Category: Management Notes

Lucknow University BBA Notes / Management Notes

Understanding the present day Scenario of HRM

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Business environment is changing environment and so is HR environment. The changing environment of HRM includes work force diversity, economic and technological change, globalisation, organizational restructuring, changes in the nature of jobs and work and so on.

1. Work force Diversity:

Diversity has been defined as any attribute that humans are likely to use to tell themselves, that person is different from me and, thus, includes such factors as race, sex, age, values, and cultural norms’. The Indian work force is characterized by such diversity that is deepening and spreading day by day.

It is likely to be more diverse as women, minority- group members, and older workers flood the work force. With the increasing number of women entering the work force due to a combination of factors like women’s emancipation, economic needs, greater equality of sexes, education and so on, additional pressures of managing a different set of problems at the work place have arisen. As such, the number of women is on increase in all walks of life i.e., teachers, lawyers, doctors, engineers, accountants, pilots, parliamentarians and so on.

However, increasing number of women in the work force has been necessitating the implementation of more flexible work scheduling, child care facilities, maternity and now paternity leave also and transfer to location of husband’s place of posting.

Also, as the work force ages, employers will have to grapple with greater health care costs and higher pension contributions. On the whole, the increased diversity of work force will place tremendous demands on the HR management function.

Further, creating unanimity from a diverse work force has also become a challenge for HR manager. This is because, as several experts’ put it; diversity is marked by two fundamental and inconsistent realities operating today with it. One is that organisations claim they seek to maximize diversity in the work place, and maximize the capabilities of such a diverse work force.

The other is that traditional human resources system will not allow diversity, only similarity. These experts emphasize that employers traditionally hire, appraise, and promote people who fit a particular employer’s image of what employees should believe and act like. At the same time, there is corresponding tendency to screen out those who do not fit.

2. Economic and Technological Change:

Along with time, several economic and technological changes have occurred that have altered employment and occupational pattern. In India too, there is a perceptible shift in occupational structure from agriculture to industry to services.

The New Economic Policy, 1991 has led to liberalization and globalization giving genesis to multinational organisations with their multicultural dimensions having certain implications for HRM. The implications of globalization for HRM are discussed subsequently. The Indian economy has already become an open economy but it will be more so from April 2003 with the complete lifting of quantitative restrictions (QRs) on imports in India.

Technology has become the hallmark of the modem organisations. As such, modem organisations have become the technology-driven organisations. So to say, men are replaced by machinery. Manufacturing technology, for example, has changed to automation and robotisation.

Manufacturing advances like these will eliminate many blue-collar jobs, replacing them with fewer but more highly skilled jobs. Similar changes are taking place in office automation, where personal computers, word processing, and management information system (MIS) continue to change the nature of office work.

The explosive growth of information technology linked to the internet has ushered in many changes throughout the organisation. One of the major changes led by information technology is that it has hastened what experts call the “fall of hierarchy”, i.e., managers depend less and less on yesterday’s “stick-to-the -chain-of-command approach,” to their organising function.

This is so because earlier it used to be, if one wanted information, one had to go up, over and down through the organisation. Now, one just taps in. That’s what broke down the hierarchy. Somuchso, now employees do not need to be present a definite work place.

Instead, they can work from their own places/ residences through the net. This has given genesis to a new breed of organisations, called ‘virtual organisations.’ (VO).

3. Globalization:

The New Economic Policy, 1991 has, among other things, globalised the Indian economy. There has been a growing tendency among business firms to extend their sales or manufacturing to new markets aboard. The rate of globalization in the past few years in India has been nothing short of phenomenal.

Globalization increases competition in the international business. Firms that formerly competed only with local firms, now have to compete with foreign firms/competitors. Thus, the world has become a global market where competition is a two-way street.

Globalization has given genesis to the multinational corporations (MNCs). The MNCs are characterised by their cultural diversities, intensified competition, variations in business practices and so on. As an international business expert puts it, ‘the bottom line is that the growing integration of the world economy into a single, huge market place is increasing the intensity of competition in a wide range of manufacturing and service industries.

Given these conditions, from tapping the global labour force to formulating selection, training and compensation policies for expatriate employees have posed major challenges for HRM in the next few years. This has underlined the need for studying and understanding HRM of multinational organisations or international organisations separately.

4. Organizational Restructuring:

Organizational restructuring is used to make the organisation competitive. From this point of view, mergers and acquisitions of firms have become common forms of restructuring to ensure organizational competitiveness. The mega-mergers in the banking, telecommunications and petroleum companies have been very visible in our country. Downsizing is yet another form of organizational restructuring.

As a part of the organizational changes, many organisations have “rightsized” themselves by various ways like eliminating layers of managers, closing facilities, merging with other organisations, or out placing workers. There has been a practice to flatten organisations by removing several layers of management and to improve productivity, quality, and service while also reducing costs. Whatever be the form of restructuring, jobs are redesigned and people affected.

One of the challenges that HRM faces with organizational restructuring is dealing with the human consequences of change. For example, the human cost associated with downsizing has been much debated and discussed in the popular press. As such, HRM needs to focus on the changed scenario uniquely and that is not so simple. Thus, management of HR activities has become crucial for HR managers.

5. Changing Nature of Work:

Along with changes in technology and globalization, the nature of jobs and work has also changed. For example, technological changes like introduction of fax machines, information technology, and personal computers have allowed companies to relocate operations to locations with lower wages. There is also a trend toward increased use of temporary or part-time workers in organisations.

One most significant change in the nature of work is that it has changed from manual to mental/ knowledge work. In this context, the management expert Peter Drucker’s views are worth citing. He said that the typical business will soon bear little resemblance to the typical manufacturing company of 30 years ago.

The typical business will be knowledge-based, an organisation composed largely of specialists who direct and discipline their own performance through organized feedback from colleagues, customers, and headquarter. For this reason, it will be what he calls an information-based organization.

As a result, the organizations are giving and will give growing emphasis on their human capital i.e., the knowledge, education, training, skills, and expertise of employees, the expense of physical capital like equipment, machinery and physical plants This growing emphasis on education and human capital has, among other things, changed the nature of economy as service-oriented economy.

In the changed economic scenario, jobs demand a certain level of expertise that is far beyond that required of most workers 20 or 30 years ago. This means that companies are relying more on employee’s creativity and skills, i.e., employee’s brain power.

As Fortune magazine has rightly said:

“Brain power ….has never before been so important for business. Every company depends increasingly on knowledge-patents, processes, management skills, technologies, information about customers and suppliers, and old-fashioned experience. Added together, this knowledge is intellectual capital”.

As such, the HR environment has changed. The challenge posed by changed environment is fostering intellectuals or human capital needs managing these differently than those of previous generation. Here, Drucker puts that the centre of gravity in employment is moving fast from manual or clerical workers to knowledge workers, who resist the command and control model that business took from the military 100 years ago. Now that the changing environment of HRM is delineated, we can conveniently present the new HR management practices in such changing environment.

Lucknow University BBA Notes / Management Notes

Evolution of HRM into strategic HRM

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Strategic human resource management is the connection between a company’s human resources and its strategies, objectives, and goals. The aim of strategic human resource management is to:

  • Advance flexibility, innovation, and competitive advantage
  • Develop a fit for purpose organizational culture
  • Improve business performance

In order for strategic human resource management to be effective, human resources (HR) must play a vital role as a strategic partner when company policies are created and implemented. Strategic HR can be demonstrated throughout different activities, such as hiring, training, and rewarding employees.

HRM evolved over a period of years from the era of industrial revolution. The evolution of HRM dates back to 18th century and the concept is very old in nature involving the management of human beings. There were many phases of people management before reaching the current scenario as researched by many authors.

  1. Industrial Revolution:

It started during 18th century in Britain and spread later to Western Europe and United States. Workers were forced to indulge in monotonous and repetitive work activities. Workers were treated earlier as machines and not as resources. The industrial revolution witnessed ill treatment and exploitation of workers.

  1. Trade Unionism:

Workers joined together to form trade unions to protect their interests. The movement started within the era of industrial revolution as there were common worker demands. The origin of Trade unions can be traced back to 18th century in Europe and later it spread to many other parts of the world.

  1. Taylorism or Scientific Management:

Scientific management was propounded by Frederick Winslow Taylor in 1911. It aimed to standardize workflows and improve labour productivity through reduction of effort Human factor at work was given more importance and procedures were simplified by time and motion studies.

  1. Human Relations Movement:

The concepts of scientific management led to an awareness of improving procedures and productivity through work simplification. In early 1930s the famous research by Elton Mayo et. al. namely, the “Hawthorne Studies” opened up a new horizon of human relations at workplace. It revealed the impact of social factors, informal groups, motivation and employee satisfaction on productivity. This was the beginning of behavioural approaches and soft skill training to employees. The modern concept of HRM sprouted from such movements.

  1. Organizational Behaviour & Theory:

Other contemporary researchers like Abraham Maslow, David McClelland, Max Weber and others propounded different concepts on organizational behaviour and developed organizational theory. Motivation, leadership, workforce productivity and similar theoretical areas propped up and gained significance.

  1. Industrial and Labour Relations:

The field of industrial and labour relations started getting importance in many industries as there were strained labour relationships. Legal framework was developed to protect the interest of labour and amicably settle any industrial disputes.

  1. HR Approach:

HR rooted itself strongly in the theoretical background of earlier researches backed by support from industrialists and professional associations. The oldest HR association is the “Chartered Institute of Personnel and Development” started in 1913 in England.

The Society for Human Resource Management was later formed in 1948 in the United States. The first college level study on HR was from Cornell University, United States. At present, there are umpteen numbers of specialized courses in HRM offered by renowned universities all over the world.

The following are benefits of strategic human resource management:

  • Increased job satisfaction
  • Better work culture
  • Improved rates of customer satisfaction
  • Efficient resource management
  • A proactive approach to managing employees
  • Boost productivity
Management Notes

Human Resource Planning, Features, Process, Importance

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Human Resource Planning (HRP) is a systematic process of identifying and addressing an organization’s human resource needs to achieve its objectives. It involves forecasting the future demand for and supply of human resources, assessing current workforce capabilities, and developing strategies to bridge the gap between the two. HRP ensures that the right number of people with the right skills are available at the right time to meet organizational goals.

Features of Human Resource Planning:

  • Well Defined Objectives

Enterprise’s objectives and goals in its strategic planning and operating planning may form the objectives of human resource planning. Human resource needs are planned on the basis of company’s goals. Besides, human resource planning has its own objectives like developing human resources, updating technical expertise, career planning of individual executives and people, ensuring better commitment of people and so on.

  • Determining Human Resource Reeds

Human resource plan must incorporate the human resource needs of the enterprise. The thinking will have to be done in advance so that the persons are available at a time when they are required. For this purpose, an enterprise will have to undertake recruiting, selecting and training process also.

  • Keeping Manpower Inventory

It includes the inventory of present manpower in the organization. The executive should know the persons who will be available to him for undertaking higher responsibilities in the near future.

  • Adjusting Demand and Supply

Manpower needs have to be planned well in advance as suitable persons are available in future. If sufficient persons will not be available in future then efforts should be .made to start recruitment process well in advance. The demand and supply of personnel should be planned in advance.

  • Creating Proper Work Environment

Besides estimating and employing personnel, human resource planning also ensures that working conditions are created. Employees should like to work in the organization and they should get proper job satisfaction.

HR Planning Process:

  • Current HR Supply:

Assessment of the current human resource availability in the organization is the foremost step in HR Planning. It includes a comprehensive study of the human resource strength of the organization in terms of numbers, skills, talents, competencies, qualifications, experience, age, tenures, performance ratings, designations, grades, compensations, benefits, etc. At this stage, the consultants may conduct extensive interviews with the managers to understand the critical HR issues they face and workforce capabilities they consider basic or crucial for various business processes.

  • Future HR Demand:

Analysis of the future workforce requirements of the business is the second step in HR Planning. All the known HR variables like attrition, lay-offs, foreseeable vacancies, retirements, promotions, pre-set transfers, etc. are taken into consideration while determining future HR demand. Further, certain unknown workforce variables like competitive factors, resignations, abrupt transfers or dismissals are also included in the scope of analysis.

  • Demand Forecast:

Next step is to match the current supply with the future demand of HR, and create a demand forecast. Here, it is also essential to understand the business strategy and objectives in the long run so that the workforce demand forecast is such that it is aligned to the organizational goals.

  • HR Sourcing Strategy and Implementation:

After reviewing the gaps in the HR supply and demand, the HR Consulting Firm develops plans to meet these gaps as per the demand forecast created by them. This may include conducting communication programs with employees, relocation, talent acquisition, recruitment and outsourcing, talent management, training and coaching, and revision of policies. The plans are, then, implemented taking into confidence the mangers so as to make the process of execution smooth and efficient. Here, it is important to note that all the regulatory and legal compliances are being followed by the consultants to prevent any untoward situation coming from the employees.

Objectives of Human Resource Planning:

  1. Provide Information

The information obtained through HRP is highly important for identifying surplus and unutilized human resources. It also renders a comprehensive skill inventory, which facilitates decision making, like, in promotions. In this way HRP provides information which can be used for other management functions.

  1. Effective Utilization of Human Resource:

Planning for human resources is the main responsibility of management to ensure effective utilization of present and future manpower. Manpower planning is complementary to organization planning.

  1. Economic Development

At the national level, manpower planning is required for economic development. It is particularly helpful in the creating employment in educational reforms and in geographical mobility of talent.

  1. Determine Manpower Gap

Manpower planning examine the gaps in existing manpower so that suitable training programmes may be developed for building specific skills, required in future.

  1. To forecast Human Resource Requirements

HRP to determine the future human resource needed in an organization. In the absence of such a plan, it would be difficult to have the services of the right kind of people at the right time.

  1. Analyze Current Workforce

HRP volunteers to assist in analyzing the competency of present workforce. It determines the current workforce strengths and abilities.

  1. Effective Management of Change

Proper HR planning aims at coping with severed changes in market conditions, technology products and government regulations in an effective way. These changes call for continuous allocation or reallocation of skills evidently in the absence of planning there might be underutilization of human resource.

  1. Realizing Organizational Goals

HRP helps the organization in its effectively meeting the needs of expansion, diversification and other growth strategies.

Importance of Human Resource Planning:

  • It gives the company the right kind of workforce at the right time frame and in right figures.
  • In striking a balance between demand-for and supply-of resources, HRP helps in the optimum usage of resources and also in reducing the labor cost.
  • Cautiously forecasting the future helps to supervise manpower in a better way, thus pitfalls can be avoided.
  • It helps the organization to develop a succession plan for all its employees. In this way, it creates a way for internal promotions.
  • It compels the organization to evaluate the weaknesses and strengths of personnel thereby making the management to take remedial measures.
  • The organization as a whole is benefited when it comes to increase in productivity, profit, skills, etc., thus giving an edge over its competitors.
Lucknow University BBA Notes / Management Notes

HRM Limitations

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1. Recent Origin:

HRM is of recent origin.

So it lacks universally approved academic base. Different people try to define the term differently. Some thinkers consider it as a new name to personnel management. Some enterprises have named their traditional personnel management department as human resource management department.

Such superficial actions may not bear much fruit. What is actually required is a fundamental change in attitudes, approaches and the very management philosophy. Without such a change, particularly at the top management level, renaming of personnel department or redisgnating the personnel officer may not serve the purpose. With the passage of time an acceptable approach will be developed.

2. Lack of Support of Top Management:

HRM should have the support of top level management. The change in attitude at the top can bring good results while implementing HRM. Owing to passive attitude at the top, this work is handled by personnel management people. Unless there is a change in approach and attitude of top management nothing remarkable will happen.

3. Improper Actualisation:

HRM should be implemented by assessing the training and development requirements of employees. The aspirations and needs of people should be taken into account while making human resource policies. HRM is actuated half-heartedly. The organising of some training programmes is considered as the implementation of HRM. With this, management’s productivity and profitability approach remains undisturbed in many organisations.

4. Inadequate Development Programmes:

HRM needs implementation of programmes such as career planning, on the job training, development programmes, MBO, counselling etc. There is a need to create an atmosphere of learning in the organisation. In reality HRM programmes are confined to class room lectures and expected results are not coming out of this approach.

5. Inadequate Information:

Some enterprises do not have requisite information about their employees. In the absence of adequate information and data base, this system cannot be properly implemented. So there is a need to collect, store and retrieval of information before implementing human resource management.

In many organisations, even the professionals misunderstand HRM as synonymous with HRD. Some class room training programmes are generally arranged, which are called HRD programmes. These programmes are understood as human resources management. Such casual class room programmes are not the actual HRM programmes.

Even a well planned and executed HRD programme is not HRM. HRD is only a part of HRM which is an integrated approach to management. Undoubtedly, human resource management suffers from such limitations. But the impact it has made on the managerial effectiveness has been spectacular wherever it was introduced. Actually speaking a real need exists in every Indian organisation for an HRM approach.

Management Notes

Consumer Behaviour, Meaning, Nature and Challenges

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Consumer behaviour refers to the study of how individuals, groups, or organizations select, buy, use, and dispose of goods, services, ideas, or experiences to satisfy their needs and wants. It involves understanding the decision-making processes of buyers, both individually and collectively, and how various internal and external factors influence their purchasing decisions.

Consumer behaviour is influenced by several psychological, personal, social, and cultural factors. These include motivation, perception, learning, personality, lifestyle, income, family, reference groups, and cultural background. For example, a consumer’s preference for a brand can be shaped by past experiences, advertisements, peer recommendations, or current trends.

The study of consumer behaviour is essential for businesses and marketers because it helps them understand what drives customer choices. It enables companies to design better products, tailor marketing strategies, set appropriate pricing, choose effective distribution channels, and enhance customer satisfaction. By analyzing consumer behaviour, businesses can also forecast demand, segment markets accurately, and gain a competitive edge.

In modern times, consumer behaviour is dynamic and continuously evolving due to digital transformation, rising consumer awareness, and socio-economic shifts. Businesses must keep track of changing consumer patterns to remain relevant and responsive to market needs.

In essence, consumer behaviour is at the heart of all marketing activities, helping businesses connect their offerings to what customers truly value.

Nature of Consumer Behaviour:

  • Complex Process

Consumer behavior is a complex process involving multiple psychological and social factors that influence decision-making. Consumers do not simply purchase products; they go through several stages, including need recognition, information search, evaluation of alternatives, purchase decision, and post-purchase behavior. The complexity arises due to varying individual preferences, motivations, cultural influences, and situational factors, making it challenging for businesses to predict consumer actions accurately.

  • Influenced by Various Factors

Consumer behavior is influenced by personal, psychological, social, and cultural factors. Personal factors include age, gender, and lifestyle, while psychological factors involve perception, learning, and attitudes. Social influences like family, reference groups, and social class also play a role. Additionally, cultural factors such as values, traditions, and societal norms shape consumer preferences and buying decisions.

  • Dynamic in Nature

Consumer behavior is dynamic and constantly evolving due to changes in personal preferences, technology, lifestyle, and market trends. New products, innovations, and marketing strategies influence consumer preferences over time. Additionally, external factors like economic conditions and societal shifts can alter consumer priorities, making it essential for businesses to stay updated and adapt to changing consumer needs.

  • Goal-Oriented

Consumers exhibit goal-oriented behavior, meaning their purchasing decisions are driven by the desire to fulfill specific needs or achieve certain outcomes. These needs may be functional, emotional, or symbolic. For instance, a consumer may buy a product for its practical utility, to gain emotional satisfaction, or to express social status. Understanding these goals helps marketers design better value propositions.

  • Varies Across Individuals

Consumer behavior varies greatly from person to person due to differences in personality, preferences, and socio-economic background. While some consumers may prioritize price, others might focus on quality, brand reputation, or convenience. This variability necessitates market segmentation and personalized marketing approaches to cater to different consumer groups effectively.

  • Involves Decision-Making

Consumer behavior involves a decision-making process where consumers evaluate various alternatives before making a final purchase. This process includes identifying needs, gathering information, comparing options, and making choices. Post-purchase evaluation, where consumers assess whether their expectations were met, is also a critical aspect. Businesses need to understand this process to influence decision-making positively.

  • Reflects Social Influence

Consumer behavior often reflects the influence of social factors such as family, friends, peer groups, and society at large. People tend to seek social acceptance and approval in their purchasing decisions. Word-of-mouth recommendations, social media, and online reviews have a significant impact on consumer behavior, making social influence a critical element in marketing strategies.

  • Varies by Product Type

Consumer behavior differs depending on the type of product or service being purchased. For high-involvement products like cars or electronics, consumers spend more time researching and comparing options. In contrast, low-involvement products like daily essentials involve quick decision-making. Understanding this distinction helps businesses tailor their marketing efforts to suit different product categories.

  • Influenced by Perception

Perception plays a significant role in consumer behavior, as individuals form subjective opinions about products and brands based on how they interpret information. Factors such as advertising, packaging, branding, and word-of-mouth shape consumer perceptions. Even if two products offer similar value, consumers may choose the one they perceive as superior due to effective marketing.

  • Leads to Customer Satisfaction

The ultimate goal of consumer behavior is to achieve customer satisfaction. When consumers feel that a product or service meets or exceeds their expectations, they experience satisfaction, leading to brand loyalty and repeat purchases. Conversely, dissatisfaction can result in negative reviews and lost customers. Understanding consumer behavior allows businesses to create offerings that maximize satisfaction and long-term relationships.

Challenges of Consumer Behaviour:

  • Complexity of Consumer Needs

Consumers have diverse and complex needs that vary across individuals and situations. A single product may cater to different needs for different people. For instance, one consumer may buy a car for luxury, while another buys it for utility. Understanding and predicting these multifaceted needs is a significant challenge for marketers aiming to create products that satisfy varying consumer expectations.

  • Rapidly Changing Preferences

Consumer preferences evolve rapidly due to factors like technological advancements, societal trends, and exposure to global cultures. What is popular today may become obsolete tomorrow. Keeping up with these changing preferences requires businesses to be highly adaptable and continuously innovate to meet new demands. Failing to do so can result in losing relevance in the market.

  • Influence of Social and Cultural Factors

Social and cultural factors greatly influence consumer behavior. These factors differ significantly across regions, making it challenging for global businesses to design universally appealing marketing strategies. For example, a product that is successful in one country may not resonate in another due to cultural differences. Understanding and respecting these nuances is critical for market success.

  • Impact of Psychological Factors

Consumer behavior is heavily influenced by psychological elements such as perception, motivation, attitudes, and beliefs. These factors are subjective and vary widely among individuals, making it difficult for marketers to generalize behaviors. Additionally, psychological factors are often subconscious, further complicating efforts to predict or influence consumer actions.

  • Information Overload

In today’s digital age, consumers are bombarded with information from multiple sources, including advertisements, social media, and peer reviews. This information overload makes it harder for businesses to capture and retain consumer attention. Moreover, consumers may struggle to process all the information, leading to unpredictable buying behavior.

  • Increasing Consumer Expectations

With the availability of numerous alternatives and personalized offerings, consumer expectations have risen significantly. Modern consumers demand high-quality products, exceptional service, and unique experiences. Meeting these elevated expectations requires businesses to continuously improve their offerings, which can be resource-intensive and difficult to sustain.

  • Influence of Technology

Technology has transformed how consumers interact with businesses. From online shopping to social media engagement, digital platforms have created new avenues for consumer behavior. However, this has also increased the complexity of tracking and understanding consumer preferences across multiple channels. Businesses must invest in advanced analytics to gain insights into online consumer behavior.

  • Brand Loyalty vs. Switching Behavior

Building brand loyalty is a key objective for businesses, but it has become more challenging due to increased competition and abundant choices. Consumers can easily switch to competitors if they find better value elsewhere. Marketers must constantly engage consumers and deliver superior value to retain loyalty while addressing switching behavior effectively.

  • Ethical and Sustainable Consumption

Modern consumers are increasingly concerned about ethical and sustainable practices. They prefer brands that prioritize environmental and social responsibility. Businesses face the challenge of aligning their operations with these values while maintaining profitability. Additionally, they must communicate their efforts effectively to gain consumer trust.

  • Difficulty in Segmenting Markets

Effective market segmentation is essential for targeted marketing, but it is not always easy to implement. Consumer behavior can vary within segments due to individual differences, making it hard to identify homogeneous groups. Moreover, segments may overlap, requiring businesses to adopt complex, multi-segment strategies for better targeting.

Management Notes

Factors affecting Consumer Behaviour

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Consumer behaviour refers to the study of how individuals, groups, or organizations select, buy, use, and dispose of goods, services, ideas, or experiences to satisfy their needs and wants. It involves understanding the decision-making process of consumers, including psychological, social, and economic influences. Businesses analyze consumer behaviour to identify patterns and preferences, enabling them to develop effective marketing strategies. Factors such as cultural background, personal preferences, lifestyle, and economic conditions shape consumer behaviour. By gaining insights into consumer actions and motivations, marketers can better meet customer expectations and enhance customer satisfaction.

1. Cultural Factors

Consumer behavior is deeply influenced by cultural factors such as: buyer culture, subculture, and social class.

(a) Culture

Basically, culture is the part of every society and is the important cause of person wants and behavior. The influence of culture on buying behavior varies from country to country therefore marketers have to be very careful in analyzing the culture of different groups, regions or even countries.

(b) Subculture

Each culture contains different subcultures such as religions, nationalities, geographic regions, racial groups etc. Marketers can use these groups by segmenting the market into various small portions. For example marketers can design products according to the needs of a particular geographic group.

(c) Social Class

Every society possesses some form of social class which is important to the marketers because the buying behavior of people in a given social class is similar. In this way marketing activities could be tailored according to different social classes. Here we should note that social class is not only determined by income but there are various other factors as well such as: wealth, education, occupation etc.

2. Social Factors

Social factors also impact the buying behavior of consumers. The important social factors are: reference groups, family, role and status.

(a) Reference Groups

Reference groups have potential in forming a person attitude or behavior. The impact of reference groups varies across products and brands. For example if the product is visible such as dress, shoes, car etc then the influence of reference groups will be high. Reference groups also include opinion leader (a person who influences other because of his special skill, knowledge or other characteristics).

(b) Family

Buyer behavior is strongly influenced by the member of a family. Therefore marketers are trying to find the roles and influence of the husband, wife and children. If the buying decision of a particular product is influenced by wife then the marketers will try to target the women in their advertisement. Here we should note that buying roles change with change in consumer lifestyles.

(c) Roles and Status

Each person possesses different roles and status in the society depending upon the groups, clubs, family, organization etc. to which he belongs. For example a woman is working in an organization as finance manager. Now she is playing two roles, one of finance manager and other of mother. Therefore her buying decisions will be influenced by her role and status.

3. Personal Factors

Personal factors can also affect the consumer behavior. Some of the important personal factors that influence the buying behavior are: lifestyle, economic situation, occupation, age, personality and self concept.

(a) Age

Age and life-cycle have potential impact on the consumer buying behavior. It is obvious that the consumers change the purchase of goods and services with the passage of time. Family life-cycle consists of different stages such young singles, married couples, unmarried couples etc which help marketers to develop appropriate products for each stage.

(b) Occupation

The occupation of a person has significant impact on his buying behavior. For example a marketing manager of an organization will try to purchase business suits, whereas a low level worker in the same organization will purchase rugged work clothes.

(c) Economic Situation

Consumer economic situation has great influence on his buying behavior. If the income and savings of a customer is high then he will purchase more expensive products. On the other hand, a person with low income and savings will purchase inexpensive products.

(d) Lifestyle

Lifestyle of customers is another import factor affecting the consumer buying behavior. Lifestyle refers to the way a person lives in a society and is expressed by the things in his/her surroundings. It is determined by customer interests, opinions, activities etc and shapes his whole pattern of acting and interacting in the world.

(e) Personality

Personality changes from person to person, time to time and place to place. Therefore it can greatly influence the buying behavior of customers. Actually, Personality is not what one wears; rather it is the totality of behavior of a man in different circumstances. It has different characteristics such as: dominance, aggressiveness, self-confidence etc which can be useful to determine the consumer behavior for particular product or service.

4. Psychological Factors

There are four important psychological factors affecting the consumer buying behavior. These are: perception, motivation, learning, beliefs and attitudes.

(a) Motivation

The level of motivation also affects the buying behavior of customers. Every person has different needs such as physiological needs, biological needs, social needs etc. The nature of the needs is that, some of them are most pressing while others are least pressing. Therefore a need becomes a motive when it is more pressing to direct the person to seek satisfaction.

(b) Perception

Selecting, organizing and interpreting information in a way to produce a meaningful experience of the world is called perception. There are three different perceptual processes which are selective attention, selective distortion and selective retention. In case of selective attention, marketers try to attract the customer attention. Whereas, in case of selective distortion, customers try to interpret the information in a way that will support what the customers already believe. Similarly, in case of selective retention, marketers try to retain information that supports their beliefs.

(c) Beliefs and Attitudes

Customer possesses specific belief and attitude towards various products. Since such beliefs and attitudes make up brand image and affect consumer buying behavior therefore marketers are interested in them. Marketers can change the beliefs and attitudes of customers by launching special campaigns in this regard.

Management Notes

Consumer Involvement and Decision Making

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The involvement theory is based on the concept that there are low and high involvement con­sumers and there are high and low involvement purchases. According to this theory consumers involvement depends on the degree of relevance of purchase to a consumer. If for instance, consumer wants to buy a packet of tea or food or bread or butter he does not feel very much involved. It is because the life of these products is very short and ones consumed they exhaust. If the experience with the product is not good, next time some other brand can be purchased.

However, this is not true in case of consumer durables and certain services. If one buys an automobile, refrigerator, air conditioner, furniture, or a house he is forced to use it for long period and cannot change early and if he decides to dispose off there is big loss. Hence in these products there is high degree of involvement, therefore, consumer takes a decision after lot of deliberations. In case of insurance policy ones taken one has to live with it.

Based on this hypothesis researchers have developed theories of high relevant/high involvement, low relevance/low involvement. In case of high involvement products the consumer collects all possible information and access it in detail based on his knowledge and makes efforts to get the opinion of family members, relatives and friends and some times even of experts.

If some one decides to buy a car he will consider large number of attributes but in case of daily consumption items, the same consumer will make quick and effortless decision. The involvement is dependent not only on nature of product or service to be purchased but also on the psychology of the consumers. Even for same product involvement is not uniform for all consumers. For instance if a packet of tea or biscuit is to be purchased, there are consumers who take it casually and simply ask the retailer to give a packet without mentioning any brand and everything is left to the retailer.

For such consumers tea is tea and biscuit is biscuit. They are not brand conscious nor make any investigation before purchases. But for same tea or biscuit there is other set of consum­ers who will collect information about various brands available in the market and their attributes. Thus degree of involvement differs not only on the nature of product but also on the psychology of consumers.

Some consumers take risk even for vital services and products. They take decisions without consideration of all attributes. For instance, if some one needs to be admitted into a hospital for treatment of serious injury or fracture there are persons who will take treatment in a near by hospital. But there are other persons who in a similar situation will make lot of inquiry before deciding the hospital for admission.

Thus there are two set of factors which decide the degree of involvement:

  1. The nature of product or service and
  2. The psychology of the consumer

Still it can be generalized that degree of involvement depends upon perceived risks in buying a particular product, the higher the risk, the deeper is the involvement. Based on this generalization there can be three degrees of involvement – high, medium and low depending upon period of impact of purchases. Higher degree of involvement is in a product of long life or in services which have long term impact on consumer. The medium degree of involvement is in items or services which have medium term impact upon life and the low involvement is in product and services which have short life and once used cannot be used again, “a few illustrations are given in Table 1”.

Antecedents of Involvement

The degree of involvement depends upon past history of buyer i.e. on his level of knowledge, information, psychology, culture, life style, social system. Depending upon the circumstance of an individual, his involvement differs even for the same service or product. There is no clear cut and universally acceptable definition of involvement.

According to one view there are five types of involvement namely:

  1. Ego involvement
  2. Commitment
  3. Communication involvement
  4. Purchase importance
  5. Extent of information secured

Accounting to Judith L. Zaichkowsky (conceptualizing) involvement (Journal of Advertising 15 (2) 1986), the involvement theory deals with advertising, with products, and with purchase decisions.

There are other researchers who see the person, product and situation as major important part of involvement. According to David W. Firm in his article on the Integrated Information Response Model in Journal of Advertising (1984) the involvement depends upon purchase situation.

In spite of the fact that there is no unimanity about the concept of involvement, it is an important element of consumer behaviour and purchases of all high value and durable products depend upon it. Similarly services which are vital for life like medical services there is high level of involvement.

Ego involvement is to satisfy ones ego. For instance, if in a family there are five – members husband, wife, two daughters and one son every one would like to be involved in purchase decision not only for a product he consumes directly but also for products consumed by other family members.

Wife would like to be involved in purchase of shaving cream, underwear and garments for her hus­bands. Husband would like to be involved in purchase of cosmetics for the use by his wife and /or daughters. The son and daughters would like to be involved in purchase of TV, Car, house for satisfaction of their ego that they must be consulted before purchase and due importance should be given to their views-likings / disliking’s of a particular brand or model of a brand.

Commitment is another factor of involvement. If wife or son has to be treated for any illness, husband or parents are highly involved in countries like India where there is great attachment in each other. Parents are committed that their children get best education within their means so that they may make good future for themselves.

Communication involvement relates to share the available information with others in the family and /or organization who are involved in buying a product or service. For example, if a right dentist is to be located for treatment and if one member has some information on the subject, he should commu­nicate it to the person who is going to take a decision.

Similarly if some one is going to buy a car and some one has information about one or more models he should communicate to other members. The other side of communication involvement is that marketer must make the information reach the consumer i.e. there should be proper and effective communication between seller and buyer whether it is FMCG or consumer durables or in industrial goods.

The involvement also depends to a great degree on the importance of purchase. If some one needs bypass surgery of heart best possible hospital and heart surgeon will have to be located, thus there has to be high degree of involvement. If an house or flat costing Rs. 10 lakhs to Rs. 50 lakhs or more has to be purchased the location should be healthy, house title should be clear to avoid risk of ownership. Against this if one is buying wheat or sweets there are little risk and so level of involvement is low.

The extent of information search is part of purchase importance. If the purchase is important; information search is intensive from all possible sources. But if the purchase is not important and is of routine nature there is limited information search.

Low Involvement Decision Making

When the stake in an item to be purchased or service to be utilized is not much and the risk of wrong decision is only short lived, decision making involves low involvement. If for instance con­sumer decides to buy X brand washing powder and does not find it suitable it can be rejected and repeat purchase is not made of the same brand. But the loss due to buying decision is limited to the cost of the powder.

If one develops fever and visits near by doctor and he takes longer time than normally required he can be discarded. If some one sends a courier mail from Delhi to Mumbai and it does not reach next day the service can definitely be rejected for next mail but if the mail contains important documents delay may cause loss and so risk is involved.

Thus the low involvement does not depend entirely on the nature of product or service but also on other factors such as its conse­quences. Therefore, even in some low involvement product or service decision making has to depend upon other factors too. However, on the whole generally no or very limited inquiry is done tor low involvement items. Very often some inquiry is made from seller but its attributes vis-a-vis of alternatives are not evaluated.

Unplanned Purchase Behaviour

All purchase by any consumer is not preplanned. When a wife visits a market for planned purchases and if something which was not in the list she likes or finds it a bargain on-spot the short decision is taken for purchase which is called unplanned purchase. The unplanned purchases may be defined those purchase decisions which are taken on the spot without any prior planning.

Such purchase is quite large when one visits an exhibition or visits a religious place or visits mela like Khumbh Mela. One sees many products at these places and makes purchases for oneself, relatives and friends, for gifting or when innovative products are available. Generally when one visits such places he takes money for such purchases but does not know what he is going to buy.

The purchase decision in such circumstances is called unplanned purchase decision. The basic point to observe is that no prior inquiry is made nor prior information is collected. But in such purchases also often alternatives are available and one has to decide which product is better. This depends purely on mood at that point of time and liking or disliking of a particular product or its alternative. It will not be correct to say that all unplanned purchase decision is taken without considering alternatives.

Theory of Low Involvement

Low involvement is applicable when neither performance nor image dimensions are very impor­tant. In such cases there is very vague or shallow impression and product is readily accessible. For instance, if one buys sugar one is not bothered about the name of the factory which produced it because all sugar is alike.

This was the case with wheat flour also till recently but now with a number of brands, the level of involvement is increasing. In India where larger number of products is sold without brands the level of involvement is low. This is particularly true of rural market or poor persons purchases who largely buy a product and not a brand. In such cases use of brain is very limited. For poor person tea is tea and sugar is sugar. He takes decision largely on price consideration because “beggar cannot be chooser”. Thus use of brain is minimal.

According to involvement theory involve­ment depends upon the importance of product in purchase. But this is not always true. In India a person below the poverty line only decision is that he must get a product be it wheat, tea, sugar, bread or milk, because he has little choice to make.

However, theory remains in tact that the level of involve­ment depends upon the product to be purchased and involvement remains low in case of commodities and goes up as the level of purchases relates to branded products. The persons, the product and the situation decides the degree of involvement. Thus a poor person in India has low involvement in purchases. The product of general nature and of daily consumption does not involve much risk and so have low involvement.

The other important factor in low involvement theory is that purchase decision in such cases have little impact of advertisement and consumer tries new brands for experience and adopt them if found suitable. In such cases job of marketer is to make consumer aware about a particular brand so that it may be purchased instead of alternatives.

There must be attractive displays in shops and stores so that it may catch the eye of the customer Packaging also induces customers repeatedly some brand and packaging promotes purchase behaviour in case of low involvement products.

Strategic Implications of Low Involvement Decision Making

In case of low involvement decision making it is more likely that consumer changes the brand if he finds equally good brand in the market or there is bargain sale or discount sale. In products of low I involvement there is class of consumers for whom “brand loyalty” has little meaning. Moreover studies in India suggest that brand loyalty is weakening.

The bargain sales are attracting customers like buy two trousers and get-one free, buy a toothpaste and get tooth brush free, buy Nature Fresh Atta and get a scratch coupon free. There are a number of others who offer 10 to 20 percent extra quantity without extra price.

The consumer purchase decisions are influenced by such bargains because he belongs to none specially in case of low involvement products. The thumb rule in Indian discount bazars is that who gives best deal to buyers thrives. It has been realized by marketers that price value score cover brand.

This trend is most visible not only in garments but also in FMCG. Therefore Lux offered Rs. 5 discount. Good Knight mosquito mats offered free soaps, The management of Shoppers Stops admits that discount sales work well for its store because it sells more and attracts new custom­ers Bombay Dyeing has discount sales every year.

Since Bhilwara group announced 15 to 50 percent discount its sales have doubled. If there is no basic difference in a product consumer decision is based on discount or incentives available. But brand loyalty is continuing in certain items like cosmet­ics and design and quality conscious customers. However, the share of such buyers in total is declining and strategic planners will have to keep this fact in mind.

Now buyers for low involvement products decide on the basis of price and value over brand at least in India where purchasing power of majority of consumers is limited.

Complex Decision Making

In case of high involvement products and services decision making is complex and difficult. If for example some one is seriously ill besides the reliability of a doctor one has to look to his pocket and permanent loss of funds if treatment does not succeed.

The heart operation cost Rs. 3 Lakh in one hospital and Rs. 1 lakh in another hospital. The concern person has to decide whether it is worth spending Rs. 3 lakhs instead of Rs. 1 lakh. In such case psychology, emotion, price, pocket play a part along with reliability. There are social culture inputs consisting of non-commercial influences which are considered. Social class, culture, sub-culture, information, recognition, opinions of users all play apart.

If some one decides to buy a car, it is available from Rs. 2 lakhs onwards going up to Rs. 25 lakhs or more for imported car. The decision to buy a particular model does not depend mearly on technical factors, reliability of operations, trouble free operation but also on non-utility factors.

The buyer considers his status, ego satisfaction, impression on friends and relatives and satisfaction that most of his known persons do not process that high price model. But there are others whose decision is based only on utility.

In that case he has to collect information on all the possible models, compare there technical and non-technical features, narrow down his choice to two or three models before taking the final decision. At this stage friend who have experience of driving that model or who knows about automobiles is consulted.

In any other high involvement item also the process is quite complex. First, one has to collect information on alternative choices, evaluate them not only in term of performance, reliability and durability but also price.

One is required to work out cost benefit analysis and terms of payment. It is difficult to evaluate all these complex factors. When some manufacturer is offering wide range of TV or refrigerator task becomes all the more complex.

Model of Consumer Involvement

There is no one single model of consumer involvement in all situations and in all products but in all cases there are three major components – input, process and output. As an economist Mc Fadden (1981) has described the multinomial logic model based on macroeconomic theories of choice. In contrast, Yellot (1978) has described the same model as a descendent of psychological theories of comparative judgment development in the late 1920.

In figure 2 a taxonomy of theoretical choice model form is given. The economic theory pre­sumes that an individual attempts to maximize utility and thus choice is made in such a manner as to achieve this objective.

Management Notes

Models of Decision Making

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The decision-making process though a logical one is a difficult task. All decisions can be categorized into the following three basic models.

(1) The Rational/Classical Model

(2) The Administrative or Bounded Rationality Model

(3) The Retrospective Decision-Making Model

All models are beneficial for understanding the nature of decision-making processes in enterprises or organizations. All models are based on certain assumptions on which the decisions are taken.

  1. The Rational/Classical Model

The rational model is the first attempt to know the decision-making-process. It is considered by some as the classical approach to understand the decision-making process. The classical model gave various steps in decision-making process which have been discussed earlier.

Features of Classical Model

  • Problems are clear.
  • Objectives are clear.
  • People agree on criteria and weights.
  • All alternatives are known.
  • All consequences can be anticipated.
  • Decision makes are rational

  1. Bounded Rationality Model or Administrative Man Model

Decision-making involve the achievement of a goal. Rationality demands that the decision-maker should properly understand the alternative courses of action for reaching the goals.

He should also have full information and the ability to analyse properly various alternative courses of action in the light of goals sought. There should also be a desire to select the best solutions by selecting the alternative which will satisfy the goal achievement.

Herbert A. Simon defines rationality in terms of objective and intelligent action. It is characterised by behavioural nexus between ends and means. If appropriate means are chosen to reach desired ends the decision is rational.

Bounded Rationality model is based on the concept developed by Herbert Simon. This model does not assume individual rationality in the decision process.

Instead, it assumes that people, while they may seek the best solution, normally settle for much less, because the decisions they confront typically demand greater information, time, processing capabilities than they possess. They settle for “bounded rationality or limited rationality in decisions. This model is based on certain basic concepts.

(a) Sequential Attention to alternative solution

Normally it is the tendency for people to examine possible solution one at a time instead of identifying all possible solutions and stop searching once an acceptable (though not necessarily the best) solution is found.

(b) Heuristic

These are the assumptions that guide the search for alternatives into areas that have a high probability for yielding success.

(c) Satisficing

Herbert Simon called this “satisficing” that is picking a course of action that is satisfactory or “good enough” under the circumstances. It is the tendency for decision makers to accept the first alternative that meets their minimally acceptable requirements rather than pushing them further for an alternative that produces the best results.

Satisficing is preferred for decisions of small significance when time is the major constraint or where most of the alternatives are essentially similar.

Thus, while the rational or classic model indicates how decisions should be made (i.e. it works as a prescriptive model), it falls somewhat short concerning how decisions are actually made (i.e. as a descriptive model).

  1. Retrospective decision model (implicit favourite model)

This decision­-making model focuses on how decision-makers attempt to rationalise their choices after they have been made and try to justify their decisions. This model has been developed by Per Soelberg. He made an observation regarding the job choice processes of graduating business students and noted that, in many cases, the students identified implicit favorites (i.e. the alternative they wanted) very early in the recruiting and choice process. However, students continued their search for additional alternatives and quickly selected the best alternative.

The total process is designed to justify, through the guise of scientific rigor, a decision that has already been made intuitively. By this means, the individual becomes convinced that he or she is acting rationally and taking a logical, reasoned decision on an important topic.

Some Common Errors in Decision-Making

Since the importance of the right decision cannot be overestimated enough for the quality of the decisions can make the difference between success and failure. Therefore, it is imperative that all factors affecting the decision be properly looked into and fully investigated.

In addition to technical and operational factors which can be quantified and analyzed, other factors such as personal values, personality traits, psychological assessment, perception of the environment, intuitional and judgemental capabilities and emotional interference must also be understood and credited.

Some researchers have pinpointed certain areas where managerial thinking needs to be re-assessed and where some common mistakes are made. These affect the decision-making process as well as the efficiency of the decision, and must be avoided.

Some of the errors are

(a) Indecisiveness

Decision-making is full of responsibility. The fear of its outcome can make some people timid about taking a decision. This timidity may result in taking a long time for making a decision and the opportunity may be lost. This trait is a personality trait and must be looked into seriously. The managers must be very quick in deciding.

(b) Postponing the decision until the last moment

This is a common feature which results in decision-making under pressure of time which generally eliminates the possibility of thorough analysis of the problem which is time consuming as well as the establishment and comparison of all alternatives. Many students, who postpone studying until near their final exams, usually do not do well in the exams.

Even though some managers work better under pressures, most often an adequate time period is required to look objectively at the problem and make an intelligent decision. Accordingly, a decision plan must be formulated; time limits must be set for information gathering, analysis and selection of a course of action.

(c) A failure to isolate the root cause of the problem

It is a common practice to cure the symptoms rather than the causes. For example, a headache may be on account of some deep-rooted emotional problem. A medicine for the headache would not cure the problem. It is necessary to separate the symptoms and their causes.

(d) A failure to assess the reliability of informational sources

Very often, we take it for granted that the other person’s opinion is very reliable and trustworthy and we do not check for the accuracy of the information ourselves.

Many a time, the opinion of the other person is taken, so that if the decision fails to bring the desired results, the blame for the failure can be shifted to the person who had provided the information. However, this is a poor reflection on the manager’s ability and integrity and the manager must be held responsible for the outcome of the decision.

(e) The method for analyzing the information may not be the sound one

Since most decisions and especially the non-programmed ones have to be based upon a lot of information and factors, the procedure to identify, isolate and select the useful information must be sound and dependable. Usually, it is not operationally feasible to objectively analyse more than five or six pieces of information at a time.

Hence, a model must be built which incorporates and handles many variables in order to aid the decision makers. Also, it will be desirable to define the objectives, criteria and constraints as early in the decision-making process as possible.

This would assist in making the process more formal so that no conditions or alternatives would be overlooked. Following established procedures would eliminate the efforts of emotions which may cloud the process and rationality.

(f) Do implement the decision and follow through

Making a decision is not the end of the process, rather it is a beginning. Implementation of the decision and the results obtained are the true barometer of the quality of the decision. Duties must be assigned, deadlines must be set, evaluation process must be established and contingency plans must be prepared in advance. The decisions must be implemented whole heartedly to get the best results.

Lucknow University BBA Notes / Management Notes

Consumer Perception

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Consumer Perception is a marketing concept that tells us what Consumer think about a brand or a company or its offerings. It can be positive or negative feelings, perceptions, inhibitions, predispositions, expectations or experiences that a customer has.

A marketing concept that encompasses a customer’s impression, awareness and/or consciousness about a company or its offerings. Customer perception is typically affected by advertising, reviews, public relations, social media, personal experiences and other channels.

If you understand the concept of Consumer perception, you will figure out that it is arguably the most important factor that decides the success of a brand, product or a company as a whole. How a particular brand or company is positioned also plays a vital role in this. The characteristics of a brand and its personality play a big role.

If we look at the company Apple, we can see that the company is positively perceived by most of its customers. In fact, there are die-hard fans of Apple. The reason being that the company has been repeatedly innovative, it has good performing products which make a connect with their customers. As a result, Apple is one of the consistently top performing brands across the world.

Customer Perception decides how much a product sells and how a company is perceived.

Factors deciding customer perception

In general, customer perception can be influence by a lot of factors. Some of the major factors are

(i) Consistency of performance

How has the brand performed in the past and how it is performing currently.

(ii) Emotional Connect

Superb brands know that emotional connection with the customer is critical to brand development.

(iii) Marketing Communications

How the brand communicates with the customers using the various media vehicles.

(iv) Holistic Marketing

A brand cannot be excellent if it has good sales staff but pathetic support staff. A brand has to be a good all rounder and satisfy customers from all its touch points.

Importance of Consumer Perception

When customers buy your products, they purchase much more than physical objects. Successful marketing involves building a brand with sensory and emotional triggers and then working daily to reinforce the image that your brand triggers in the hearts and minds of customers.

The consumer perception that can make or break your brand may be carefully cultivated through clever and effective advertising. Changes in consumer perception of brands can also spring seemingly out of nowhere, as when the Hush Puppies shoe brand became a fad during the ’90s with little engineering from the company itself.

Whether your company has painstakingly fostered customer perception or had the great fortune to unwittingly benefit from it, the importance of your brand’s reputation should never be underestimated.

(i) Importance of Marketing and Action

Successful marketing is a process of reaching out to customers through advertising, selling strategies and the product itself to create an impression that inspires loyalty. However, that impression is unlikely to endure unless you work hard to maintain it. The outdoor apparel company L.L. Bean has a return policy of replacing any product that a customer returns for any reason, regardless of how long it has been worn. This policy surely costs the company extra when unscrupulous customers choose to take advantage and return items that have been worn for a considerable period of time. Over the long term, though, this legendary return policy has worked to the company’s advantage by building trust and extraordinary loyalty.

(ii) Influence of Negative Perceptions

Negative consumer perceptions can be at least as powerful as positive ones especially in the era of social media when stories about companies’ bad behaviors spread quickly and can have devastating repercussions. When United Airlines had a ticketed customer dragged off a flight in April 2017, the story spread through both social and mainstream media, creating a backlash from consumers who boycotted the airline and canceled credit cards affiliated with it. The negative publicity rippled among shareholders as well causing the company’s price to plummet by $1.4 billion.

(iii) The Power of Referrals

Referrals are a powerful way to foster positive consumer perception because they often come about organically through customers telling their friends which products they buy and why they buy them. Because they come from customers rather than from marketing or advertising, referrals give your company genuine credibility. Referrals grow out of brand loyalty and generate additional loyalty to your brand. You can give customers incentives to make referrals such as by offering free products or services, but if you’ve done a good job fostering positive consumer perceptions, you’ll get customer referrals whether or not you reward customers for them.

Your company’s brand isn’t only about what you want customers to see, it’s also about how they already see you. Public perception can make or break a business today, making it the most valuable commodity you have in your sales and marketing arsenal.

The Role of Perception

The idea of perception theory is often capitalized by haunted houses and amusement parks. The visitors are forced to walk into a dark are, which is pretty small and claustrophobic. Visitors are led to a panoply of attractions that look and and sound like like monsters, rodents, and so on. All this to overwhelm our senses. The idea is to stimulate an adrenaline rush, which would then surge through the patrons as they are forced to face their fears. The people who enjoy these things usually love the idea of conquering their fears, and they often find this experience exhilarating. However, this can be turned on its head. If you’re in the wrong neighborhood, attractions in a haunted house could easily attract customers to a haunted house but could easily chase customers away from your storefront.

As a business owner, you want to maximize the amount of time that customers spend in your store. You want them to purchase an item on a whim, and to then go on a spree of impulse buying. You want them to browse your shelves, and walk through your aisles, discovering and exploring with each step. Whether your store is a brick-and-mortar store or an online store, you want them to browse and buy, so that you increase your sales.

As a business owner, you should seek to improve their experience and give them the right perception, no matter what.

Using Customer Perception to Your Advantage

So to get customer perception right, you should look into what turns your consumers on, so to speak, and then to use it to your advantage when you want to attract them. If you wish to attract high-end customers, then make a play on such things as quality, cleanliness and hygiene, lighting, packaging, and general details in the way you present your products and services. Segment your customers into the different consumer groups they fall into, and use these groups to figure what is important to each group and what to show to different categories of customers.

When you make an effort to improve consumer perception of your products, your bottom line will quickly reflect your hard-won effort. You will also make your customers and your community feel as if they are part of your family – and there is no better recipe for brand loyalty than family.

Management Notes

Consumer Attitudes and Changes in Attitude

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Consumer attitudes is a composite of three elements: cognitive information, affective information, and information concerning a consumer’s past behavior and future intentions. In other words, attitude consists of thoughts or beliefs, feelings, and behaviors or intentions towards a particular thing, which in this case is usually a good or service. For example, you may have a very positive view of a particular sports car (for example, you believe it performs better than most), it makes you feel good, and you intend to buy it.

Marketers need to know what are consumers likes and dislikes. In simple explanation, these likes and dislikes or we can say favourable or unfavourable attitudes. Attitudes can also be defined as “learned predispositions to respond to an object or class of objects in a consistently favourable or unfavourable way”.

This means attitudes towards brands are consumers learned tendencies to evalu­ate brands in a consistently favourable or unfavourable way. More formally, an overall evaluation done by consumers for choosing a particular product.

Attitudes help us understanding, why consumers do or do not buy a particular product or shop from a certain store etc. They are used for judging the effectiveness of marketing activities, for evaluating marketing actions ever before they are implemented within the market place.

Changes in Consumer Attitude

Companies may focus on changing consumer attitudes for a variety of reasons. Dropping sales, increased product or service complaints and new, or renewed, competition in the marketplace can all necessitate a hard look at the reasons behind trends related to consumer perceptions and attitudes. Deciphering the cause of negative perceptions requires appropriate planning and the commitment to make the necessary changes to ensure success. For small businesses, analyzing consumer behavior becomes an essential part of developing a targeted marketing and promotional campaign.

  1. Identify consumer perceptions

In order to develop an action plan for changing consumer attitudes, you need to understand current perceptions of products and services. Evaluate captured feedback, such as customer service contact statistics regarding complaints and concerns. Service businesses can leave comment cards for customers to complete and mail back. Utilize surveys, paper and electronic, and focus groups to receive an accurate representation of problems or concerns that may exist.

  1. Compile data for interpretation

Interpretations derived from statistical data can provide immediate feedback related to possible product or service defects. Evaluate survey responses for information related to consumer views and perceptions of the business’s products or services. Focus on repeated or habitual problems experienced by customers. Find the common thread among complaints and negative perceptions. Determine if a negative consumer attitude is the result of employee neglect or product deficiencies.

  1. Create a plan of action

Once you have identified consumer perceptions, develop a plan to improve areas where consumer perceptions reflect a negative attitude toward the company, product or service. This can include improved employee training to handle concerns and help cultivate customer loyalty. Involve product development on needed product improvements. Enlist the help of the marketing department to develop campaigns focused on increasing brand awareness and resolving common concerns.

  1. Share vital information with affected employees

Educate the appropriate personnel on the goals of any new campaigns and promotions. Ensure customer service representatives understand the impact of creating a positive customer environment. Changing consumer attitudes is essential to ensuring future loyalty and creating a secure job environment.

  1. Measure success

Use customer service metrics as one way to measure success. This can include keeping track of incident reports, positive feedback and complaints. Signs of a shift in consumer attitudes include reduced complaints and increased sales.

Components of Attitudes

(a) Cognitive

A person’s knowledge and beliefs about some attitude object reside within the cognitive component. Through marketing research, marketers develop a vocabulary of product at- tributes and benefits.

(b) Affective

The affective component represents a person’s likes or dislikes of the attitude object. Beliefs about them are multidimensional because they represent the brand attributes consum­ers perceive but this component is one dimensional. Consumer’s over all evaluation of a brand can be measured by rating the brand from “poor” to “excellent” or from “least preferred” to “most preferred”.

Brand evaluation is central to the study of attitudes because it summarizes consumer’s predisposition to be favourable or unfavourable to the brand. Brand beliefs are relevant only to the extent that they influence brand evaluations which in turn leads to behaviour.

(c) Conative

The conative component refers to the person’s action or behavouioral tendencies toward the attitude object. This is measured in terms of intention to buy. For developing marketing strategy, this measured buying intent is important. To avoid failures in the market, marketers fre­quently test the elements of the marketing mix like – ads, packages, alternative product concepts or brand names. All this is done to know what is most likely to influence purchase behaviour.

There are important predicting and diagnostic differences among three components and mea­sures when prediction is of prime concern then behavioural intention measures are most appropriate, since they offer the greatest predictive power as shown in Fig. But are limited in their diagnostic power.

This is basically because of their inability to reveal why consumers intend or don’t intend to perform a behaviour. For example – consumer doesn’t want to shop from a particular store for a number of reasons. Intention measures do not reveal these reasons like convenient shopping hours. There­fore, reasons for consumers attitudes and intention can be known by measuring beliefs.

Properties of Attitudes

Attitudes can vary along a number of dimensions or properties. They are:

(i) Favourability

A person may like Coke or Pepsi and dislike others like Fanta, Mirinda, Canada Dry etc.

(ii) Intensity

This means, the strength of liking or disliking. For example, consumer may be liking two brands at a time but he/she may be more positive towards one.

(iii) Confidence

This means, attitude is the confidence with which they are held. Intercity and confidence differ slightly. For example, a person may be equally confident that he/she really likes Pepsi but may be slightly favourable toward Coke.

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