consumer behavior

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.

• Includes all the decisions a consumer makes when spending their time and money.

• What, when, where and how of consumer purchases are examined in consumer behavior.

• Individuals, households, families and groups influence the decisions we make.Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 2Chapter One Slide

Consumer Behavior

• Personal consumers buy goods and services for his or her own use, for the use of household, or as a gift for a friend.

• Organisational consumers include profit and not-for-profit businesses, government agencies and institutions, which buy products equipment and services in order to run their organisations.

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 3Chapter One Slide

Two Consumer Entities

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 4

Personal Consumer

• The 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 Consumer

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

Chapter One Slide

Development of the Marketing Concept


Production Orientation

Sales Orientation

Marketing Concept

Chapter One Slide


• From the 1850s to the late 1920s• Companies focus on production capabilities• Consumer demand exceeded supply



Sales Orientation

Marketing Concept

Chapter One Slide

Sales Orientation

• From the 1930s to the mid 1950s• Focus on selling• Supply exceeded customer demand



Sales Orientation

Marketing Concept

Chapter One Slide

Marketing Concept

• 1950s to current - Focus on the customer!• Determine the needs and wants of specific

target markets• Deliver satisfaction better than competition



Sales Orientation

Marketing Concept

Chapter One Slide

Societal Marketing Concept

• Considers consumers’ long-run best interest

• Good corporate citizenship

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 9

http://promomagazine.com/othertactics/causecht08.3.pdf

The Marketing Concept

• Consumer Research• Segmentation• Market Targeting• Positioning

• The process and tools used to study consumer behavior

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

Embracing the Marketing Concept

Chapter One Slide 10

http://www.acrwebsite.org/index.asp



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


Implementing the Marketing Concept




The selection of one or more of the segments identified to pursue






• 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

Marketing Mix


Customer Value, Satisfaction, Trust, and Retention


Successful Relationships

Customer value

High level of

customer satisfaction

Strong sense of

customer trust

Customer retention

Chapter One Slide


• Customer Value• Customer

Satisfaction• Customer Trust• Customer

Retention

• 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


Value, Satisfaction, Trust, and Retention



• Customer Value

• Customer Satisfaction

• Customer Trust• Customer

Retention

• The individual's perception of the performance of the product or service in relation to his or her expectations.

• Customer groups based on loyalty include loyalists, apostles, defectors, terrorists, hostages, and mercenariesCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall




• Customer Value



Retention

• completely satisfied customers are either loyalists who keep buying, or apostles whose experiences exceed their expectations and spread positive word of mouth

• Defectors feel neutral or merely satisfied and just likely to stop buying





• Customer Value



Retention

• Consumer terrorists have bad experiences and spread negative word of mouth

• Unhappy customers who stay with the company just because of monopolistic environment or low prices and have frequent complaints are hostages







Retention


• Establishing and maintaining trust is essential.

• Trust is the foundation for maintaining a long-standing relationship with customers.






Retention

• It is an important strategy • Goal is to make customers

stay with the company and generate positive word of mouth about your services and products

• Internet and mobile phones have helped businesses maintain closer relations with their consumers







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– Servicing them is

cheaper– They spread positive

word of mouth




Top 10 Ranked U.S. Companies in Terms of Consumers’ Trust and Respect of Privacy

Table 1.2Top 10 Companies

• American Express • eBay• IBM• Amazon• Johnson & Johnson• Hewlett-Packard• U.S. Postal Service• Procter and Gamble• Apple• Nationwide

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 26

Customer Profitability-Focused Marketing

• Common segmentation scheme used by marketers is to segment customers by their profitability to the firm

• 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



• Tracks costs and revenues of individual consumers

• Categorizes them into tiers based on consumption behavior

• A customer pyramid groups customers into four tiers


Platinum

Gold

Iron

Lead

Chapter One Slide


• Platinum tier includes heavy users who are not price sensitive and who are willing to try new offerings

• Gold tier customers are heavy users but are less profitable because they are more price sensitive, ask for more discounts and likely to buy from multiple sellers

• Spending volume and profitability of customers in the iron tier do net merit special treatment



• Lead tier customers actually cost company money because they claim more attention than is merited by their spending, tie up company resources and spread negative word of mouth


Copyright 2010 Pearson Education, Inc. publishing as Prentice HallChapter One Slide 28

THE TRADITIONAL MARKETING CONCEPT VALUE- AND RETENTION-FOCUSED MARKETING

Make only what you can sell instead of trying to sell what you make.

Use technology that enables customers to customize what you make.

Do not focus on the product; focus on the need that it satisfies.

Focus on the product’s perceived value, as well as the need that it satisfies.

Market products and services that match customers’ needs better than competitors’ offerings.

Utilize an understanding of customer needs to develop offerings that customers perceive as 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 and the influences on consumer behavior.

Understand consumer behavior in relation to the company’s product.

Realize that each customer transaction is a discrete sale.

Make each customer transaction part of an ongoing relationship with the customer.

Impact of Digital Technologies


Marketers

• More products and services through customization

• Instantaneous exchanges• Collect and analyze data

Consumers

• Power• Information• Computers, phones, PDA,

GPS, smart TV

Chapter One Slide

The Mobile Consumer

• Wireless Media Messages will expand as:– Flat-rate data traffic

increases– Screen image

quality is enhanced– Consumer-user

experiences with web applications improve


Penetration of Internet Usage Among Mobile Subscribers in 16 Countries - FIGURE 1.3

http://www.marketingcharts.com/

Consumer Behavior Is Interdisciplinary

Psychology

Sociology

Social psychologyAnthropology

Economics


Why Segmentation is Necessary

• Consumer needs differs

• Differentiation helps products compete

• Segmentation helps identify media

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall 32Chapter Three Slide

Positioning

The value proposition,

expressed through promotion, stating

the product’s or service’s capacity to deliver specific

benefits.


Criteria for Effective Targeting

Identifiable Sizeable

Stable Accessible

Congruent with the company’s objectives

and resourcesCopyright 2010 Pearson Education, Inc. Publishing as Prentice Hall 34Chapter Three Slide

Which Distinct Benefit Does Each of the Two Brands Shown in This Figure Deliver?


The Dentyne Ad’s Benefit is Fresh Breath and the Nicorette Ad is Whitening and Smoking Cessation


Bases for Segmentation


Discussion Questions

• Considering the largest bank in your college’s city or town:– How might consumers’ needs differ?– What types of products might meet their needs?– What advertising media makes sense for the

different segments of consumers?


Consumer-Rooted Segmentation Bases

Demographics

Geodemographic

Personality Traits

Lifestyles

Sociocultural


Demographic Segmentation

Age Gender

Marital Status Family Life-cycle

Income, Education, and

Occupation



• What types of marketers might segment according to social class?

• What ethical issues might marketers have when marketing to different social classes?


Geodemographic Segmentation

• Based on geography and demographics• People who live close to one another are

similar• “Birds of a feather flock together”


http://www.claritas.com/MyBestSegments/Default.jsp?ID=20&SubID=&pageName=ZIP+Code+Look-up

One PRIZM Segment - Table 3.4 (excerpt)

MOVERS & SHAKERS• 1.59 of U.S. households, Median household income: $95,372, Predominant employment:

Professional• Social group: Elite suburbs, Life stage group: Midlife success, Key education level: College

grad+• Adult age range: 35–64

CHARACTERISTICS• Movers & Shakers is home to America’s up-and-coming business class: a wealthy suburban

world of dual-income couples who are highly educated, typically between the ages of 35 and 54 and often with children. Given its high percentage of executives and white-collar professionals, there’s a decided business bent to this segment: Movers & Shakers rank number-one for owning a small business and having a home office.

LIFESTYLE TRAITS:• Go scuba diving/snorkeling, Plan travel on the Internet• Read PC Magazine, Listen to adult contemporary radio• Drive a Porsche


Personality Traits

• People often do not identify these traits because they are guarded or not consciously recognized

• Consumer innovators– Open minded– Perceive less risk in trying new things


Lifestyles

• Psychographics• Includes activities,

interests, and opinions

• They explain buyer’s purchase decisions and choices



• How might you differ from a person with similar demographics to yourself?

• How would this be important for marketers?


Two Views of Post-Retirement LifestyleTable 3.6 (excerpt)

AS AN OPPORTUNITY TO MAKE A NEW START• This group regards retirement as an exciting time. Work will have been

largely unrewarding, so the transition is seen as a freedom from the constraints of their former role. Retirement will invigorate such people and inspire them toward undertaking activities that work largely prevented them from pursuing.

AS A CONTINUATION OF THEIR PRE-RETIREMENT LIFESTYLE• To such people, retirement is not perceived as signaling a drastic change.

Work life has not been as unsatisfying as for others, hence its ending is not greeted with euphoria. There is, however, some satisfaction that retirement permits more opportunity to devote time to existing activities outside of their working role. The future is likely to see an increase in such activities but no real desire to engage in new ones.


VALS – Figure 3.4


http://www.sric-bi.com/VALS/presurvey.shtml

Socio-Cultural Values and Beliefs

• Sociological = group• Anthropological = cultural• Include segments based on– Cultural values– Sub-cultural membership– Cross-cultural affiliations


Consumption-Specific Segmentation Bases

Usage rate

Usage situation

Benefit segmentation

Perceived brand loyalty

Brand relationship


Consumption-Specific SegmentationUsage-Behavior

• Usage rate– Awareness status– Level of involvement


Consumption-Specific SegmentationUsage-Behavior

• Usage-situation segmentation– Segmenting on the basis of special occasions or

situations– Example : When I’m away on business, I try to

stay at a suites hotel.


Which Consumption-Related Segmentation Is Featured in This Ad?


This is an Example of a Situational Special Usage Segmentation.


Benefits Segmentation

• Benefits sought represent consumer needs• Important for positioning• Benefits of media

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Three Slide 28

Benefits Visiting Tourists Seek in National Park – Table 3.13 (excerpt)

Segment Description

Environmentalists Interested in an unpolluted, un-spoilt natural environmentand in conservation. Not interested in socializing, entertainment, or sports. Desire authenticityand less man-made structures and vehiclesin the park.

Want-it-all Tourists Value socializing and entertainment more thanconservation. Interested in more activities andopportunities for meeting other tourists. Do notmind the “urbanization” of some park sections.

Independent Tourists Looking for calm and unpolluted environment,exploring the park by themselves, and staying ata comfortable place to relax. Influenced by wordof mouth in choosing travel destinations.


Brand Loyalty and Relationships

• Brand loyalty includes:– Behavior– Attitude

• Frequency award programs are popular• Customer relationships can be active or passive• Retail customers seek:

– Personal connections vs. functional features• Banking customers seek:

– Special treatment– Confidence benefits– Social benefits


Implementing Segmentation Strategies

• Micro- and behavioral targeting– Personalized advertising messages– Narrowcasting• Email• Mobile

– Use of many data sources


http://www.google.com/prdhp?hl=en&tab=wf

Sample Acxiom Clusters - Table 3.16 (excerpt)

Shooting Stars• Still relatively young at a mean age of 36, and with top rankings for

income, college education, home value and net worth, these consumers have the world by the tail. Feeling financially secure with large investment portfolios, Shooting Stars spend their disposable Income making life a comfortable one, focusing on health, exercise, gourmet food, golf, and travel.

Tots & Toys• Two things—work and family—consume these professional working

couples. They’re putting their college degrees into action, climbing the corporate ladder for lucrative careers, while saving for their children’s education through do-it-yourself home improvements and trips to the zoo for entertainment. With time at a premium, it’s not surprising that the radio is the most relied-upon source for news and entertainment.


Implementing Segmentation Strategies

• Concentrated Marketing– One segment

• Differentiated– Several segments with individual marketing mixes

• Countersegmentation


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