Comprehensive: Introduction to Consumer behavior

Introduction to Consumer Behavior

Session 1

What is Consumer Behavior?. . . is defined as the study of the buying units and the exchange processes involved in acquiring, consuming, and disposing of goods, services, experiences, and ideas

What is Consumer Behavior?Most marketers recognize that consumer behavior is an ongoing process, not merely what happens at the moment a consumer hands over money or a credit card and in turn receives some good or service (buyer behavior).The exchange—a transaction where two or more organizations or people give and receive something of value—is an integral part of marketing. The expanded view emphasizes the entire consumption process. This view would include issues that influence the consumer before, during, and after a purchase

Consumer behavior is a process.

Stages in the Consumption Process

Actors in Consumer BehaviorB. Consumer behavior involves many different actors.

A consumer is generally thought of as a person who identifies a need or desire, makes a purchase, and then disposes of the product during the three stages in the consumption process.The purchaser and user of a product might not be the same person. A separate person might be an influencer. This person provides recommendations for or against certain products without actually buying or using them. Consumers may be organizations or groups (in which one person may make the decision for the group).

Why Study Consumer Behavior?• Consumer Analysis as a Foundation of

Marketing Management Marketers attempt to satisfy needs and wants

of their target market Marketing involves the study of exchange

process in which two parties For marketers to create a successful exchange

they must understand the factors that influence consumers’ needs and wants

Consumer primacy is the principle on which the entire field of marketing rest

The principle insists that that consumer should be at the center of the marketing effort

Why Study Consumer Behavior?• Public Policy and Consumer Behavior The development of laws and

regulations that impact consumer in the market place

Elimination of advertisement on cigarette industry

The study of consumer misbehavior , sometimes called “the dark side of consumer behavior.”

Consumers can act unethically , misuse products, engage in behaviors that risk life and limb

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04/28/2023Copyright © 2011 Pearson Education, Inc.

publishing as Prentice Hall

The Consumer “Dark Side”

Consumer terrorism Addictive

consumption

Compulsive consumption Consumed

consumers

Illegal activities

The Consumer “Dark Side”• Consumer Terrorism The terrorist attacks of 2001 had a tremendous impact on consumerism

throughout the world. Such effects give the indication that both natural and man-made disruptions to financial, electronic, and supply networks can be devastating.

Although bioterrorism has occurred in the past, the threat of such attacks is more prevalent than ever.

• Addictive Consumption• Consumer addiction is a physiological and/or psychological dependency

on products or services. New examples of this might be video gaming or SMS addictions.

The Consumer “Dark Side”• Compulsive Consumption Compulsive consumption refers to repetitive shopping, often

excessive, as an antidote to tension, anxiety, depression, or boredom.

These people are often called “shopaholics.” Note that compulsive consumption is different from impulse

buying• Negative or destructive consumer behavior. Three aspects are: The behavior is not done by choice. The gratification derived from the behavior is short-lived. The person experiences strong feelings of regret or guilt afterward

The Consumer “Dark Side”

• Gambling is an example of consumption addiction that touches every segment of society

• Consumed ConsumersPeople who are used or exploited, whether willingly or

not, for commercial gain in the marketplace can be thought of as consumed consumers. Examples include:

• Prostitutes• Organ, blood, and hair donors• Babies for sale

The Consumer “Dark Side”• Illegal Activities• Shrinkage is an industry term for inventory and

cash losses due to shoplifting and employee theft. A growing form of fraud involves “serial

wardrobers” who abuse exchange and return policies

• Some types of destructive consumer behavior can be thought of as anti-consumption whereby products and services are deliberately defaced or mutilated

Why Study Consumer Behavior?• Consumer Behavior and Altruistic

Marketing Altruistic Marketing is a field of study that:1. Researches the causes of negligent

consumer behavior2. Applies the finding to develop treatment

and/or preventive methods to reduce the maladaptive actions of consumers

3. Suggest ways to influence people to act more responsibly in their consumption of dangerous goods and services

The Meaning of Consumption

• A fundamental premise of consumer behavior is that people often buy products not for what they do, but for what they mean.

• People, in general, will choose the brand that has an image (or even a personality) that is consistent with his or her underlying needs.

• Role theory takes the view that much of consumer behavior resembles actions in a play. Consumers have roles and they may alter their consumption decisions depending upon the role being played at the time.

•

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The Meaning of Consumption

• Consumers can develop relationships with brands:

Self-Concept Attachment Nostalgic Attachment

Interdependence Love

The product helps to establish the user’s identity

The product serves as a link with a past self

The product is a part of the user’s daily routine

The product elicits emotional bonds of warmth, passion, or other strong emotion

Discussion Question

• Give some examples of products that might be consumed strictly for image.

• How does the image of the product enhance your sense of self when you use or consume the product?

• Give some examples of products that may remind you of some pleasant happening in the past

Exchange Processes and Consumer Behavior

• Exchange is the process that involves the “transfer of something tangible or intangible, actual or symbolic, between two or more social actors

Prerequisites for Exchange:

– Two or more parties must be present– Each party has something of value to the other– Each party is capable of communication and

delivery– Each party must be free to accept or reject the

other's offer– Each party must believe that it is appropriate

or desirable to deal with the other

Elements of Exchange

• Six Types of Resources Are Exchanged:

Goods

Service

Money

Information

Status

Feelings

Dimensions of Exchange Relations

• Four types of consumer exchange relations have been identified:

– Restricted versus Complex Exchanges– Internal versus External Exchanges– Formal versus Informal Exchanges– Relational versus Discrete

Relational exchange– Current hot topic in marketing– Characteristics• long term• reciprocal obligations• non-economic rewards: market embedded ness--social

ties between buyer and seller increase perceived value of exchange.• extensive formal and informal communications• high interdependence• planning

– Relational exchange practiced between members of marketing channel

Market Embeddedness

• The social ties between buyer and seller increase the perceived value of the exchange.

• Examples, house parties of:– Tupperware– Mary Kay Cosmetics

Customer Value, Satisfaction, Trust, and Retention

• The goal of all marketers is to build and maintain successful relationships with their consumers.

• This occurs by offering a product which has benefits that the consumer values.

• In addition, they see the value of those benefits as exceeding the cost of the product – the cost in terms of money, time, and opportunity costs.

• If a product delivers value, the company is likely to have a high level of customer satisfaction.

• They will trust the marketer and continue to purchase the product. In addition, they will tell others about the product and speak highly of it when asked or when reviewing the product online.

• A company with strong customer relationships will be able to achieve a high level of customer retention – their customers will not defect to the competitor or stop using their product. They will retain these customer over time and will be more profitable due to these valuable loyal customers.

Customer Value, Satisfaction, Trust, and Retention

Successful Relationships

Customer valueHigh 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

• If the value propositions are clear and applicable to the consumer, they will understand the strength of the product benefits.

Value, Satisfaction, Trust, and Retention

Chapter One Slide 30

Discussion Questions

• How does McDonald’s create value for the consumer?

• How do they communicate this value?

31Chapter One Slide


• 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.

• If you fall below the consumer's expectations, then the consumer is not satisfied, but if you exceed expectations then you can create “customer delight.”

• When customers are highly satisfied, they can become Loyalists who continue to purchase

• Apostles, who provide very positive word-of-mouth.

• When customers are disappointed, they can become Defectors and move to the competition

• Terrorists, who spread negative word-of-mouth. Some dissatisfied customers become hostages and stay with the company but are very unhappy. Mercenaries are satisfied but are not really considered loyal and will move from company to company


Chapter One Slide




Retention

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

• Customer trust is closely related to customer satisfaction.

• Trust in a company helps build loyalty.

• Consumer trust differs based on the media and the source of the message.

• This is seen in advertising where customers trust word-of-mouth much more than marketing messages that are from the marketer






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

Top 10 Companies• American Express • eBay• IBM• Amazon• Johnson & Johnson• Hewlett-Packard• U.S. Postal Service• Procter and Gamble• Apple• Nationwide

HallChapter One Slide 26

Customer Profitability-Focused Marketing

• You are probably familiar with segmentation based on demographics, such as age and gender.

• Another common segmentation scheme used by marketers is to segment customers by their profitability to the firm.

• With this method, 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

Customer Profitability-Focused Marketing

• Tracks costs and revenues of individual consumers

• Categorizes them into tiers based on consumption behavior

• A customer pyramid groups customers into four tiers

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall 37

Platinum

Gold

Iron

Lead

Chapter One Slide

Copyright 2010 Pearson Education, Inc. publishing as Prentice HallChapter One Slide 38

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.

Three Research Perspectives on Consumer Behavior

• The Decision-Making Perspective

• The Experiential Perspective

• The Behavioral Influence Perspective

The Decision-Making Perspective

. . . proposes that buying results from consumers perceiving that they have a problem and then they move through a series of rational steps to solve the problem

• Generic Decision Model•Problem Recognition–Search–Alternative Evaluation–Choice–Post-acquisition

Evaluation

The Experiential Perspective

. . . proposes that in some instances buying results from the consumer’s need for fun, to create fantasies, obtain emotions, and feelings.

The Behavioral Influence Perspective

• . . assumes that strong environmental forces propel consumers to make purchases without necessarily first developing strong feelings or beliefs about the product.

Do Marketers Create Artificial Needs?

• Objective of marketing: create awareness that

needs exist, not to create needsNeed: a basic biological motive

Want: one way that society has taught us that the need can be satisfied

versus

Are Advertising & Marketing Necessary?

• Yes, we can say that advertising and marketing are necessary because consumers may not know that solutions to problems exist without the information provided by advertising and marketing.

• This is the view of the economics of information perspective.

• It points out that there is an economic cost to searching for information. Advertising helps consumers by reducing search time

Do Marketers Promise Miracles?• The failure rate for new

products ranges from 40-80%.

• Although people may think that advertisers use magic to sell products, marketers are only successful when they promote good products

• Advertisers simply do not know enough about people to manipulate them

Discussion

Advertisers are often blamed for promoting a materialistic society by making their products as desirable as possible.

• Do you agree with this?– If yes, is materialism a bad thing?– If no, what are your reasons?

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Interdisciplinary Research Issues in Consumer Behavior

Disciplinary Focus Product Role

Experimental Psychology

Perception, learning, and memory processes

Clinical Psychology Psychological adjustmentMicroeconomics/Human Ecology

Allocation of individual or family resources

Social Psychology Behavior of individuals as members of social groupsSociology Social institutions and group relationshipsMacroeconomics Consumers’ relations with the marketplaceSemiotics/Literary Criticism

Verbal and visual communication of meaning

Demography Measurable characteristics of a population

History Societal changes over timeCultural Anthropology Society’s beliefs and practices

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Experimental PsychClinical Psychology

Developmental PsychHuman EcologyMicroeconomicsSocial Psychology

SociologyMacroeconomics

Semiotics/Literary CriticismDemography

HistoryCultural Anthropology

Disciplines in Consumer Research

MICRO CONSUMER BEHAVIOR(INDIVIDUAL FOCUS)

MACRO CONSUMERBEHAVIOR

(SOCIAL FOCUS)

Consumer behaviorinvolves many different

disciplines

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Wheel of Consumer Behavior

Comprehensive: Introduction to Consumer behavior

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