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CHAPTER 1 CONSUMER BEHAVIOR: ITS ORIGINS AND

STRATEGIC APPLICATIONS

Lecturer: Indira TabyldyEmail: [email protected]

BBM2123 CONSUMER BEHAVIOR 1

BBM2123 CONSUMER BEHAVIOR

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


The Book:

• Leon Schiffman, Lesle Lazar Kanuk, Consumer Behavior, 9th Edition, Pearson International Edition, 2007


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.


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.


Development of the Marketing Concept


Production Concept

Selling Concept

Product Concept

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



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

• Two perspectives:– Positivist approach– Interpretivist approach


Implementing the Marketing Concept


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



Segmentation Used by Sports Illustrated



• TargetingThe selection of one or more of the segments to pursue




• Positioning • 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



This product is positioned as a

solution to facial redness.

CONSUMER BEHAVIOR

The Marketing Mix

• Product• Price• Place• Promotion


Successful Relationships


Customer Value

Customer Satisfaction

Customer Retention


• Customer 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


Value, Satisfaction, and Retention


• 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 (provide positive word-of-mouth), defectors (neutral), terrorists (spread negative word-of-mouth), hostages (unhappy customers who stay with the company because of a monopolistic environment or low price), and mercenaries (satisfied customers with no loyalty)



Customer Satisfaction

• The researchers propose that companies should strive to create apostiles, raise the satisfaction of defectors and turn them into loyalists, avoid having terrorists or hostages, and reduce the number of mercenaries



• Customer 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

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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


Customer Profitability-Focused Marketing


Tier 1: Platinum

Tier 2: Gold

Tier 3: Iron

Tier 4: Lead

Traditional Marketing Concept Vs. Value and Retention Focused Marketing

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 enablescustomers to customize whatyou make

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

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

Market products and services that match customers’ needs better thancompetitors’ offerings

Utilize an understanding of customer needs to develop offerings that customers perceive as more valuable than competitors’ offerings

CONSUMER BEHAVIOR

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 Concept

Marketers 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


References

• These slides are taken from Schiffman & Kanuk, Consumer Behavior, 9th Edition, 2007


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