Consumer Behaviour

UNIT 4- CONSUMER DECISION MAKING MODELS AND NEW

TRENDS
CONSUMER DECISION MODELS

1. HOWARD SHETH MODEL

John Howard and Jagadish Sheth put forward the Howard Sheth Model of consumer behaviour
in 1969, in their publication titled, ‘The Theory of Buyer Behaviour’. J. Howard and J. Sheth
used the term buying behaviour and not consumer behaviour as industrial buyers and
consumers are similar in most aspects. This model explains buyer rationality while making
purchase decisions even in conditions of incomplete information.

The Howard-Sheth model of consumer behaviour suggests three levels of decision-making:

1. Extensive Problem Solving: The first level describes extensive problem-solving. At

this level, the consumer does not have any basic 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.
2. Limited Problem Solving: The second level is limited problem-solving. At this level,
the buyer has little knowledge about the brand/ product which he wants to purchase. To
arrive at a brand preference some comparative brand information is sought.
3. Routinized Response Behaviour: At this level, the buyer knows very well about the
different brands. The consumer can differentiate between the different characteristics
of each brand. Therefore, decide to purchase a particular brand.

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Sets of Variables
According to this model of buyer behaviour, there are four major sets of variables; namely:

• Significative stimuli
Inputs • Symbolic Stimuli
• Social stimuli

Hypothetical • Perceptual constructs

Constructs: • Learning constructs

•Attention
•Comprehension
Outputs •Cognition
•Intention
•Purchase behaviour

• external variables are not a direct part of the

Exogenous decision-making process

1. Inputs: The input variables consist of three distinct types of stimuli (information
sources) in the consumer's environment. These three types of stimuli provide inputs
concerning the product class or specific brands to the buyer.
• Significative stimuli - Physical attributes of a product, such as price, quality,
originality and accessibility, and brand characteristics.
• Symbolic Stimuli - verbal or visual characteristics of the product, a form of the
product perceived by the buyer, effect of advertising and promotion messages used
by the seller.
• Social stimuli - whose source is the buyer's social environment, family, reference
groups, and social class.

2. Hypothetical Constructs: The central part of the model deals with the psychological
variables influencing consumer behaviour during the decision-making process. J.
Howard and J. Sheth stated two main constructs:
• Perceptual constructs - describe obtaining and processing information, attention
to stimulus, sensitivity to messages, receptivity, blocking information, prejudice,
etc.
• Learning constructs - how buyer forms attitudes, opinions, and knowledge
influencing his buying decision, evaluation after purchase, brand comprehension,
etc.

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3. Outputs: The outputs are the results of the perceptual and learning variables. The most
important output variable from the point of view of marketing is actual purchase
because it involves carrying out activities based on consumer preferences.
The hierarchy of output variables includes:
• Attention - scope of information accepted after exposing the buyer to stimulus.
• Comprehension - the amount of information processed and stored in the
buyer's mind.
• Cognition - forming attitude towards products.
• Intention - to buy or not to buy a particular product.
• Purchase behaviour - the final act whereby the buyer is prepared to buy.

4. Exogenous (External) Variables: The external variables are not a direct part of the
decision-making process. However, they have a significant impact on consumer
decisions and are used in marketing activities as a criterion for segmentation. These
include variables such as the importance of purchase for the buyer, the personality traits
of the consumer, membership of a social group, the financial status of a consumer, the
pressure of time etc.

Evaluation of the Model:

The model is an integrative model that incorporates several aspects of consumer behaviour. It
links together the various variables which may influence the decision-making process and
explains their relationship that leads to a purchase decision. It highlights the importance of
inputs to the consumer buying process. This model indicates the factors that result in loyalty
towards a product.
The main limitation lies in the fact that the various variables cannot be realistically tested;
some of the variables are inadequately defined, and thus do not lend to reliable measurement.
Also, this model does not give much importance to the external variables. At times, external
variables such as influence from family members play an important role in the buying decisions
of individual buyers.

2. ENGEL, BLACKWELL, MINIARD MODEL

James Engel, Roger Blackwell and Paul Miniard developed a model (EBM Model) on
consumer decision-making in 1995. The Consumer Decision Model (known as the Engel
Blackwell-Miniard (EBM Model) was originally developed in 1968 by Engel, Kollat, and
Blackwell and has gone through numerous revisions.

The EBM Model consists of four elements:

1. Information Input
2. Information Processing
3. Decision Process
4. Influences

1. Information Input:
The model suggests that information input is required in the consumer decision process. The
information can be obtained from marketing-dominated sources such as publicity, ads,
salesmanship, etc., provided by the marketer. The information input can also be obtained from
non-marketing-dominated sources. Additional information can be collected from external

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sources, if required, to make a purchase decision.

2. Information Processing:
The buyer processes the information obtained, which involves:
• Pays attention to the information to which he has been exposed to
• He understands or comprehends the information
• He accepts relevant information.
• He retains the required information in his memory.

3. Buying Decision Process:

The buying decision process consists of various stages such as:
Need
Listing of
Identificatio Search
Alternatives
n

Purchase Attitude Evaluation of

Decision Development Alternatives

Post-
purchase
Behaviour
(a) Need Identification: The consumer buying process starts with need identification. It may
come from internal stimuli (such as hunger, or desire to look good, etc.) or from external stimuli
(such as an ad, suggestion from a friend, etc.)

(b) Search: When consumers identify a need, they may search for information to buy a product.
The information search may be from various sources such as:
• Internal sources such as recalling from memory.
• Group sources such as consulting other people like friends, family, etc.
• Marketing sources such as ads and other sources from marketers.
• Public sources such as from Internet, industry reports, etc.
• Experiential sources by experiencing products on a trial basis.

(c) Listing of Alternatives: A consumer may list out few alternatives from several brands that
are available in the market.

(d) Evaluation of Alternatives: The consumer may evaluate each brand against certain criteria
such as features, price, after-sale service, etc.

(e)Attitude Development: After evaluation, the consumer may develop an attitude towards
the product.

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(f) Purchase Decision: After attitude development, a consumer may decide to purchase the
product depending on the situation.

(g) Post-Purchase Behaviour: A consumer may provide feedback to the marketer and may
repeat the purchase, if satisfied, and may even recommend the brand to others.

4. Influences:
The consumer buying decision is influenced by Individual Differences and Environmental
Influences:
(a) Individual Differences: The EBM Model states that consumer behaviour is influenced
by 5 categories of individual differences:

• Consumer Resources - such as time availability, money, and information reception

and processing capabilities.
• Knowledge -regarding product features, price, competitors' brands, uses of the product,
etc.
• Attitudes - towards the product/ brand.
• Motives - the drives or desires to buy the product
• Personality traits, values, and lifestyles of the consumer.

(b) Environmental Influences: The various environmental influences that influence the
consumer buying process include the following:
• Culture - which includes race, religion, region, etc.
• Social class - certain brands are associated with a specific social class, such as luxury
cars are associated with the upper class.
• Influences of family members, reference groups, opinion leaders, etc.
• Situational influences such as physical surroundings at the purchase place, social
surroundings, time factor, moods of the buyer, etc.

3. NICOSIA MODEL
The model proposed by Francesco Nicosia in 1966 was one of the first models of consumer
behaviour. This model attempted to explain the buying decision process of consumers. This
model identifies four fields - each one has its processes, resulting in the purchase. The fields
are:
Field 1 - Attributions
Field 2 - Search and Evaluation
Field 3 - Purchase Decision
Field 4 - Post-purchase Action

Nicosia presented the model as a flow chart, wherein, the decision-making steps, which a buyer
adopts before buying products. OR REFER MODEL GIVEN IN THE PPT

FIELD 1 - ATTRIBUTIONS
• Firm's Attributes Advertisements-Message
• Consumer's Attributes
• Attitude

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FIELD 2 - SEARCH
• Consumer Search and Evaluation
• Motivation

FIELD 3 - DECISION MAKING

• Purchase Behaviour

FIELD 4 - POST-PURCHASE
• Feedback
• Using the Product

The model describes a flow of influences where each component acts as an input to the next.
The consumer decision process focuses on the relationship between the marketer and its
consumers. The marketer through its marketing programme influences its buyers. The buyers
through their response to the marketer’s action, influence the subsequent decisions of the
marketer and the cycle continues. The various components that are further distinguished into
main fields and subfields of the model are stated as follows:

FIELD 1: DEVELOPING ATTRIBUTIONS

The first field is concerned with the development of Attributions through marketing
communications. The marketer identifies various Attributes of the product offering and
communicates the same to the Consumer through publicity, advertising, salesmanship,
participation in trade fairs and exhibitions, etc. The communication message persuades the
consumer to develop a Favourable attitude towards the product. Consumer attitude is also
Influenced by his perception, past experiences, the influence of family members Reference
groups, opinion leaders, etc. For example, a buyer may be exposed to an ad in the newspaper
for A new brand of car with special features; On reading the ad, a buyer may develop a positive
attitude towards the brand.

FIELD 2: SEARCH AND EVALUATION

After developing of positive attitude, a buyer may search for further information about the
product from other sources (other than the ad). For instance, a buyer may visit the showroom
of the car and may go for a test drive. He may also consult friends and others to get their views
and opinions about the car. After obtaining relevant information, a buyer may list alternative
brands and evaluate the alternatives in terms of features, price, warranty, after-sales service etc.
The active search and evaluation lead to motivation for the purchase.

FIELD 3: PURCHASE DECISION

Once the consumer has narrowed down the possible alternatives to Just a few, he/she may
decide to purchase. There are three possible options:
• Make a purchase decision for the shortlisted brand
• May postpone the decision to buy shortly
• May not buy the product, if none of the short-listed brands meet his/her requirements.

FIELD 4: POST-PURCHASE BEHAVIOUR

(a) Feedback to the Company: The buyer may provide feedback to the company regarding
the satisfaction level. This will help the company to make changes in the marketing mix.
(b)Post-purchase actions: The marketer may monitor the post-purchase action of the
customers. A satisfied customer may become brand loyal. He may even become a brand

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evangelist and spread good word about the product. However, a dissatisfied customer may
return the goods or stop further purchases and may warn others through internet reviews or
personally.

Evaluation of the Model:

Nicosia's model was a pioneering attempt to focus on the conscious decision-making behaviour
of consumers. The flow chart approach proposed by Francesco Nicosia simplifies the variables
that affect consumer decision-making. It contributes to the step-by-step systematic approach,
which views consumers' movement from general product knowledge towards specific brand
knowledge and from a passive position to an active state which is motivated towards a
particular brand. The model suffers from certain limitations. The model proposes assumptions
and constraints that need not be realistic. It has been argued that attitude and motivation may
not occur in the same sequence. At times, a person may be motivated to buy a product, and
then search for information, evaluate the alternative brands, and then develop an attitude
towards a specific brand.

DIFFUSION OF INNOVATION
Diffusion of Innovation Theory was developed by Everett M. Rogers in 1962. It is one of the
oldest social science theories. It explains how, over some time, an idea, behaviour or product
gains momentum and diffuses (spreads) through people or a social system. The result of this
diffusion is that people, as part of a social system, adopt a new idea, behaviour, or product.
Adoption means that people do something differently than what they had done previously
(purchase a new product; acquire a new behaviour; accept a new idea, etc.).
The key to adoption is that a person must perceive the idea, behaviour, or product as new or
innovative. It is through this that diffusion is possible.

Adoption of an innovation (new idea, new behaviour, or new product) does not happen
simultaneously in a social system. It is a process whereby some people are more willing to
adopt the innovation than others. Researchers have found that people who adopt an innovation
early have different characteristics than people who adopt it later. When promoting an
innovation to a target group, it is important to understand the characteristics of that target group,
which may help or hinder the adoption of innovation.

PROCESS OF DIFFUSION OF INNOVATION AND ADOPTION

Refer to scanned PDF

❖ INNOVATION

Refer to scanned PDF

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❖ DECISION PROCESS

• Perception of the Problem

This stage involves identifying a problem, need, or opportunity that requires a new solution
or approach. It's about recognizing that something isn't working well or that there's a gap in
the market or a current solution.
• Setting of the Stage
This stage focuses on gathering information, understanding the context, and defining the
scope of the problem. It involves researching the problem, identifying stakeholders, and
setting clear goals for the innovation process.
• The Act of Insight
This is the "aha!" moment where a new idea or solution emerges. It's about thinking
creatively and exploring different possibilities to find a solution that addresses the identified
problem.
• The Critical Revision
This stage involves evaluating the proposed solution, testing it, and refining it based on
feedback and results. It's about ensuring that the solution is feasible, effective, and meets the
needs of the target audience.

❖ INNOVATOR’S PROFILES

A profile is a short description of à person's life, work, character, etc. Innovator refers to a
person/ company who innovates new products or ideas or new methods or new technology.
Innovation is about turning a vision into new products or services.

"The characteristic of great innovators and great companies is they see a space that
others do not. They don't just listen to what people tell them; they invent something new,
something that you didn't know you needed, but the moment you see it, you say, 'I must
have it.'" - Eric E Schmidt, former CEO of Google.

Characteristics of Innovators
Some of the characteristics of innovative business leaders are as follows:
1. Doing things Differently: Being innovative means doing things differently or doing
things that have never been done before. An innovator is someone who comes up with
a new idea and creates an environment in which employees are given the resources to
challenge the status quo, push boundaries and achieve growth.
2. Authentic Leaders: Innovators are authentic leaders committed to creating dynamic,
highly productive and values-based organizations. Such organisations hire people who
are passionate about their work; give them opportunities to grow; make them feel
valued and respected; and give them clarity about their roles and responsibilities.
3. Build Vibrant Networks of People: Innovators understand innovation never happens
in a vacuum. They value, build and sustain active, vibrant networks of people, assets
and organizations. Instead of viewing, collaboration as a challenge, they see it as an
opportunity to identify strengths, weaknesses, opportunities and threats.
4. Committed to Diversity: Innovators are committed to diversity and understand it takes
many different points of view to fully grasp the complexity of economic, technological
and other challenges.
5. Empowerment of Employees: Innovators have let go of the high-control, low-trust
model of leadership and lead by directing from the centre of their organizations. They

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empower employees to be creative and develop the skills they need to move to the next
level in their careers.
6. Risk Takers: Innovators are not taking shortcuts and are not afraid of going after more
complex solutions, even if it means taking higher risks.
7. Effective Change Managers: Innovators understand innovation is not a one-time thing
and that start-up companies, as well as those that are several generations old, have to
continuously reach above and beyond what they have done before to stay competitive.
This requires innovators to be effective change managers who know how to navigate
through resistance to their ideas.
8. Encourages Out of Box Thinking: Innovators are not afraid to break with the norm
and push past conventional wisdom that causes people to think in a box. They are aware
customers don't always know what they want.
9. Pays Attention to Modern Business Metrics: Innovators understand paying too much
attention to traditional business metrics can inhibit companies from making
breakthroughs. At the same time, however, their business success speaks for itself.
Innovators contribute new, unconventional ideas of their own.

❖ E-BUYING BEHAVIOUR
E-buyer behaviour is the study of how an individual or a group of customers select, and buy
a product. E-buying behaviour attempts to provide answers to the following questions:

1. What E-buyers buy?

E-buyer makes a buying decision as to what to buy. The type of goods to be purchased
depends on the needs and preferences of the buyer and also on the purchasing power of
the buyer.

2. How much do E-buyers buy?

E-buying behaviour also involves how much to buy a certain product. The quantity and
quality of the product to be purchased depends on the buyer's requirements, the size of
the family, income level, social class, and other factors.

3. Why E-buyers buy?

E-buyers may buy products due to various buying motives and selling points. The
buying motives are the drives such as love and affection, comfort and convenience,
pride and possession, etc. The selling points are the special points of the product such
as features, price, and promotional offers such as discounts, exchange offers, gifts, etc.

4. Where E-buyers buy?

E-buyers buy the products online. Buyers can place orders online with e-sellers like
Amazon, Flipkart, etc.

5. How often do E-buyers buy?

Like offline buyers, e-buyers buy regularly in the case of products like clothing,
consumer usable, and other products. Some products are purchased as per the season
such as raincoats and umbrellas on the onset of monsoon. But in the case of durables,
the e-buyer may buy once or if the existing durability needs to be replaced.

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CONCEPT AND FEATURES OF E-BUYING

E-buying refers to online buying. It involves buying goods and services with the help of the
internet. E-buying brings benefits to the consumer as well as to the seller.

Features of E-buying:
1. Organised Activity: E-buying is an organised activity of buying goods and services
through the internet. The activities relating to e-buying involve:
o Information search by the buyer
o Placement of order by the buyer
o Processing of order by the seller
o Delivery of goods/services
o Payment for the purchase by the buyer
o After-sale service, if required.

2. Exchange of Information: E-buying facilitates the online exchange of information

from the sellers to the buyers. Information is exchanged and processed by a
communications network and computers. A large amount of information is made
available through the Internet.

3. Global Reach: E-buyers can buy across geographic boundaries. For instance, a buyer,
located in Mumbai can purchase online from USA, Europe, etc. This is because; the
internet has global reach. Global reach enables entrepreneurs to reach a large number
of buyers across several countries.

4. Benefits of Ubiquity: E-commerce is ubiquitous, its existence is everywhere at the

same time. Ubiquity lowers transaction costs for the buyer. Ubiquity also reduces
cognitive energy. Humans tend to seek options that require the minimum cognitive
energy. For instance, the mental energy needed to buy a book online is far less than
hunting for it at various bookstores.

5. Interactivity: E-buying facilitates interaction between the customer and the online
marketer via the Internet. Interaction can take place with the help of networking sites.
Also, video conferencing enables interaction between the buyer and seller, especially
in the case of repeat orders by B2B buyers.

6. Customization: E-buying facilitates customization of products. The buyer can provide

online his specific requirements to the sellers, Interested Sellers may contact the buyers,
get the order, design the product. As per buyer needs, and accordingly supply the same
to meet the buyer’s requirements.

7. Direct Channel: Generally, e-buying transactions are conducted through direct

channels. For instance, a buyer can place a direct order with the seller through the
internet. Generally, intermediaries are avoided in the case of e-buying. Therefore, the
buyer has to pay a lower price as the commission of intermediaries is not involved.

8. Benefits to Buyers: E-buying offers several benefits to the buyers, such as:
• It offers convenience to buyers in shopping.
• It offers lower prices to buyers.
• It enables any-time shopping (24 × 7)
• It provides loyalty incentives.

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ADVANTAGES OF E-BUYING
E-buying provides several advantages to the buyer:

1. Convenience Factor: E-buying offers a lot of convenience to -buyers. The e-buyers

need not travel to the store to place orders and to get the goods. The -buyers place the
orders online and get the goods delivered to their doorstep.
2. Anytime Shopping: The customers can place orders anytime at their convenience. One
can place orders 24/7, i.e., anytime during the day or night. However, in the case of
physical stores, one can do shopping only during the specific times during which the
store is open.
3. Loyalty Incentives: The e-sellers offer loyalty incentives for repeat purchases. The e-
buyers are rewarded with special discounts on loyalty points. The loyalty points can be
redeemed for future purchases. The e-buyers also get cash back for their purchases,
which can be utilized for future purchases made online. Therefore, e-buyers are
influenced to buy the goods online.
4. Lower prices: E-buyers can get the goods at lower prices from the online store. This
is because there are no or limited intermediaries. The online seller may be The only
intermediary between the e-buyer and the manufacturer. Therefore, the margin of the
intermediary is less, which results in lower prices for the e-buyer.
5. Brand Comparisons: An e-buyer gets the option of varied brand comparisons on the
internet. After analysing several brands in terms of features price, after-service,
warranty, etc., the buyer can place an order for the best option. However, in the case of
offline buying, a customer may get the option of a few brand comparisons to make a
purchase decision.
6. Return Policy: E-buyers get the benefit of a return-back policy offered by various
online sellers like Amazon, Flipkart, and others. The goods are taken back without
much hesitation by the seller, and if required, a refund is given or the exchange of some
other product is adjusted.

7. Speed of Delivery: Nowadays, the speed of delivery by online sellers has improved to
a great extent. One can get certain goods on the same day of the order. For instance,
online medical suppliers provide medicines on the same day of the order.

LIMITATIONS OF E-BUYING
E-buying suffers from certain limitations as follows:
1. Low Penetration in Rural Areas: Online buying is mostly available in urban areas.
This may be due to low internet penetration in rural areas.
2. Problem of Return of Goods: In India, first-time online buyers and even existing
online buyers sometimes fall prey to hard-sell tactics adopted by online sellers. There
are several cases where online buyers are dissatisfied with the goods ordered online.
They find difficulty in the return of goods with some e-sellers.
3. Problem of Touch and Feel Experience: In several countries, including India,
customers would like to first examine the product, before purchasing it. Online
marketing does not provide an opportunity to physically examine the product before
purchasing and therefore, online business is very insignificant in a country like India
and even in advanced countries like the USA, although people are optimistic about its

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potential.
4. Problem of Delivery: In India, there are problems with the delivery of goods. This may
be due to poor infrastructure in terms of roadways and airways and therefore, there are
often delays in getting the products ordered online. Also, e-retailers do not deliver in
certain parts of states, even though it is feasible to do so.
5. Problem of Confidence: In India, customers do not trust online marketing. Both
business customers and household customers do not have much faith in online
marketing. They have a suspicion about the quality, price, delivery and other aspects.
Therefore, online marketers need to create a good amount of confidence in the minds
of prospective buyers.
6. Unsuitability to Certain Products: It is difficult to conduct business through e-
commerce for certain products such as perishable items. Also, high-cost items such as
expensive jewellery may not be purchased by customers online because it is difficult to
inspect the product before purchase.
7. Problem of Negotiation: No bargaining is allowed on e-commerce sites. However,
price sensitive Indian customers love to bargain, and therefore, quite often, they may
not be inclined to buy online.
8. Problem of Language: Most retailers use the English language on their websites,
However, in India, only about 5% of India's population understands proper English, and
therefore, Indian customers may not place orders online.
9. Privacy Issues: Customers provide personal details including addresses to the online
shopping site. However, personal details may get leaked during transit or even by the
online marketer to others.
10. Faulty Billings: At times, some of the online sites wrongly bill the customers. The
customers find it difficult to get the faulty billings corrected, which in turn may compel
them not to order items online by using their credit card details. Therefore, in India,
over 60% of e-commerce transactions take place on a Cash on Delivery basis.

❖ INFLUENCES ON E-BUYING: Refer to scanned PDF

❖ E-BUYER V/S BRICKS & MORTAR BUYER: Refer to scanned PDF

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