Chapter 1 Consumer Behavior: Its Origins and Strategic Applications

Chapter Outline

• Overview of Consumer Behavior• The Marketing Concept• The Marketing Mix and Relationships• Digital Technologies• Societal Marketing Concept• A Simplified Model of Consumer Decision Making

Consumer BehaviorThe behavior that consumers display in searching for, purchasing, using, evaluating, and disposing of products and services that they expect will satisfy their needs.

Personal ConsumerThe individual who buys goods and services for his or her own use, for household use, for the use of a family member, or for a friend.

Organizational ConsumerA business, government agency, or other institution (profit or nonprofit) that buys the goods, services, and/or equipment necessary for the organization to function.

Development of the Marketing Concept

The Production Concept• Assumes that consumers are interested primarily in product availability at low prices• Marketing objectives:

– Cheap, efficient production– Intensive distribution– Market expansion

The Product Concept• Assumes that consumers will buy the product that offers them the highest quality, the

best performance, and the most features• Marketing objectives:

– Quality improvement– Addition of features

• Tendency toward Marketing Myopia

The Selling Concept• Assumes that consumers are unlikely to buy a product unless they are aggressively

persuaded to do so• Marketing objectives:

– Sell, sell, sell• Lack of concern for customer needs and satisfaction

The Marketing Concept• Assumes that to be successful, a company must determine the needs and wants of specific

target markets and deliver the desired satisfactions better than the competition• Marketing objectives:

– Make what you can sell– Focus on buyer’s needs

Implementing the Marketing Concept

Consumer Research• The process and tools used to study consumer behavior• Two perspectives:

– Positivist approach– Interpretivist approach

Segmentation• Process of dividing the market into subsets of consumers with common needs or

characteristicsTargetingThe selection of one or more of the segments to pursuePositioning

• Developing a distinct image for the product in the mind of the consumer• Successful positioning includes:

– Communicating the benefits of the product– Communicating a unique selling proposition

The Marketing Mix• Product• Price• Place• Promotion

Successful Relationships

Value, Satisfaction, and RetentionCustomer Value

• Defined as the ratio between the customer’s perceived benefits and the resources used to obtain those benefits

• Perceived value is relative and subjective• Developing a value proposition is critical

Customer Satisfaction• The individual's perception of the performance of the product or service in relation to his

or her expectations.• Customers identified based on loyalty include loyalists, apostles, defectors, terrorists,

hostages, and mercenariesCustomer Retention

• The objective of providing value is to retain highly satisfied customers.• Loyal customers are key

– They buy more products– They are less price sensitive– They pay less attention to competitors’ advertising– Servicing them is cheaper– They spread positive word of mouth

Impact of Digital Technologies• Consumers have more power and access to information• Marketers can gather more information about consumers• The exchange between marketer and customers is interactive and instantaneous and goes

beyond the PC.• Marketers must offer more products and services

Societal Marketing ConceptMarketers adhere to principles of social responsibility in the marketing of their goods and services; that is, they must endeavor to satisfy the needs and wants of their target markets in ways that preserve and enhance the well-being of consumers and society as a whole.Consumer Behavior Is Interdisciplinary

• Psychology • Sociology • Social psychology• Anthropology• Economics

A Simplified Model of Consumer Decision Making – Figure 1-1

THE HIERARCHY OF EFFECTS AWARENESS: Consumers learn the brand name and product attributes. INTEREST: Consumers relate the product benefits to their own needs. EVALUATION: Consumers compare the goods with existing alternatives. TRIAL: Consumers obtain direct or vicarious product experience. ADOPTION: Consumers choose the innovation as a permanent solution

Selected Concepts in Consumer Behavior Involvement and Buying Decisions Consideration Set How Preferences are Formed

InvolvementThe degree of importance the consumer accords to the product class or its purchase

Factors Affecting Inclusion in Consideration Set Top-of-mind awareness - recall

experience - trial, previous purchase, habitual use brand equity

Distribution Shelf space and location Shelf tags, displays and other attention-getting devices

Nature of the set goal-driven Taxonomic (classification of options)

How Preferences are Formed Preference for a product reflects the customer’s expectation of its ability to satisfy

important wants and needsPreference depends on …

4 the relative importance of each attribute (weight)4 the evaluation of the product on each attribute (belief)