Consumer Behavior includes all the decisions a consumer makes when spending their time and money. The what, why, when, where, and how of consumer purchases are examined in consumer behavior. It is not just individuals, but households, families, and groups that influence the decisions we make. This web link takes you to Google’s shopping site which is still in BETA test mode. Google used to have a shopping portal, Froogle, which is no longer active. There are many online sites which influence us as consumers either in the information gathering, decision making, or final purchasing part of our decisions.
The personal consumer is sometimes called the end user or ultimate consumer. This is you when you go to Best Buy to purchase a new television for your home. The organizational consumer is buying for the organization or to re-sell to the personal consumer. Although both types of consumer entities are important, we will be focusing on the personal consumer throughout these presentations.
The marketing concept was developed over time through two other important business orientations called the production and the sales orientation . They will be discussed in more detail on the following slides.
During the production orientation , companies wanted efficient production lines to mass produce products for the consumer. Because the demand was higher than the supply, consumers were content to get a product and were not focused on product variation. This was the time that the control was in the hands of the producers who said, “if we make it they will buy it.”
There was overproduction during the production orientation, which led to excess product. Although the products were still similar and there was little variation, during the sales orientation period, the manufacturers focused on selling the product which they had overproduced.
Rather than focus on what can be manufactured, the focus shifts with the marketing concept to what consumers prefer. It became a time to put the customer first and to understand their needs and wants. With this information, marketers can deliver satisfaction to their target markets. We are remaining focused on the marketing concept today as marketers become more sophisticated in understanding the consumer and in delivering products that meet their needs.
There are many companies you can choose from. Some common ones might include Coca-Cola, Pepsi, Apple, and Nike. These companies are focused on the following: They develop a wide variety of products to meet very different needs. They realize the importance of communicating with their consumer and explaining their product benefits. They practice corporate social responsibility through tie-ins with charities and fundraising.
The societal marketing concept was developed from the marketing concept. Marketers and consumers are increasingly taking stock of what is good for themselves, their family, their country, and the planet. Marketing looks for opportunities to provide products and services to help consumers reach their goals while also making profitable decisions for their companies. The image in this slide of a Siemens ad suggests the company is committed to developing products that are safe for customers and the environment. This web link will take you to the “Cause Marketing Planner” assembled by promomagazine.com. It is rich with information about not-for-profit organizations for cause marketing campaigns.
All companies must continually conduct research to understand the needs and priorities of their market segments. This web link will take you to the Association for Consumer Research, whose goal it is to advance consumer research and facilitate the exchange of scholarly information among members of academia, industry, and governments worldwide.
Consumer needs are shaped by the environment, culture, education, and life experiences. Marketers perform segmentation by looking for groups with common needs. Segmentation can be based on consumers’ demographics, product usage, geography, lifestyle, and many other characteristics and needs.
Shampoo is usually highly segmented. There are products based on gender, hair type, preferred smell, and price. Segmentation is useful because the marketers can clearly match their product benefits to the consumer. If you have dandruff, then use our specially formulated dandruff shampoo. If you are a guy, use our Axe product because it will make you look so good women will not be able to resist you.
When a marketer chooses the segments that they will pursue, they have chosen a target market . Selection of the correct target market is critical to success of the product since the marketer has assumed that this group of consumers has a similar need with respect to their product or service.
Positioning is how the consumer thinks about your product versus the competitor’s product. Does yours have a sleeker design, or is it faster or more compact? The positioning is ultimately in the mind of the consumer but the marketer helps form the positioning through effective advertising and communication. Strong positioning differentiates your product from the competition and clearly tells the consumer how it will fulfill their needs better than other products on the market.
The marketing mix is one of the most important concepts in marketing. It thoroughly describes the product and the tools the company offers to consumers. The product includes the name, design, and features. The price includes the list price, discounts, and payment methods. Place is how a company will distribute their product and promotion is how they will let customers know about the product and its benefits.
The goal of all marketers is to build and maintain successful relationships with their consumers. This occurs by offering a product which has benefits that the consumer values . In addition, they see the value of those benefits as exceeding the cost of the product – the cost in terms of money, time, and opportunity costs. If a product delivers value, the company is likely to have a high level of customer satisfaction . They will trust the marketer and continue to purchase the product. In addition, they will tell others about the product and speak highly of it when asked or when reviewing the product online. A company with strong customer relationships will be able to achieve a high level of customer retention – their customers will not defect to the competitor or stop using their product. They will retain these customer over time and will be more profitable due to these valuable loyal customers.
It is best to think of value as the consumers’ perception of what they gained vs. what they gave up to purchase a product or use a service. Marketers are developing value propositions which are statements of the value their product offers to consumers. If the value propositions are clear and applicable to the consumer, they will understand the strength of the product benefits.
They create bundled meals and dollar menus to create value for price-conscious consumers. In addition, they create value to the health-conscious consumer by offering salads, fruit, and healthy options for Happy Meals. They communicate this value through television ads, in-store signage, and their website.
It is important to understand the role of customer expectations in customer satisfaction. If you fall below the consumer's expectations, then the consumer is not satisfied, but if you exceed expectations then you can create “customer delight.” When customers are highly satisfied, they can become loyalists who continue to purchase or apostles , who provide very positive word-of-mouth. When customers are disappointed, they can become defectors and move to the competition or terrorists , who spread negative word-of-mouth. Some dissatisfied customers become hostages and stay with the company but are very unhappy. Mercenaries are satisfied but are not really considered loyal and will move from company to company.
Customer trust is closely related to customer satisfaction. Trust in a company helps build loyalty. Consumer trust differs based on the media and the source of the message. This is seen in advertising where customers trust word-of-mouth much more than marketing messages that are from the marketer.
Customer retention is an important strategy to all marketers. The goal is to make customers stay with your company and generate positive word of mouth about your service and products. The Internet and cell phones have helped marketers maintain closer relations with their consumers and have opened easier channels for the customer to contact the company if they have questions, problems, or suggestions.
These are the top 10 out of the 20 companies listed in Table 1.2 in the text. These companies have achieved a high level of trust with their customers if they are on this list.
You are probably familiar with segmentation based on demographics, such as age and gender. Another common segmentation scheme used by marketers is to segment customers by their profitability to the firm. With this method, marketers can offer higher-level services to their platinum customers who are more valuable to the marketer, more likely to try new offerings, and are often not price sensitive.
This is a portion of Table 1.3 from the text, which highlights the difference between the traditional marketing concept versus value-and-retention-focused marketing . The full details of this comparison can be found in the textbook.
The impact of digital technologies is tremendous. Not only has the computer changed the way companies transact with customers, but there are changes from cell phones, smart phones, and cable television. Think of how you see marketing messages if you are watching a movie through on-demand or playing an online video game. Marketers can now transact in a one-to-one relationship with customers – offering product, prices, and messages that are tailored for that consumer. By gathering data on the consumer, the marketer has more information to tailor these offers and communication messages. The consumer has more power because they have more information on competing products, prices, and reviews on product performance. This gives them more choices and more bargaining power with the marketer.
We all know how important our cell phones are to our daily functioning. We have already seen penetration of devices with better applications and screens through the iPhone and BlackBerry products. This will continue to grow in the near future and marketers’ challenge is to determine how to best use these devices to reach consumers. This web link takes you to a great site called “Marketing Charts.” It has data on all sorts of marketing-related information, including interactive and mobile phone use.
Consumer Behavior as a field of study emerged in the late 1960s. As you study consumer behavior this semester, you will realize the importance of all these fields. Given huge economic shifts in the world economy beginning in 2008, it is important to realize the effect of economic changes on the behavior of consumers.
This model will guide your studies of consumer behavior. The input stage includes sources of information to the consumer – how they learn and are influenced by the marketer and their environment. The process stage ties to the decision-making process the consumer undergoes when considering a purchase. It moves from the inputs to the psychological factors involved in recognizing a need, searching for information, and evaluating alternatives. The output stage involves the actual purchase and the post-purchase evaluation. This post-purchase evaluation ties to the satisfaction topics discussed earlier in this presentation and the importance of customer loyalty to marketing’s profitability.
CHAPTER ONEConsumer Behavior:Meeting Changes and Challenges
Learning Objectives1. To Understand What Consumer Behavior Is and the Different Types of Consumers.2. To Understand the Relationship Between Consumer Behavior and the Marketing Concept, the Societal Marketing Concept, as Well as Segmentation, Targeting, and Positioning.3. To Understand the Relationship Between Consumer Behavior and Customer Value, Satisfaction, Trust, and Retention.4. To Understand How New Technologies Are Enabling Marketers to Better Satisfy the Needs and Wants of Consumers.Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 2
Learning Objectives (continued)5. To Understand How Marketers Are Increasingly Able to Reach Consumers Wherever Consumers Wish to Be Reached.6. To Understand How the World’s Economic Condition Is Leading to Consumption Instability and Change.7. To Understand the Makeup and Composition of a Model of Consumer Behavior.8. To Understand the Structure of This BookCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 3
To Which Segment of Consumers Will This Ad Appeal?Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 4
A Segment of Consumers Who are Environmentally ConcernedCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 5
Consumer Behavior• The behavior that consumers display in searching for, purchasing, using, evaluating, and disposing of products and services that they expect will satisfy their needs.Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 6
Two Consumer EntitiesCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 7
Development of the Marketing ConceptCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 8
Production Orientation• From the 1850s to the late 1920s• Companies focus on production capabilities• Consumer demand exceeded supplyCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 9
Sales Orientation• From the 1930s to the mid 1950s• Focus on selling• Supply exceeded customer demandCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 10
Marketing Concept• 1950s to current - Focus on the customer!• Determine the needs and wants of specific target markets• Deliver satisfaction better than competitionCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 11
Discussion Questions1. What two companies do you believe grasp and use the marketing concept?2. Why do you believe this?Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 12
Societal Marketing Concept • Considers consumers’ long-run best interest • Good corporate citizenshipCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 13
The Marketing Concept Embracing the Marketing Concept • Consumer Research • The process and tools • Segmentation used to study consumer • Market Targeting behavior • PositioningCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 14
The Marketing Concept Implementing the Marketing Concept • Consumer Research • Process of dividing the • Segmentation market into subsets of • Market Targeting consumers with common needs or • Positioning characteristicsCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 15
Discussion Questions1. What products that you regularly purchase are highly segmented?2. What are the different segments?3. Why is segmentation useful to the marketer for these products?Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 16
The Marketing Concept Implementing the Marketing Concept • Consumer Research The selection of one or • Segmentation more of the segments • Market Targeting identified to pursue • PositioningCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 17
The Marketing Concept Implementing the Marketing Concept • Consumer Research • Developing a distinct image for the product in the mind of the • Segmentation consumer • Market Targeting • Successful positioning includes: • Positioning – Communicating the benefits of the product – Communicating a unique selling propositionCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 18
The Marketing MixCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 19
Customer Value, Satisfaction, Trust, and RetentionCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 20
Successful RelationshipsValue, Satisfaction, • Defined as the ratioTrust, and Retention between the customer’s • Customer Value perceived benefits and the • Customer resources used to obtain Satisfaction those benefits • Customer Trust • Perceived value is relative and subjective • Customer Retention • Developing a value proposition is criticalCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 21
Discussion Questions• How does McDonald’s create value for the consumer?• How do they communicate this value?Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 22
Successful RelationshipsValue, Satisfaction,Trust, and Retention • The individuals perception • Customer of the performance of the Value product or service in • Customer relation to his or her Satisfaction expectations. • Customer • Customer groups based on Trust loyalty include loyalists, • Customer apostles, defectors, Retention terrorists, hostages, andCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall mercenaries Chapter One Slide 23
Successful RelationshipsValue, Satisfaction,Trust, and Retention • Establishing and • Customer Value maintaining trust is • Customer essential. Satisfaction • Trust is the • Customer Trust foundation for • Customer Retention maintaining a long- standing relationship with customers.Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 24
Successful RelationshipsValue, Satisfaction, • The objective of providingTrust, and Retention value is to retain highly satisfied customers. • Customer Value • Loyal customers are key • Customer Satisfaction – They buy more products • Customer Trust – They are less price sensitive • Customer Retention – Servicing them is cheaper – They spread positive word of mouthCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 25
Top 10 Ranked U.S. Companies in Terms of Consumers’ Trust and Respect of Privacy Table 1.2 Top 10 Companies • American Express • eBay • IBM • Amazon • Johnson & Johnson • Hewlett-Packard • U.S. Postal Service • Procter and Gamble • Apple • NationwideCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 26
Customer Profitability-Focused Marketing• Tracks costs and revenues of individual consumers• Categorizes them into tiers based on consumption behavior• A customer pyramid groups customers into four tiers Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 27
THE TRADITIONAL MARKETING CONCEPT VALUE- AND RETENTION-FOCUSED MARKETINGMake only what you can sell instead of trying Use technology that enables customers toto sell what you make. customize what you make.Do not focus on the product; focus on the Focus on the product’s perceived value, as wellneed that it satisfies. as the need that it satisfies.Market products and services that match Utilize an understanding of customer needs tocustomers’ needs better than competitors’ develop offerings that customers perceive asofferings. more valuable than competitors’ offerings.Research consumer needs and characteristics. Research the levels of profit associated with various consumer needs and characteristics.Understand the purchase behavior process Understand consumer behavior in relation toand the influences on consumer behavior. the company’s product.Realize that each customer transaction is a Make each customer transaction part of andiscrete sale. ongoing relationship with the customer. Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 28
Impact of Digital TechnologiesCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 29
The Mobile Consumer Penetration of Internet Usage Among Mobile• Wireless Media Subscribers in 16 Countries - FIGURE 1.3 Messages will expand as: – Flat-rate data traffic increases – Screen image quality is enhanced – Consumer-user experiences with web applications improveCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 30
Consumer Behavior Is InterdisciplinaryCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 31
A Simple Model of Consumer Decision Making - Figure 1.4Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 32