BB Chapter One: Consumer Behavior and Marketing Strategy

Chapter One:Consumer Behavior and

Marketing Strategy

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Welcome to Consumer Behaviour

• Why study consumer behaviour (CB)?

• What is consumer behaviour?• How does it affect marketing strategy?

The Text Required

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For information:

• This Australian Edition is based on the main US Edition:

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Subject objectives

• Knowledge and understanding– Theories working model of CB– Implications for strategic marketing decisions– A focus on marketing decisions

• Communication skills– Increase your skills in developing and presenting

ideas orally and in writing

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The marketing car

Marketing manager

Advertising

Distribution

Market research

Consumer behaviour‘the engine of marketing’

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Overview of the chapter:

1. Studying the consumer is important for marketers2. Implications of consumer behavior for marketing

strategy3. Components of a consumer behavior audit4. Relevance of consumer behavior for non-profit

organizations, government agencies or consumer groups

5. A working model of consumer behavior

Introductory chapter

• Is usually the most important

• Provides an overview of what’s in store• Bird’s-eye view of the subject

• Important to see the linkages between BB and Marketing Strategy

• (note all the past year examination questions require explanation of how the BB concept being tested is linked to marketing strategy)

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Definitions of consumer behaviour

• The dynamic interaction of cognition, behaviour and environmental events by which human beings conduct the exchange aspects of their lives(American Marketing Association)

• A discipline dealing with how and whyconsumers purchase (or don’t purchase) products and services.(Neal et al.)

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Definitions of consumer behaviour (cont.)

• Those behaviours performed by decision-making units in the purchase, usage and disposal of goods and services (Kotler & Levy)

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The Meaning of ConsumptionThe Meaning of Consumption

Consumption frequently has deep meaning for the consumer!

Figure 1.1 Multiple influences on consumer behavior

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Demographics and household structure

Understanding Consumer Behavior

Needs, emotions, values and

personalities

Group influences

Purchase and use behavior

Information processing

REGULATORY POLICY

To protect consumers

MARKETING STRATEGY

To satisfy target markets

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Marketing decisions

At each stage in this course you will be required to consider the importance of consumer behaviour knowledge in the development of marketing strategy.

Marketing decisions are based on:

• Market segmentation• Product positioning• Marketing mix

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Consumer behaviour is product-person-situation specific

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Consumer behaviour is product-person-situation specific

• Product specific– Depends on the nature of the product

• Person-individual– Different customers behave differently due to

needs, personalities and values

• Situation– Buying behaviour is dependent on the given

situation

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The Nature of Consumer Behavior

Situations Situations and Consumer Decisionsand Consumer Decisions

Consumer decisionsConsumer decisionsresult from perceived problems and opportunities. Consumer problems arise in specific situations and the nature of the situation influences the resulting consumer consumer behavior.behavior.

Using Outdoor Media to Trigger Problem RecognitionUsing Outdoor Media to Trigger Problem Recognition

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Consumer behaviour and marketing strategy

• Positioning strategy• Market segmentation

• New products• New market applications

• Global marketing• Marketing mix

• Consumerism • Non-profit marketing

Read pages 10 to 13 from the text

The consumer behavior audit

• Read Table 1.1 (pages 13-17)• Evaluate how each area of marketing is

connected to the understanding of consumer buying behavior

• You can use this table as a checklist for understanding the key issues in your group project

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How consumer influences drive marketing decisions

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Consumer lifestyle and consumer decisions

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An overview of consumer behaviour

• Consumers’ needs/attitudes influence consumption decisions

• These are reflected in consumer choices

• In turn, consumers respond to:– Reduce, maintain or enhance their lifestyle

• Consumer lifestyle - a basis for understanding consumption

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Consumer decision process

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Consumer decision process

• Consumers are problem solvers

In a given situation the decision process involves:

1. Problem recognition2. Information search3. Evaluation and selection4. Store choice and purchase5. Post-purchase processes

Decision vary according to situations

• See Table 1.2• Consumer decision making for high versus

low involvement purchases

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Read overview of internal and external influences

• Read pages 21- 25

• Provides an early overview of the chapters to come in later lectures

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The Nature of Consumer Behavior

External InfluencesExternal Influences

The following are the major external influences:

• Culture

• Demographics and social stratification

• Ethnic, religious, and regional subcultures

• Families and households

• Groups

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The Nature of Consumer Behavior

Internal InfluencesInternal Influences

Internal influences include:

• Perception

• Learning

• Memory

• Motives

• Personality

•Emotions

•Attitudes

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The Nature of Consumer Behavior

SelfSelf--Concept and LifestyleConcept and Lifestyle

SelfSelf--conceptconcept is the totality of an individual’s thoughts and feelings about oneself.LifestyleLifestyle is how one lives, including the products one buys, how one uses them, what one thinks about them, and how one feels about them.

There are also the B2B aspects

• The buyer in many cases may not be an individual but rather an organization

• Business-to- business organizational behavior

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Overall model of consumer behaviour

APPLICATION OF MARKETING STRATEGY

The remaining slides outline the key issues in marketing strategy. Understand how consumer behavior is linked to the development of marketing strategies

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Applications of Consumer BehaviorApplications of Consumer Behavior

1.1. Marketing StrategyMarketing Strategy

2.2. Regulatory PolicyRegulatory Policy

3.3. Social MarketingSocial Marketing

4.4. Informed IndividualsInformed Individuals

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Applications of Consumer BehaviorApplications of Consumer Behavior

Marketing Strategy

�Marketing strategies and tactics are based on explicit or implicit beliefs about consumer behaviorconsumer behavior.

�Decisions based on explicit assumptions and sound theory and research are more likely to be successful than are decisions based solely on implicit intuition.

�Knowledge of consumer behaviorconsumer behavior can be an important competitive advantage and can greatly reduce the odds of bad decisions and market failures!

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Applications of Consumer BehaviorApplications of Consumer Behavior

Regulatory Policy

�Various regulatory bodies exist to develop, interpret, and/or implement policies designed to protect and aid consumer.

�Effective regulation of many marketing practices requires an extensive knowledge of consumer behaviorconsumer behavior.

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Applications of Consumer BehaviorApplications of Consumer Behavior

Social Marketing

�Social marketing is the application of marketing strategies and tactics to alter or create behaviors that have a positive effect on the targeted individuals or society as a whole.

�As is true for commercial marketing strategy, successful social marketing strategy requires a sound understanding of consumer behaviorconsumer behavior.

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Social MarketingSocial Marketing-- Government CampaignsGovernment Campaigns

Speak Mandarin “low crime doesn’t mean no crime

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Applications of Consumer BehaviorApplications of Consumer Behavior

Informed Individuals

�Most economically developed societies are referred to as consumption societies. Most individuals in these societies spend more time engaged in consumption than any other activity, including work or sleep.

�Knowledge of consumer behaviorconsumer behavior can enhance our understanding of our environment and ourselves.

�Such an understanding is essential for sound citizenship, effective purchasing behavior, and reasoned business ethics.

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Marketing Strategy and Consumer Marketing Strategy and Consumer BehaviorBehavior

Customer valueCustomer value is the difference between all the benefits derived from a total product and all the costs of acquiring those benefits.Providing superior customer value requires the organization to do a better job of anticipating and reacting to customer needs than the competition does.

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Marketing Strategy and Consumer BehaviorMarketing Strategy and Consumer Behavior

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Marketing Strategy and Consumer Marketing Strategy and Consumer BehaviorBehavior

Marketing Strategy Marketing Strategy begins with an analysis of the market the organization is considering, requiring a detailed analysis of the:

•organization’s capabilities

•strengths and weaknesses of competitors

•economic and technological forces

•current and potential customers

Step 1. Market AnalysisStep 1. Market Analysis

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Marketing Strategy and Consumer Marketing Strategy and Consumer BehaviorBehavior

On the basis of the consumer analysis, the organization identifies groups of individuals, households, or firms with similar needs. These market segments are described in terms such as demographics, media preferences, geographic location, etc. Management then selects the segment(s) to target.

Step 2. Market SegmentationStep 2. Market Segmentation

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Marketing Strategy and Consumer Marketing Strategy and Consumer BehaviorBehavior

Marketing StrategyMarketing Strategy seeks to provide the customer with more value than the competition, while still producing a profit for the firm. Marketing strategy is formulated in terms of the marketing mix, which involves determining the product features, price, communications, distribution and services that will provide customers with superior value, resulting in the total total productproduct.

Step 3. Marketing StrategyStep 3. Marketing Strategy

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Marketing Strategy and Consumer Marketing Strategy and Consumer BehaviorBehavior

The total product total product is presented to the target market, which is consistently engaged in processing information and making decisions designed to maintain or enhance its lifestyle or performance.

Many firms are wrapping experiences around their traditional products and service in order to sell them better. For example, retailers have been moving to lifestyle lifestyle centerscenters in an effort create a more pleasing shopping experience.

Step 4. Consumer Decision ProcessStep 4. Consumer Decision Process

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Marketing Strategy and Consumer Marketing Strategy and Consumer BehaviorBehavior

SocietySociety – the cumulative effect of the marketing process affects economic growth, pollution, social problems.FirmFirm – reaction of the target market to the total product produces an image of the product/brand/organization.IndividualIndividual – the process results in some level of need satisfaction, financial expenditure, attitude development/change, and/or behavioral changes.

Step 5. OutcomesStep 5. Outcomes

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Market Analysis ComponentsMarket Analysis Components

1.1. The ConsumersThe Consumers

2.2. The CompanyThe Company

3.3. The CompetitorsThe Competitors

4.4. The ConditionsThe Conditions

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Market Analysis Components

The ConsumersIt is not possible to anticipate and react to customers’ needs and desires without a complete understanding of consumer consumer behaviorbehavior. Discovering customers’ needs is a complex process, but it can often be accomplished by marketing research.

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Market Analysis Components

The CompanyA firm must fully understand its own ability to meet customers needs. This involves evaluating all aspects of the firm including:

• financial condition• general managerial skills• production capabilities• R&D capabilities• technological sophistication• reputation, and • marketing skills

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Market Analysis Components

The CompetitorsIt is not possible to consistently do a better job of meeting customer needs than the competition without a thorough understanding of the competition’s capabilities and strategies.This requires the same level of knowledge of a firm’s key competitors that is required on one’s own firm.

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Market Analysis Components

The Conditions

The state of the economy, the physical environment, government regulations, and technological developments affect consumer needs and expectations as well as company and competitor capabilities.

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Market Segmentation

Market segmentationMarket segmentation is a portion of a larger market whose needs differ from the larger market.

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Market SegmentationMarket Segmentation

Market Segmentation Involves Four Steps:

1. Identifying Product-Related Need Sets

2. Grouping Customers with Similar Need Sets

3. Describing Each Group

4. Selecting an Attractive Segment(s) to Serve

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Market Segmentation

ProductProduct--Related Need SetsRelated Need Sets

Organizations approach market segmentationmarket segmentation with a set of current and potential capabilities. The term need setneed set is used to reflect the fact that most products in developed economies satisfy more than one need.Customer needs are not restricted to product features but also include types and sources of product information, outlets where the product is available, product price, the image of the product or firm, and even where and how the product is produced.

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Market Segmentation

Customers with Similar Need SetsCustomers with Similar Need Sets

The next step is to group consumers with similar need sets.

These consumers can be grouped into one segment as far as product features and perhaps even product image are concerned despite sharply different demographics.

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Market Segmentation

Description of Each GroupDescription of Each Group

Once consumers with similar need nets are identified, they should be described in terms of demographics, lifestyles, and media usage.In order to design an effective marketing program, it is necessary to have a complete understanding of the potential customers.

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Market Segmentation

Attractive Segment(s) to ServeAttractive Segment(s) to Serve

Target marketTarget market - segment(s) of the larger market on which we will focus our market effort. This decision is based on our ability to provide the selected segment(s) with superior customer value at a profit.Each market segment requires its own marketing strategy.

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Market SegmentationMarket Segmentation

Market Segment Attractiveness WorksheetMarket Segment Attractiveness Worksheet

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Marketing StrategyMarketing Strategy

�� Marketing Strategy Marketing Strategy is the answer to the question: How will we provide superior customer value to our target market?

� This requires the formulation of a consistent marketing marketing mixmix, which includes the

1.1. ProductProduct

2.2. PricePrice

3.3. CommunicationsCommunications

4.4. DistributionDistribution, and

5.5. ServicesServices

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Marketing Strategy

The ProductThe Product

A product is anything a consumer acquires or might acquire to meet a perceived need.Consumers are generally buying need satisfaction, not physical product attributes.

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Marketing Strategy

CommunicationsCommunications

Marketing communicationsMarketing communications include advertising, the sales force, public relations, packaging, and any other signals that the firm provides about itself and its products.

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Marketing Strategy

PricePrice

PricePrice is the amount of money one must pay to obtain the right to use the product.PricePrice sometimes serves as a signal of qualityConsumer costConsumer cost is everything the consumer must surrender in order to receive the benefits of owning/using the product.

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Marketing Strategy

DistributionDistribution

DistributionDistribution means having the product available where target customers can buy it. This is essential to the product’s success.Good channel decisions require a sound knowledge of where target customers shop for the product.

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Marketing Strategy

ServiceService

Service Service refers to auxiliary or peripheral activities that are performed to enhance the primary product or primary service.Auxiliary services cost money to provide, so it is essential that the firm furnish only those servicesservices that provide value to the target customers.

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Consumer DecisionsConsumer Decisions

The consumer decision process intervenes between the marketing strategymarketing strategy, as implemented in the marketing mixmarketing mix, and the outcomesoutcomes.

The firm can succeed only if consumers see a need that its product can solve, become aware of the product and its capabilities, decide that it is the best available solution, proceed to buy it, and become satisfied with the result of the purchase.

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OutcomesOutcomes

1.1. Firm OutcomesFirm Outcomes

2.2. Individual OutcomesIndividual Outcomes

3.3. Society OutcomesSociety Outcomes

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OutcomesOutcomes

Firm OutcomesFirm Outcomes

The product positionproduct position is the image of the product or brand in the consumer’s mind relative to competing products and brands.Sales are a critical outcome, as they produce the revenue necessary for the firm to continue in business.Customer satisfactionCustomer satisfaction remains a concern for marketers. Retaining customers requires that they be satisfied with their purchase and use of the product.

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OutcomesOutcomes

Creating Satisfied CustomersCreating Satisfied Customers

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OutcomesOutcomes

Individual OutcomesIndividual Outcomes

Need satisfactionNeed satisfactionThe most obvious outcome of the consumption processconsumption processfor an individual, whether or not a purchase is made, is some level of satisfaction of the need that initiated the consumption process.Injurious consumption, Injurious consumption, the dark side of consumer behavior, , occurs when individuals or groups make consumption decisions that have negative consequences for their long-run well-being.

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OutcomesOutcomes

Society OutcomesSociety OutcomesEconomic OutcomesEconomic OutcomesThe cumulative impact of consumers’ purchase decisions, including the decision to forgo consumption, is a major determinant of the state of a given country’s economy.Physical Environment OutcomesPhysical Environment OutcomesConsumers make decisions that have a major impact on the physical environments of both their own and other societies.Social WelfareSocial WelfareConsumer decisions affect the general social welfare of a society, including having a major impact on the overall quality of life in a society.