customer behavior

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lecture material on consumer behavior online for e-business management students

customer behavior

  1. 1. CUSTOMER BEHAVIOR AND RELATIONSHIP MARKETING
  2. 2. CLASSIC ECONOMIC THEORY – PURCHASER TRIES TO ACHIEVE MAXIMUM BENEFITS WITH MINIMAL FINANCIAL, TIME AND ENERGY RESOURCES. It would be correct only when purchaser would be able to convert money amount to value he/she gets. Theory cannot explain the variety of consumer behavior and irrationality.
  3. 3. CUSTOMER PURCHASE PROCESS COMPLICATIONS COMPLICATIONS COMPLICATIONS COMPLICATIONS COMPLICATIONS
  4. 4. PROBLEM RECOGNITION • FUNCTIONAL NEEDS – what do I need? • PSYCHOLOGICAL NEEDS – what do I want? • The job of marketing specialist is to convert psychological need to functional one
  5. 5. INFORMATION SEARCH INTERNAL (inside your head) EXTERNAL ( internet, magazines, friends) RESEARCH CAN BE INFLUENCED BY SEVERAL FACTORS: – Is it worth to search? – Locus of control – Risk assessment A lot more information tojai Consumers are more active while searching
  6. 6. EVALUATION OF ALTERNATIVES What can be evaluated? PRICE BRAND APPEARANCE ACCESABILITY etc
  7. 7. THE MOMENT OF PURCHASE • IMPORTANT: not the last step of purchase process • CONTINUITY • SERVICE, GUARANTEES, WARRANTY
  8. 8. POST PURCHASE • • • • POST PURCHASE REASSURANCE COGNITIVE DISSONANCE SHOWING HOW TO USE THE PRODUCT CONSUMERS SHOULD NOT BE WORRIED THAT THEY SPENT TO MONEY
  9. 9. THIS PROCESS: – ONE WAY MARKETING COMMUNICATIONS, PUSHED TO THE CONSUMER – RELIED ON INFLUENCING DECISIONS AT TWO DISTINCT POINTS IN THE PURCHASE PROCESS - INFORMATION GATHERING AND AT THE POINT OF PURCHASE
  10. 10. THIS PROCESS: – ONE WAY MARKETING COMMUNICATIONS, PUSHED TO THE CONSUMER – RELIED ON INFLUENCING DECISIONS AT TWO DISTINCT POINTS IN THE PURCHASE PROCESS - INFORMATION GATHERING AND AT THE POINT OF PURCHASE
  11. 11. CONSUMER DECISION JOURNEY TODAY THE CONSUMER DECISION JOURNEY HAS MORPHED INTO A NON-LINEAR DECISION PROCESS THAT INVOLVES MULTIPLE INFORMATION TOUCH POINTS, VARIOUS INFLUENCERS, AND STRONG WOM AND FEEDBACK CULTURE. Each phase provides marketers with an opportunity to interact with consumers to influence purchase decisions, build brand loyalty, and engage in two-way conversations.
  12. 12. WHAT HAVE CHANGED? NOISE: The proliferation of media and products requires marketers to find new ways to get their brands included in the initial-consideration set that consumers develop as they begin their decision journey. Advertising or sales promotion alone cannot cut-through. TWO-WAY: A shift away from one-way communication — from marketers to consumers — toward a two-way conversation, requires that marketers have a more systematic way to satisfy customer demands and manage word-ofmouth. ALIGNMENT: Aligning all elements of marketing (strategy, spend, channels, and message) with the journey that a consumer undertakes when they make purchasing decisions. The moments of maximum influence. LOYALTY: The research identifies two different types of loyalty, this challenges companies to reinvent their retention or loyalty programmes and the way they manage the customer experience post purchase
  13. 13. (1) Consideration Set CONSUMERS ARE SEEKING, PULLING, INFORMATION INTO THEIR DECISION MAKING PROCESS (RATHER THAN RELYING ON MESSAGES THAT ARE PUSHED BY A BRAND) 2/3 OF TOUCH POINTS INVOLVED CONSUMER DRIVEN MARKETING ACTIVITIES: – – – – ONLINE PRODUCT REVIEWS WORD-OF-MOUTH RECOMMENDATIONS FROM SOCIAL NETWORKS IN-STORE INTERACTIONS PRIOR EXPERIENCES WITH THE BRAND INFLUENCE OF THESE CHANNELS GROWN (DUE TO ENTRANCE OF DIGITAL MARKETING)
  14. 14. (2) Active Evaluation THE CIRCULAR DECISION JOURNEY ALSO ALLOWS FOR CONSUMERS TO CONSTANTLY RE-EVALUATE EARLIER DECISIONS CAR BUYING PROCESS CONSUMERS BEGIN EVALUATING OPTIONS WITH A SPECIFIC SET OF MODELS IN MIND > AS THEY RESEARCH, THEY EXPAND THEIR CONSIDERATION SET (FROM 4 TO 6 CARS) SO, WHERE THE LINEAR MODEL FOCUSED ON REDUCING BRAND/PRODUCT CHOICES, THE CIRCULAR JOURNEY ALLOWS CONSUMER’S CONSIDERATION SET TO FLUCTUATE DURING THE EVALUATION PROCESS.
  15. 15. WHERE IT COUNTS - MOST INFLUENTIAL TOUCH POINTS
  16. 16. (3) Moment of purchase Throughout the circular decision making process, consumers are bombarded with information from a variety of sources. Consequently, their actual decision is made at the point of purchase. In their article The Consumer Decision Journey, McKinsey found that brands in the initial consideration set are up to three times more likely to be purchased than those brands that are not in the consideration set.
  17. 17. (4) Post-purchase • • Given the circular nature of the consumer decision making process, monitoring WOM and other digital conversations is essential to ensure the brand promise is being met throughout the consumer experiences, as well as protect brand equity. The strong and influential nature of feedback, through various digital tools, offers brands opportunities to provide timely, proactive post-purchase service that can position a brand more favorably in the consumers consideration set during future decision journeys. As the Internet gains further in-home penetration and dependency, consumers will continue to evolve their decision making process, spurring two-way conversation between the consumer and brands. This new decision journey process challenges marketers to be consistent and relevant to their target consumer across all media channels. Additionally, marketers need build brand awareness to break through the proliferation of media and products to gain initial consideration. Finally, marketers must establish systematic ways and methods for managing consumer demands and word-of-mouth.
  18. 18. ZMOT (Zero moment of truth) model TRADITIONAL MARKETING MODEL P&G first realised the idea of ‘moments of truth’ in 2005, they said that the first moment was “in front of the shelf,” and that the “second moment of truth” was gained through product trial and experience.
  19. 19. The aim of ZMOT is to explain how the consumer’s research and decision-making journey on the way to purchase is now fundamentally different, that there’s a step prior to P&G’s first moment of truth, called ZMOT.
  20. 20. What to do? 1. 2. 3. 4. Align – Marketers will need to align their resources with “where consumers spend their time.” The “evaluate” and “advocate” stages will likely become more significant to consumers than the “consider” and “buy” stages, and marketers will have to respond accordingly. Link – Marketers need to ensure that every message about a product or service is consistent across every touch-point or channel. Lock – Marketers must “lock in” a customer’s attention by providing direct, opt-in channels, such as email promotions, Facebook and Twitter feeds, and apps that truly benefit the customer. This means allocating resources to content that engages the customer at every stage of their journey. Loop – Marketers must accommodate that process with a continuous loop that mines data, uses it to create valuable, relevant content, and then analyses consumer response. Edelman uses Amazon as a classic example: The customers can rate products, which it shares with other customers; Amazon then analyses and uses that information to create personalised recommendations. Source: Edelman, 2011 http://csi.mckinsey.com/Knowledge_by_region/Global/consumerengage.aspx
  21. 21. http://www.youtube.com/watch?v=F3CBWI4ZYbQ
  22. 22. Centaur
  23. 23. TRADITIONAL CONSUMER CENTAUR CYBER CONSUMER A HYBRID CONSUMER: A COMBINATION OF TRADITIONAL AND CYBER, RATIONAL AND EMOTIONAL, AND WIRED AND PHYSICAL.
  24. 24. BASIC PROPOSITIONS 1. 2. THE NEW TECHNOLOGIES DO NOT REPLACE THE OLD. PEOPLE ARE COMPLEX, RETAINING THE SAME ENDURING HUMAN NEEDS EVEN AS THEY ADAPT TO NEW TECHNOLOGIES AND BEHAVIORS.
  25. 25. WHO IS THE CENTAUR? ONLINE POPULATION – EARLY INTERNET USERS: “GEEKY WHITE GUYS” – THE ONLINE POPULATION IS MORE LIKE THE OFFLINE, GENERAL POPULATION  DIVERSE SEGMENTS – NOT BASED ON DEMOGRAPHIC FACTORS, BUT RATHER ON ONLINE EXPERIENCES, WIRED LIFESTYLE, TIME PRESSURE, PURCHASES FROM CATALOGS HETEROGENEOUS – GENERATION Y
  26. 26. Types of “centaurs” 1. 2. 3. 4. Connectors: New users; more offline purchase Samplers: Light users Simplifiers: Efficiency seekers Routiners: Go online for information but not primarily interested in shopping 5. Surfers: Heavy users; spend lots of time online; Searching multiple domains 6. Bargainers: Online price comparison; Shop for the best buy 7. Funsters: Looking for information in entertainmentoriented domains McKinsey Report
  27. 27. Segment Important Facts Online Time 7 hours per month. Simplifiers 50% of total online purchases. 49% have been online for over 5 years. Longest online tenure. Surfers 8% of active user population. 32% of online time usage—far more than any other segment. More than the average 9.8 hours per month. Less than the average of 9.8 per month. Connectors 36% active user population. 40% have been online under two years. 42% have made online purchases. Bargainers 8% of active user population 52% are eBay users Less than the average of 9.8 per month. Routiners 6% have purchased online. They visit fewer domains. 9.8 hours per month. Sportsters 4% of active user population. 7.1 hours per month. User Segments Based on Online Viewing Behavior Source: Adapted from McKinsey and MediaMetrix study
  28. 28. MYTHS OF THE CYBERCONSUMER 1. 2. 3. 4. 5. 6. 7. PEOPLE DON’T WANT TO BE TROUBLED WITH SHOPPING EFFICIENCY IS ALL THAT MATTERS CONSUMERS WANT TO GET THE BEST PRICE CONSUMERS ARE EITHER ONLINE OR OFFLINE EASE OF VISITING STORES WILL LEAD TO MORE PURCHASING THE INTERNET IS INHERENTLY FASCINATING AND ATTRACTIVE EVERYTHING HAPPENS ONLINE
  29. 29. FACTORS INFLUENCING BUYING PROCESS PSYCHOLOGICAL SOCIAL RANDOM Motive Past experience Opinion Culture Social class Family Friends Influence groups Environment Time Reason for buying Mood
  30. 30. * MASLOW HIERARCHY OF NEEDS
  31. 31. * SIMPLIFIED VERSION
  32. 32. PARADOX OF CHOICE http://videos.howstuffworks.com/ted-conferences/1819-barryschwartz-on-consumer-behavior-video.htm
  33. 33. RELATIONSHIP MARKETING RELATIONSHIP MARKETING IS A STRATEGY DESIGNED TO FOSTER CUSTOMER LOYALTY, INTERACTION AND LONG-TERM ENGAGEMENT. THIS CUSTOMER RELATIONSHIP MANAGEMENT (CRM) APPROACH FOCUSES MORE ON CUSTOMER RETENTION THAN CUSTOMER ACQUISITION. Contrast to transactional marketing that focuses on single, "point of sale" transactions
  34. 34. IN-CLASS ASSIGNMENT • Reading • Presentation of case studies
  35. 35. Relationship Lifecycle Baines, et al, 2011, p. 568
  36. 36. Loyalty Ladders Traditional Marketing Partners Members Members Advocates Advocates Clients Clients Customers Relationship Marketing Partners Repeat Cust 1st Time Cust Prospects Prospects Suspects Payne et al 1995 Kotler 1997 Baines, et al 2011
  37. 37. 4 steps to successful marketing strategy Understanding customer needs and online behaviour (market research, data mining, web analytics) Formulate a strategy to fill needs Implement effectively and efficiently (web usability, stickiness, advertising, search engine optimization, email marketing, pricing, distribution, product development) Build trusting relationships with customers

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