Consumer Behavior: Meeting Changes and ChallengesCHAPTERONE

1-*What is Marketed?Goods (tangible)Services (intangible)Events (time basedtrade shows) and Experiences (Walt Disney Worlds Magic kingdom)Persons (Artists, Musicians, CEO, Physicians)Places (Cities, States, Regions, Nations) and Properties (Intangible rights of ownership of real estate or financial properties)Organizations (Universities, Museums, Performing Arts Organization)Information (Books, Schools, Magazines) Ideas (consultation)

*New Market Economy

*New Market Economy

*Understand customer needs and wants

Human needs are physiological, safety, social, esteem, and self-actualization. These needs are not created by marketers.

Wants are shaped by ones society and are described in terms of objects that will satisfy needs.BUYER BEHAVIOR

*

*Understand marketplace, customer needs and wants

While hungry everyone irrespective to any countries needs something to meet hunger

A Bangladeshi people meet that need through rice, meat, fish Want .

An American does that through food like Big Mac, French fries, and soft drinks Want

Wants are shaped by society and culture

When backed by buying power, wants become demand.BUYER BEHAVIOR

*

In winter a Bangladeshi consumer (typically living in sub urban area) wants blanket, a Canadian consumer wants heater and comforter.

In summer a Bangladeshi consumer wants hand Fan, electric (ceiling or table) Fan, or AC, a western consumer wants AC or table Fan.

For Bangladesh, in summer, for rich consumer demand is AC, for middle class demand is electric Fan, for poor hand Fan.

BUYER BEHAVIOR

*

Market offering is some combination of products, services, information, or experiences offered to a market to satisfy a need or wantMany sellers make the mistake of paying more attention to the specific products (wants) they offer than to the benefits and experiences produced by these products (needs).BUYER BEHAVIOR

*

Suppose a customer is buying a floppy disk to store data.So, the seller may think to upgrade the attributes of the floppy disk.But the customers need that Floppy disk to fulfill his/her problem to store data from computer.So his/her main expectation is not the floppy disk rather better data storage. So when other company can provide some different innovative offers like CD, USB memory device that can satisfy his/her needs, the customer is switched. BUYER BEHAVIOR

*BUYER BEHAVIORDesign a customer-Driven Marketing strategy

To design a winning marketing strategy, the marketing manager must answer two important questions:

What customers will we serve (What is our target market)?

2.How can we serve these customers best (What is our value proposition)?To answer these questions, we should know buyer behavior

*BUYER BEHAVIOR FOR MARKETING DECISIONSome definitions for buyer behavior

Buyer/Consumer Behavior is the decision process and physical activity individuals engage in when evaluating, acquiring, using or disposing of goods and services

Buyer/Consumer Behavior reflects the totality of consumers decisions with respect to the acquisition, usage and disposition of goods, services, time and ideas by (human) decision making units (over time)

*BUYER BEHAVIOR FOR MARKETING DECISIONBuyer Behavior reflects:

the totality about the of an by decision over of decision consumption offering making units timeWhetherWhatWhyHowWhenWhereHow much/ How often/ How long

Acquisition

Usage

Disposition

Products

Services

Time

Ideas

Information gathererInfluencerDeciderPurchaserUser

Hours

Days

Weeks

Months

YearsMarketing strategies and Tactics

*BUYER BEHAVIOR FOR MARKETING DECISIONThree perspectives on Buyer BehaviorThe Decision Making perspectiveViews the buyer as a rational, decision maker moving through a series of steps when making a purchase

The Experiential perspectiveViews the buyer as someone who buys on impulses also and hence not always a rational, decision makerImpulse buying is an unplanned purchase characterized by relatively rapid decision-making, and subjective bias for immediate possessionPurchases of new products result more from impulse than from prior planningImpulsive buying is a sudden, compelling, hedonically complex behavior in which rapidity of purchase decision precludes thoughtful, deliberate consideration of all information and choice alternatives

The Behavioral Influence perspectiveViews the buyer as propelled by circumstances created by strong environmental forces to make a purchase without necessarily developing strong feelings for the product

*BUYER BEHAVIOR FOR MARKETING DECISIONWhy study Consumer Behavior?(Micro) Marketing ImplicationsMarketing Concept/Consumer PrimacyMarket Segmentation, Targeting and Positioning (S-T-P)Influencing Product/Service Choices(Macro) Societal ImplicationsUnderstanding Popular Culture--e.g., fast foodUnderstanding Consumer Culture around the World--e.g., Global trendHow does Marketing Affect Consumers?--e.g., Happiness, MaterialismWhat Else?An Increasingly Significant Part of Human BehaviorUnderstanding Our Own Consumption

Does it excite you?*

What about - LUX ? *

To Which Segment ofConsumers Will This Ad Appeal?Chapter One Slide 4Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

A Segment of Consumers Who are Environmentally ConcernedCopyright 2010 Pearson Education, Inc. publishing as Prentice HallChapter One Slide 5

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.

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

Two Consumer EntitiesCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall*Chapter One Slide

Development of the Marketing ConceptCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall*Chapter One Slide

Production OrientationFrom the 1850s to the late 1920sCompanies focus on production capabilitiesConsumer demand exceeded supplyCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall*Chapter One Slide

Sales OrientationFrom the 1930s to the mid 1950sFocus on sellingSupply exceeded customer demandCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall*Chapter One Slide

Marketing Concept1950s to current - Focus on the customer!Determine the needs and wants of specific target marketsDeliver satisfaction better than competition

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

Discussion QuestionsWhat two companies do you believe grasp and use the marketing concept?Why do you believe this?Copyright 2010 Pearson Education, Inc. publishing as Prentice HallChapter One Slide*

Societal Marketing ConceptConsiders consumers long-run best interestGood corporate citizenshipCopyright 2010 Pearson Education, Inc. publishing as Prentice HallChapter One Slide*

The Marketing ConceptConsumer ResearchSegmentationMarket TargetingPositioningThe process and tools used to study consumer behavior

Copyright 2010 Pearson Education, Inc. publishing as Prentice HallEmbracing the Marketing ConceptChapter One Slide*

The Marketing ConceptConsumer ResearchSegmentationMarket TargetingPositioningProcess of dividing the market into subsets of consumers with common needs or characteristics

Copyright 2010 Pearson Education, Inc. publishing as Prentice HallImplementing the Marketing ConceptChapter One Slide*

Discussion QuestionsWhat products that you regularly purchase are highly segmented?What are the different segments?Why is segmentation useful to the marketer for these products?Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall*Chapter One Slide

The Marketing ConceptConsumer ResearchSegmentationMarket TargetingPositioningThe selection of one or more of the segments identified to pursueCopyright 2010 Pearson Education, Inc. publishing as Prentice HallImplementing the Marketing ConceptChapter One Slide*

The Marketing ConceptConsumer ResearchSegmentationMarket TargetingPositioningDeveloping a distinct image for the product in the mind of the consumerSuccessful positioning includes:Communicating the benefits of the productCommunicating a unique selling proposition

Copyright 2010 Pearson Education, Inc. publishing as Prentice HallImplementing the Marketing ConceptChapter One Slide*

The Marketing MixCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall*Chapter One Slide

Customer Value, Satisfaction, Trust, and RetentionCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall*Chapter One Slide

Successful Relationships Customer ValueCustomer SatisfactionCustomer TrustCustomer RetentionDefined as the ratio between the customers perceived benefits and the resources used to obtain those benefitsPerceived value is relative and subjectiveDeveloping a value proposition is criticalCopyright 2010 Pearson Education, Inc. publishing as Prentice HallValue, Satisfaction, Trust, and RetentionChapter One Slide*

Discussion QuestionsHow does McDonalds create value for the consumer?How do they communicate this value?Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall*Chapter One Slide

Successful Relationships Customer ValueCustomer SatisfactionCustomer TrustCustomer RetentionThe 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 mercenaries

Copyright 2010 Pearson Education, Inc. publishing as Prentice HallValue, Satisfaction, Trust, and RetentionChapter One Slide*

Successful Relationships Customer ValueCustomer SatisfactionCustomer TrustCustomer Retention

Copyright 2010 Pearson Education, Inc. publishing as Prentice HallEstablishing and maintaining trust is essential.Trust is the foundation for maintaining a long-standing relationship with customers.

Value, Satisfaction, Trust, and RetentionChapter One Slide*

Successful Relationships Customer ValueCustomer SatisfactionCustomer TrustCustomer RetentionThe objective of providing value is to retain highly satisfied customers.Loyal customers are keyThey buy more productsThey are less price sensitiveServicing them is cheaperThey spread positive word of mouth

Copyright 2010 Pearson Education, Inc. publishing as Prentice HallValue, Satisfaction, Trust, and RetentionChapter One Slide*

Top 10 Ranked U.S. Companies in Terms of Consumers Trust and Respect of PrivacyTable 1.2Copyright 2010 Pearson Education, Inc. publishing as Prentice HallChapter One Slide 26

Top 10 CompaniesAmerican Express eBayIBMAmazonJohnson & JohnsonHewlett-PackardU.S. Postal ServiceProcter and GambleAppleNationwide

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

Customer Profitability-Focused MarketingTracks costs and revenues of individual consumers Categorizes them into tiers based on consumption behaviorA customer pyramid groups customers into four tiersCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall*Chapter One Slide

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

THE TRADITIONAL MARKETING CONCEPT VALUE- AND RETENTION-FOCUSED MARKETINGMake 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 products 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 companys 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 TechnologiesCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall*Chapter One Slide

The Mobile ConsumerWireless Media Messages will expand as:Flat-rate data traffic increasesScreen image quality is enhancedConsumer-user experiences with web applications improveCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall*Chapter One SlidePenetration of Internet Usage Among Mobile Subscribers in 16 Countries - FIGURE 1.3

Consumer Behavior Is InterdisciplinaryCopyright 2010 Pearson Education, Inc. publishing as Prentice Hall*Chapter One Slide

A Simple Model of Consumer Decision Making - Figure 1.4 Chapter One Slide*Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall*Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter Seven Slide

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

**Consumer Behavior includes all the decisions a consumer makes when spending their time and money. The what, why, when, where, and how of consumer purchases are examined in consumer behavior. It is not just individuals, but households, families, and groups that influence the decisions we make.This web link takes you to Googles shopping site which is still in BETA test mode. Google used to have a shopping portal, Froogle, which is no longer active. There are many online sites which influence us as consumers either in the information gathering, decision making, or final purchasing part of our decisions.*The personal consumer is sometimes called the end user or ultimate consumer. This is you when you go to Best Buy to purchase a new television for your home. The organizational consumer is buying for the organization or to re-sell to the personal consumer. Although both types of consumer entities are important, we will be focusing on the personal consumer throughout these presentations.*The marketing concept was developed over time through two other important business orientations called the production and the sales orientation. They will be discussed in more detail on the following slides.*During the production orientation, companies wanted efficient production lines to mass produce products for the consumer. Because the demand was higher than the supply, consumers were content to get a product and were not focused on product variation. This was the time that the control was in the hands of the producers who said, if we make it they will buy it.*There was overproduction during the production orientation, which led to excess product. Although the products were still similar and there was little variation, during the sales orientation period, the manufacturers focused on selling the product which they had overproduced. *Rather than focus on what can be manufactured, the focus shifts with the marketing concept to what consumers prefer. It became a time to put the customer first and to understand their needs and wants. With this information, marketers can deliver satisfaction to their target markets. We are remaining focused on the marketing concept today as marketers become more sophisticated in understanding the consumer and in delivering products that meet their needs.*There are many companies you can choose from. Some common ones might include Coca-Cola, Pepsi, Apple, and Nike.These companies are focused on the following:They develop a wide variety of products to meet very different needs.They realize the importance of communicating with their consumer and explaining their product benefits.They practice corporate social responsibility through tie-ins with charities and fundraising.*The societal marketing concept was developed from the marketing concept. Marketers and consumers are increasingly taking stock of what is good for themselves, their family, their country, and the planet. Marketing looks for opportunities to provide products and services to help consumers reach their goals while also making profitable decisions for their companies. The image in this slide of a Siemens ad suggests the company is committed to developing products that are safe for customers and the environment.This web link will take you to the Cause Marketing Planner assembled by promomagazine.com. It is rich with information about not-for-profit organizations for cause marketing campaigns. *All companies must continually conduct research to understand the needs and priorities of their market segments. This web link will take you to the Association for Consumer Research, whose goal it is to advance consumer research and facilitate the exchange of scholarly information among members of academia, industry, and governments worldwide. *Consumer needs are shaped by the environment, culture, education, and life experiences. Marketers perform segmentation by looking for groups with common needs. Segmentation can be based on consumers demographics, product usage, geography, lifestyle, and many other characteristics and needs.*Shampoo is usually highly segmented. There are products based on gender, hair type, preferred smell, and price.Segmentation is useful because the marketers can clearly match their product benefits to the consumer. If you have dandruff, then use our specially formulated dandruff shampoo. If you are a guy, use our Axe product because it will make you look so good women will not be able to resist you.*When a marketer chooses the segments that they will pursue, they have chosen a target market. Selection of the correct target market is critical to success of the product since the marketer has assumed that this group of consumers has a similar need with respect to their product or service.*Positioning is how the consumer thinks about your product versus the competitors product. Does yours have a sleeker design, or is it faster or more compact? The positioning is ultimately in the mind of the consumer but the marketer helps form the positioning through effective advertising and communication. Strong positioning differentiates your product from the competition and clearly tells the consumer how it will fulfill their needs better than other products on the market.*The marketing mix is one of the most important concepts in marketing. It thoroughly describes the product and the tools the company offers to consumers. The product includes the name, design, and features. The price includes the list price, discounts, and payment methods. Place is how a company will distribute their product and promotion is how they will let customers know about the product and its benefits.*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.*It is best to think of value as the consumers perception of what they gained vs. what they gave up to purchase a product or use a service. Marketers are developing value propositions which are statements of the value their product offers to consumers. If the value propositions are clear and applicable to the consumer, they will understand the strength of the product benefits.*They create bundled meals and dollar menus to create value for price-conscious consumers. In addition, they create value to the health-conscious consumer by offering salads, fruit, and healthy options for Happy Meals.They communicate this value through television ads, in-store signage, and their website.*It is important to understand the role of customer expectations in customer satisfaction. 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 or apostles, who provide very positive word-of-mouth. When customers are disappointed, they can become defectors and move to the competition or 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.*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.*Customer retention is an important strategy to all marketers. The goal is to make customers stay with your company and generate positive word of mouth about your service and products. The Internet and cell phones have helped marketers maintain closer relations with their consumers and have opened easier channels for the customer to contact the company if they have questions, problems, or suggestions.*These are the top 10 out of the 20 companies listed in Table 1.2 in the text. These companies have achieved a high level of trust with their customers if they are on this list.*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.*This is a portion of Table 1.3 from the text, which highlights the difference between the traditional marketing concept versus value-and-retention-focused marketing. The full details of this comparison can be found in the textbook. *The impact of digital technologies is tremendous. Not only has the computer changed the way companies transact with customers, but there are changes from cell phones, smart phones, and cable television. Think of how you see marketing messages if you are watching a movie through on-demand or playing an online video game.Marketers can now transact in a one-to-one relationship with customers offering product, prices, and messages that are tailored for that consumer. By gathering data on the consumer, the marketer has more information to tailor these offers and communication messages.The consumer has more power because they have more information on competing products, prices, and reviews on product performance. This gives them more choices and more bargaining power with the marketer.*We all know how important our cell phones are to our daily functioning. We have already seen penetration of devices with better applications and screens through the iPhone and BlackBerry products. This will continue to grow in the near future and marketers challenge is to determine how to best use these devices to reach consumers. This web link takes you to a great site called Marketing Charts. It has data on all sorts of marketing-related information, including interactive and mobile phone use.*Consumer Behavior as a field of study emerged in the late 1960s. As you study consumer behavior this semester, you will realize the importance of all these fields. Given huge economic shifts in the world economy beginning in 2008, it is important to realize the effect of economic changes on the behavior of consumers.*This model will guide your studies of consumer behavior. The input stage includes sources of information to the consumer how they learn and are influenced by the marketer and their environment.The process stage ties to the decision-making process the consumer undergoes when considering a purchase. It moves from the inputs to the psychological factors involved in recognizing a need, searching for information, and evaluating alternatives.The output stage involves the actual purchase and the post-purchase evaluation. This post-purchase evaluation ties to the satisfaction topics discussed earlier in this presentation and the importance of customer loyalty to marketings profitability.**