Consumer Behaviour Part I: The Consumer in Context

Preparation for the Consumer Behaviour exam at Edinburgh Business SchoolContent extracted from the ‘Consumer Behaviour’ text book by David A. Statt

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Module 1: People as Consumers

Module 2: Market Segmentation

Module 3: New Products and Innovations

PART I The Consumer in Context

...and we are all consumers.

Studying people as consumers

Positivist approachFocuses on predicting what the consumer will do under certain specified conditions. Uses scientific research.

Reductionist approachAll human behavior can be reduced to consumerism.

Interpretivist approachPeople are not always rational.Reality is an individual’s subjective experience.Cause and effect can’t be isolated.

Module 1: People as Consumers

Consumer

A person who purchases goods and services for personal use

CustomerU s u a l l y i m p l i e s a relationship over time between the buyer and a particular brand or retail outlet.

...the emotional, mental and physical activities that people engage in when selecting, purchasing using, and disposing of products and services so as to satisfy needs and desires.

Consumer Behaviour is...

Buying  is  not  just  a  

necessary  activity  but  an  

attractive  and  highly  

approved  way  of  

behaving.

At the heart of the trading nexus is the act of exchange between producer and consumer for their mutual benefit.

“Consumption is the sole end and purpose of all production.”

Adam Smith

“You can have any color you want, as long as it's black.”

Henry Ford

The Production Orientation

shift from selling

what you can make to

making what you

can sell!

The Marketing Concept

A business has only

two important

functions, marketing

and innovation.

Peter Drucker

‘to create a customer’

Module 2: Market Segmentation

cheapest brand, aimed at young first-time buyers

top-of-the-range for the customer who has made it

intended as intermediate stages on life’s automotive journey

3 marketing conditions to be met for segmentation to work

identity

access

size

Most important forms of market segmentation:

geographic

demographic

psychological

usage

benefit

geographic

MicromarketingSame location ≈ same needs, wants, preferences

Cultural effects differ ; Climatic conditions

geographic

Campbell’s soupsMicromarketing: America devided in 22 markets

geographic

Localization: Most consumer buying behaviour is localLocal newspaper, radio, TV, websites, in-store and POS-ads, etc.

demographic

statistically categorizing a population by

agesex income

educationoccupation

social classfamily size

racereligion

demographic

1. age

demographic

2. sex

demographic

3. socio-economic status (SES)

incomeeducation

occupation

demographic

4. geodemographic

demographic

5. psychological aka lifestyle

activitiesinterests

opinions

demographic

American market divided into 10 segments with 5 female segments

Thelma Traditionalists 25%

Candice Chic suburbanite 20%

Mildred Militant mother 20%

Cathy Contented housewife 18%

Eleanor Elegant socialite 17%

demographic

6. segmentation by usage

The market is usually divided into USER and NON-USER.

demographic

7. segmentation by benefits

Find out what people want and provide it for them.

Module 3: New Products and Innovations

New products have to be sold more and more, therefore, to existing customers.

Module 3: New Products and Innovations

Competitive advantage derives from the encouragement of idea power.

- Rosabeth Moss Kanter

Module 3: New Products and Innovations

Innovation is not a luxury but a universal necessity.

Total Product Concept

The Product Life-Cycle

The Effects of Personal Influence

passionenergy idealism

pragmatism

cunningtowering impatience

unwillingness to allow set back

love-hate relationships w/ subordinates

Personal characteristics of

PRODUCT CHAMPIONS

The Effects of Personal Influence

There are opinion leaders only if others

are willing to follow.

Diffusion of New Products & Innovations

definition:

the process by which an innovation ... is communicated through certain channels over time among the members of a social system.

Diffusion of New Products & Innovations

continuous innovation

2012

1964Modifications to existing

products, new models and flavors.

Diffusion of New Products & Innovations

dynamically continuous innovation

Requires more change in consumer behavior

Diffusion of New Products & Innovations

discontinuous innovation

Requires a new form of consumer behavior

Diffusion of New Products & Innovations

Three main types of innovation:1. continuous 2. dynamically continuous 3. discontinuous

Observability

compatibility

TrialabilityComplexity

Relative advantage

5 product characteristics that determine consumer response:

improvement over existing products?

Relative Advantage

Compatibility

deals with the issue of how well the innovation fits with the potential consumer’s existing values, attitudes, interests and behaviour

Complexity

The easier it looks to use the more likely will people be to try it.

Trialability

simple

difficult

Observability

how easily the benefits of the innovation can be conveyed

Adoption of New Products and Innovations

The Individual Perspective

4) Perception 5) Personality 6) Learning, Memory & Thinking 7) Motivation

PART II

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