able to avoid head on competition in the market
place by differentiating their products/ offering through other means beyond price such as
 Styling
 Packaging
 Promotional appeal
 Methods of distribution
Finding from research indicate that the benefits (value) from MS often enough to offset the costs to
undertake MS. By maximizing variance between segments, a differential advantage is obtained

that ideally will be so appealing that it will command a premium price greater than the cost of
catering for the specialized preferences of a particular segment.
After market segmentation, the marketers must select one or more segments to target. By
identifying market segments that are similar in their behavior, products can be developed that are
closely matched to the preferences of that group.
Identifying Market Segments
To be able to segment, marketers must dive deeper in their understanding of consumer behavior to
identify groups of people (market segments). Market Segmentation is done on the basis of
consumer with similar behavior. Because it often difficult to measure consumer behavior. The
common practice in marketing strategy is to use consumer characteristics as proxy for consumer
behavior- given that consumer characteristics and consumer behavior are often correlated. This is
because it is relatively easier to enumerate consumer characteristics. The table below shows
examples of consumer characteristics that can be used to identify market segments.
Perspective Consumer characteristics

Demographics Demographics, Age, Gender, Ethnicity, Income , Education, Family size ,
Nationality, Lifestyle, Marital status, Occupation, Religion, Living arrangements

Purchase and consumption Shopping location, Frequency of purchase , Media used, Price sensitivity,
behavior
How used , Rate of use , Brand loyalty
Values Culture, Personality
Geographic National boundaries , Regional/ county/district/ boundaries
psychographic Activities, Opinions , Interests
Criteria for choosing segments

The process of identifying segments enables firms to identify potential segments to target. How
then does a firm choose which ones to target once potential targets have been identified?
Determining the attractiveness of market segment involves analyzing segments based on the
following criteria;
1. Measurability – refers to the ability to obtain information about size, nature and
behavior of a market segment. This is because, when behavior is measurable , it is easier
to formulate and implement marketing mix strategies.
2. Accessibility-Degree to which a segment can be reached either adverting,
advertising, distribution
3. Substantiality- refers to the size of market. The signet should be substantial so as to
generate enough volume to support development
4. Congruity-refers to how similar members within the segment exhibit behavior or
characteristics that correlate with consumption behavior. The more congruous (in accord)
a segment, the more efficient are the product offering
3) Marketing Mix
Consumer research is very important in carrying out market segmentation as well as formulating
the marketing mix (both are affected by consumer behavior). The four elements of the marketing
mix;
1. Product- this includes the total bundle of utilities/benefits obtained by consumer in the
exchange process- including both goods and services. In handling this element, the
company will

I. Internally analyze its capabilities and costs associated producing , distributing and
selling a product
II. Externally focus on how consumer behavior will affect the product. This involves
answers to questions like ;
i. what form of the product best serves the consumption patterns of the
target segment,
ii. What packaging will best attract consumers and satisfy their
transportation, usage or disposal
iii. How will consumers compare this product to competition and
substitute products
2. Place / (distribution)-In this phase firms or marketers will decide the most effective
outlet through which to sell their products and how best to get there. The essential
questions include – where will consumers expect to get and want to buy the product.
3. Price – This include the cost paid for the product including the associated utilities and
dis-utilities e.g time, inconvenience, psychological risk, allowances , discounts. Consumer
research is critical in determining a pricing policy by providing answers to questions like
i. Can raising the price of a product improve consumer perception of the
product quality
ii. How important to consumer s consider price compared other aspects of
the marketing mix
4. The final element in the marketing mix is promotion including adverting, public
relations, sales promotion and personal sales. What is important is to determine
i. What message they want to send to which consumers?
ii. Which form communication will best reach specific segments

The marketing mix variables are discussed in detailed in the section 1.8
4) Implementing the market mix in the market place.
The objective is to position the product so that it is perceived by consumer within the target
segments as satisfying their needs better than competition.

1.8 Decisions on The Marketing Mix Variables
The marketing mix is a vital element of every marketing strategy. The mix forms the group of
variables that are offered to the market at a particular point in time. These variables include
product, price, place (distribution) and promotion. The 4 P's careful use of the marketing mix
enables marketers to speedily respond to changes in the marketing environment.
1) PRODUCT DECISIONS
Product means anything that is offered to customers for attention, acquisition or purchase. The
term embraces physical objects, services, ideas, personalities, places etc. Products can be grouped
into major categories as follows:
a. On durability—here we have durable and non-durable products
b. Buying effort expended—here we have
 convenience goods e.g. bread and milk
 Shopping goods e.g. television, furniture especially e.g. Rolex watch or fine
crystal Unsought good e.g. life insurance
c. Industrial vs. Consumer goods—industrial goods used by producers of industrial products,
consumer goods purchased for final consumption.
d. Standardized vs. Custom-made products
Classifying products helps marketers in designing marketing programmes. Whether the product is
perishable or durable, consumer or industrial, standardized or custom made will influence the
mode of distribution, packaging, labelling and promotion decisions.

New Product Development
Companies develop new products for various reasons:
(a) To help a business meet the pressure of competition. The more brands a company has the
more shelf space it has and the higher the likelihood of consumers picking one of the products.
(b) To help utilize excess marketing or production capacity.
(c) Sometimes company growth can only be sustained through the development of new
products.
(d) To meet changing consumer demands and tastes.
Stages in New Product Development
(a) Idea Generation—where a pool of ideas is developed. Sources of ideas include customers,
sales people, competitors, researchers, group discussions or company laboratories.
(b) Idea Screening—where ideas are analysed to see their viability bearing in mind the
following:
i. Size of demand
ii. Marketing capability
iii. Expected life cycle
iv. Technical capability
v. Expected sales growth

(c) Business analysis—the concern is future sales and profits. Here forecasts of sales and cost
are made to see whether the venture is worth it.
(d) Product development—here the company tries to find out if the product is technically
feasible. Decisions on names, brands, packaging are resolved and a model is developed.
(e) Test marketing—the product is introduced into the market on a small scale to see the
reactions of the market.
(f) Commercialisation—Full scale production and marketing of the product is implemented.
Once the product is made available to the market the consumer adoption process begins.
2) PRICE DECISIONS
The second marketing mix variable is the price. A simple term but with many dimensions. Price is
the value placed on a good or service by the customers at some point in time. A product placed in
the market with a price higher or lower than the value perceived by potential customers does not
really contain the customer orientation necessary to market that product. Price may go by many
other names e.g. rent, fees, wages, interest, honorarium, salary etc. All these terms mean one
thing—what customers pay for a good or a service.
Importance of Price
o Pricing keeps the economy in balance
o Price serves as a regulator of economic activity
o The rise in any of the factors of production e.g. land, labour and capital is
dependent upon the price received by each

o A products price has a strong effect on sales and an increase or decrease may mean
different sales levels depending on the nature of the product
Price in many cases has a psychological impact on consumers. Sometimes it can be used to
emphasize quality, other times a bargain or gain hence a saving. Price can also play a big role in
offsetting competition. Of all the 4P's only price can be changed quickly to respond to changes in
the market. Therefore, whether or not pricing is properly done does determine the success of the
firm. The marketing executive must have a thorough understanding of pricing decisions.
Factors affecting prices
 Marketing objective: The firm must decide on the strategy for its product. The
objective could be survival, profit maximisation, market share, leadership or product
quality leadership. E.g. a company may have survival as the objective when there is heavy
competition in which case it may set low prices to increase demand.
 Cost: They set the floor for the price that the company could charge a price that both
covers all its cost for producing, distributing and selling the product and delivers a fair
return on its effort and risk.
 Market and demand: The market and demand set upper limits. Both consumer and
industrial buyers balance the price of a product against the benefits of owning it.
 Consumer perception of price and value: In the end, the consumer will decide if the
price is right or wrong. The perception will affect the consumer’s buying decision. Pricing
decisions must be buyer oriented. Effective, buyer-oriented pricing involves understanding
how much value consumers place on the benefits they receive from the product and selling
a price that fits its value.

 Competitors’ prices: Consumers always evaluate a number of companies’ products
prices before buying.
 Economic factors such as boom, recession, inflation and interest rates. The consumer
price index all affects pricing decisions.
 Government legislation for example minimum price levels.
 Social concerns.
3) DISTRIBUTION DECISIONS (PLACE)
The third element of the marketing mix is distribution. This refers mainly to the movement of
goods and services from producer to the consumer through a given channel of distribution.
A channel of distribution has been defined as a chain of market intermediaries or middlemen used
by a producer or a marketer to make products and services when and where consumers or users
want them. It is therefore a route followed by a product as it moves from the producer to the user.
Examples of Channels
P-C Zero level
P-R-C One level
P-W-R-C Two level
P-A-R-C Two level
P-A-W-R-C Three level
P = Producer, A = Agent, W = Wholesaler, R = Retailer, and C = Consumer
Factors to Consider in Selecting Channels

1. Customer Characteristics—the size of the market, the geographical dispersion of
consumers, buying habits and preferences, buying outlets etc. For example where
customers are widely, sparse one cannot sell direct. If the market is composed of industrial
buyers then fewer intermediaries are better.
2. Product Characteristics—important factors include perishability, whether product is
household or industrial, need for bulk breaking whether product is fragile, non fragile,
whether product is breakable or not. For example, products that are highly perishable like
bread, milk, fresh flowers or fruits require very short channels usually from producer to
consumer direct.
3. Company Characteristics—here you look at the company objectives, financial status,
product mix and desired degree of channel control. High degree of control allows only for
one middleman or direct selling.
4. Middlemen Characteristics—what markets do the middlemen serve? Do they provide
any financial support, what services do they provide, how sound are they financially
because financially weak middlemen may require credits. Some channels of distribution for
example are not available everywhere.
5. Competitive Characteristics—is one going to use the channels already being used by
competitors or his own channels?
6. Environmental Characteristics—Economic, Political, Legal, Social and Cultural
factors also influence channel decisions. Where economic conditions are depressed,
marketers should try to move their products to the market via the least number of
channels. The government also has imposed certain legal regulations to govern
distribution, for example the requirements that manufacturing companies should not retail
directly to consumers.

Functions of channels of distribution members
 Information: Gathering and distributing marketing research and intelligence information
about actors and forces in the marketing environment needed for planning and yyyy
exchange.
 Promotion: developing and spreading persuasive communications about an offer.
 Contact: Finding and communicating prospective buyers.
 Matching, shaping and fitting the offer to the buyers’ need including activities such as
manufacturing, grading, assembling and packaging.
 Negotiation: reaching an agreement on price and other terms of the offer so that ownership
or possession can be transferred.
 Physical distribution: transporting and storing goods.
 Risk taking: assuming the risks of carrying out the channel work.
4) PROMOTION DECISIONS
Every product needs to be brought to the attention of the market through identification of the
benefits of the product. The basic elements of promotion which when put together from the
promotional mix include advertising, personal selling, sales promotion and publicity.
(a) Advertising
Advertising is defined as any paid form of non-personal presentation by an identifiable sponsor.
Advertising is used to communicate persuasive information about a product to the target group
through use of spoken or written word and by visual materials.

Advertising has certain distinctive qualities:
i. Public presentation: Advertising is a highly public mode of communication, which suggests
a standardised offering to customers.
ii. Pervasiveness: Advertising is pervasive as it permits the seller to repeat a message many
times.
iii. Amplified Expressiveness: Advertising provides opportunities for dramatising the company
and its products through the artful use of print, sound and colour.
iv. Impersonality: In developing an advertising program, marketing managers must make five
major decisions:
• What are the advertising objectives? (Mission)
• How much will be spent? (Budget)
• What is to be communicated? (Message)
• What channel will be used? (Media)
• How should the results be measured? (Effectiveness)
Advertising Objectives Include:
i. To inform
ii. To persuade
iii. To remind
(b)Personal Selling
Involves use of sales people to communicate the product to the market. It involves face-to-face
contact between the sales person and the prospective customer. Because of the personal contact,

personal selling is the most expensive of the promotional elements but it can also be the most
rewarding and effective in clinching deals.
Sales people besides just selling the product have other duties, which include after-sales servicing,
information gathering, communicating new information to customers and prospecting.
To be effective sales people need information about the company, the products offered sales and
profit targets, customers, sales plan, promotional material, techniques of selling and a knowledge
of competitor products.
A company must decide on how to structure its sales force depending on the product and the
market being targeted. The alternative forms of sales force structure include:
i. Territorial Structured Sales Force—here each sales person is assigned an exclusive
territory in which to represent the company's full line.
ii. Product Structured Sales Force—where each sales person is in charge of a specific
product or line of products.
iii. Customer Structured Sales Force—where sales force are set up for different
groups of customers.
iv. Combined Structure (Complex)
Sales force effectiveness can be measured either by net sales achieved, call rate, value of sales per
call, number of new sales or by sales expenses in proportion to sales achieved.
(c)Sales Promotion

Sales promotion involves attempts to stimulate sales by use of incentives. These incentives may
include free samples, special discounts, bonus for sales people, temporary price reductions, bargain
packs, gifts, point of sale demonstrations etc.
When directed at consumers, sales promotion has the following objectives:
i. Draw attention to new products
ii. Encourage sales of slow moving products
iii. Stimulate off peak sales
iv. Increase usage of products
Sales promotion can also be directed at traders with the following objectives:
i. Encourage dealer/retailer cooperation
ii. Persuade dealers/retailers to devote increased shelf space to the
company's products
iii. Develop goodwill of dealers/retailers
(d)Publicity
Publicity often does not cost the organization money. It is news about the product or the
organization reported in the press and other media without charge to the organization, but there
are however certain costs involved in setting up the publicity programme. In publicity the firm aims
to secure editorial space as divorced from paid space in the media available to customers.
Publicity is a part of the larger concept of public relations. A company's public relations has several
objectives including, obtaining favourable publicity for the company, building up a good company

image, and handling adverse rumours or stories about the company. To carry out these objectives
the public relations department of a company could use press relations, product publicity,
corporate communications, lobbying, and counselling.
The people in charge of publicity must make the following major decisions:
i. Establish the publicity objectives
ii. Choosing the publicity message and media
iii. Implementing the publicity plan and
iv. Evaluating the publicity results

Consumer Behavior

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Consumer Behavior

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Module 1

Mwangi Ateka (consumer Behavior) AFI 2204 January-April (2018) 1

resources (time and money) o n the consumption of products.

This include answers to questions like;

 Why they buy

 Where they buy

 How often they buy

 How often they use it

 How they evaluate its use

 Impact of such evaluation

 How they dispose

to the above choices.

One "official" definition of consumer behavior is "The study of individuals, groups, or

Mwangi Ateka (consumer Behavior) AFI 2204 January-April (2018) 2

decisions as to which products the firm should use).

influence how a product is best positioned or how we can encourage increased

landfills) this is also an area of interest.

 Consumer behavior involves services and ideas as well as tangible products.

repercussions for the national health and economy.

1.2 Why is Consumer behavior is Important

Our main thrust in this course is the consumer.

Note in looking at consumer behavior, there are 2 types of consuming entities –

personal and organizational consumer’s e.g (schools, churches, NGOs). We shall

everybody (young and old)

Mwangi Ateka (consumer Behavior) AFI 2204 January-April (2018) 3

by understanding issues such as how

alternatives (e.g., brands, products);

(e.g., culture, family, signs, media);

 The behavior of consumers while shopping or making other marketing decisions;

 Limitations in consumer knowledge or information processing abilities influence

decisions and marketing outcome;

strategies to more effectively reach the consumer.

determine if you are really getting a bargain.

Mwangi Ateka (consumer Behavior) AFI 2204 January-April (2018) 4

evolution of the marketing concept we had what was called;

products at low cost –puts focus on mass production.

unlikely to purchase the product unless they are persuaded.

The focus therefore is to produce the goods that consumers need.

better than the competition.

Mwangi Ateka (consumer Behavior) AFI 2204 January-April (2018) 5

behavior principles in marketing strategy.

As a discipline, CB is an applied discipline That borrows from every discipline

that contributes to understanding the consumers psychology, economics,

sociology and anthropology.

1.4 Key / Important Concepts in Consumer Behavior

a) Market segmentation – The marketing concept puts a lot emphasis on meeting

customer needs. Consumer needs are characterized by great diversity. Market

needs and characteristics. This is discussed later in detail.

Mwangi Ateka (consumer Behavior) AFI 2204 January-April (2018) 6

i. Product/service –features interms of design, brands, packaging

ii. Price – including discounts and allowances

iii. Place - distribution of product or service

iv. Promotion-advertisement, sales promotion and public relations

customer retention. Customer’s perceived benefits [economic, functional or

psychological]/Resources used to obtain the benefits [time, money or effort]

or service in relation to his expectation. CB studies usually give the following

 Completely satisfied customers - loyal

 Hostages –dissatisfied but cant leave

 Mercenaries- they are satisfied but can leave

Mwangi Ateka (consumer Behavior) AFI 2204 January-April (2018) 7

the company than switch.

f) Marketing ethics and social responsibility

marketing of their goods and services {sunshine kericho).