Chapter One:

Consumer Behavior and

Marketing Strategy

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 Welcome to Consumer Behaviour
• Why study consumer behaviour (CB)?
• What is consumer behaviour?
• How does it affect marketing strategy?

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The Text Required

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 For information:
• This
Australian
Edition is
based on
the main US
Edition:

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 Subject objectives
• Knowledge and understanding
– Theories working model of CB
– Implications for strategic marketing decisions
– A focus on marketing decisions

• Communication skills
– Increase your skills in developing and presenting
ideas orally and in writing

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 The marketing car

Consumer behaviour
Marketing manager ‘the engine of marketing’

Advertising Market research

Distribution

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 Overview of the chapter:
1. Studying the consumer is important for marketers
2. Implications of consumer behavior for marketing
strategy
3. Components of a consumer behavior audit
4. Relevance of consumer behavior for non-profit
organizations, government agencies or consumer
groups
5. A working model of consumer behavior

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 Introductory chapter
• Is usually the most important
• Provides an overview of what’s in store
• Bird’s-eye view of the subject
• Important to see the linkages between BB
and Marketing Strategy
• (note all the past year examination questions
require explanation of how the BB concept
being tested is linked to marketing strategy)

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 Definitions of consumer behaviour
• The dynamic interaction of cognition,
behaviour and environmental events by which
human beings conduct the exchange aspects
of their lives
(American Marketing Association)

• A discipline dealing with how and why

consumers purchase (or don’t purchase)
products and services.
(Neal et al.)

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 Definitions of consumer behaviour
(cont.)
• Those behaviours performed by decision-
making units in the purchase, usage and
disposal of goods and services
(Kotler & Levy)

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The Meaning of Consumption

Consumption frequently has deep meaning for

the consumer!

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Figure 1.1 Multiple influences on consumer behavior

Purchase and use

behavior
Demographics and
household structure

REGULATORY
POLICY
Needs, emotions, To protect consumers
values and Understanding
personalities Consumer
Behavior

MARKETING
Group influences STRATEGY
To satisfy target
markets
Information
processing

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 Marketing decisions
At each stage in this course you will be
required to consider the importance of
consumer behaviour knowledge in the
development of marketing strategy.

Marketing decisions are based on:

• Market segmentation
• Product positioning
• Marketing mix

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Consumer behaviour is product-
person-situation specific

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 Consumer behaviour is product-
person-situation specific
• Product specific
– Depends on the nature of the product

• Person-individual
– Different customers behave differently due to
needs, personalities and values

• Situation
– Buying behaviour is dependent on the given
situation
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The Nature of Consumer Behavior

Situations and Consumer Decisions

Consumer decisions
result from perceived
problems and
opportunities.
Consumer problems
arise in specific
situations and the
nature of the situation
influences the
resulting consumer Using Outdoor Media to Trigger Problem Recognition

behavior.
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 Consumer behaviour and marketing
strategy
• Positioning strategy
• Market segmentation
• New products
• New market applications
• Global marketing Read pages 10 to 13
from the text
• Marketing mix
• Consumerism
• Non-profit marketing

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 The consumer behavior audit
• Read Table 1.1 (pages 13-17)
• Evaluate how each area of marketing is
connected to the understanding of consumer
buying behavior
• You can use this table as a checklist for
understanding the key issues in your group
project

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How consumer influences drive
marketing decisions

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Consumer lifestyle and consumer
decisions

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An overview of consumer behaviour

• Consumers’ needs/attitudes influence

consumption decisions
• These are reflected in consumer choices
• In turn, consumers respond to:
– Reduce, maintain or enhance their lifestyle
• Consumer lifestyle - a basis for
understanding consumption

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Consumer decision process

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 Consumer decision process
• Consumers are problem solvers

In a given situation the decision process

involves:
1. Problem recognition
2. Information search
3. Evaluation and selection
4. Store choice and purchase
5. Post-purchase processes

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Decision vary according to situations
• See Table 1.2
• Consumer decision making for high versus
low involvement purchases

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 Read overview of internal and
external influences
• Read pages 21- 25
• Provides an early overview of the chapters to
come in later lectures

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The Nature of Consumer Behavior

External Influences
The following are the major external
influences:
• Culture
• Demographics and social stratification
• Ethnic, religious, and regional subcultures
• Families and households
• Groups

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The Nature of Consumer Behavior

Internal Influences
Internal influences include:
• Perception
• Learning
• Memory
• Motives
• Personality
•Emotions
•Attitudes
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The Nature of Consumer Behavior

Self-Concept and Lifestyle

Self-concept is the totality of an
individual’s thoughts and
feelings about oneself.
Lifestyle is how one lives,
including the products one
buys, how one uses them,
what one thinks about them,
and how one feels about them.

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 There are also the B2B aspects
• The buyer in many cases may not be an
individual but rather an organization
• Business-to- business organizational
behavior

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Overall model of consumer behaviour

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APPLICATION OF MARKETING
STRATEGY

The remaining slides outline the key issues in marketing

strategy. Understand how consumer behavior is linked to the
development of marketing strategies

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Applications of Consumer Behavior

1. Marketing Strategy

2. Regulatory Policy

3. Social Marketing

4. Informed Individuals

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Applications of Consumer Behavior
Marketing Strategy

Marketing strategies and tactics are based on explicit or

implicit beliefs about consumer behavior.
behavior

Decisions based on explicit assumptions and sound theory

and research are more likely to be successful than are
decisions based solely on implicit intuition.

Knowledge of consumer behavior can be an important

competitive advantage and can greatly reduce the odds of
bad decisions and market failures!
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Applications of Consumer Behavior
Regulatory Policy

Various regulatory bodies exist to develop, interpret, and/or

implement policies designed to protect and aid consumer.

Effective regulation of many marketing practices requires an

extensive knowledge of consumer behavior.
behavior

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Applications of Consumer Behavior
Social Marketing

Social marketing is the application of marketing strategies

and tactics to alter or create behaviors that have a positive
effect on the targeted individuals or society as a whole.

As is true for commercial marketing strategy, successful

social marketing strategy requires a sound understanding of
consumer behavior.
behavior

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 Social Marketing- Government Campaigns

Speak Mandarin “low crime doesn’t mean no crime

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Applications of Consumer Behavior
Informed Individuals

Most economically developed societies are referred to as

consumption societies. Most individuals in these societies
spend more time engaged in consumption than any other
activity, including work or sleep.

Knowledge of consumer behavior can enhance our

understanding of our environment and ourselves.

Such an understanding is essential for sound citizenship,

effective purchasing behavior, and reasoned business ethics.

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Marketing Strategy and Consumer
Behavior

Customer value is the

difference between all the
benefits derived from a total
product and all the costs of
acquiring those benefits.
Providing superior
customer value requires the
organization to do a better
job of anticipating and
reacting to customer needs
than the competition does.

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Marketing Strategy and Consumer Behavior

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Marketing Strategy and Consumer
Behavior
Step 1. Market Analysis
Marketing Strategy begins with an
analysis of the market the
organization is considering, requiring
a detailed analysis of the:
•organization’s capabilities
•strengths and weaknesses of competitors
•economic and technological forces
•current and potential customers

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Marketing Strategy and Consumer
Behavior
Step 2. Market Segmentation
On the basis of the consumer
analysis, the organization
identifies groups of individuals,
households, or firms with similar
needs. These market segments
are described in terms such as
demographics, media
preferences, geographic
location, etc.
Management then selects the
segment(s) to target.

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Marketing Strategy and Consumer
Behavior
Step 3. Marketing Strategy
Marketing Strategy seeks to
provide the customer with more
value than the competition, while
still producing a profit for the firm.
Marketing strategy is formulated in
terms of the marketing mix, which
involves determining the product
features, price, communications,
distribution and services that will
provide customers with superior
value, resulting in the total
product.
product

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Marketing Strategy and Consumer
Behavior
Step 4. Consumer Decision Process
The total product is presented to the
target market, which is consistently
engaged in processing information
and making decisions designed to
maintain or enhance its lifestyle or
performance.

Many firms are wrapping

experiences around their traditional
products and service in order to sell
them better. For example, retailers
have been moving to lifestyle
centers in an effort create a more
pleasing shopping experience.
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Marketing Strategy and Consumer
Behavior
Step 5. Outcomes
Society – the cumulative effect of the
marketing process affects economic
growth, pollution, social problems.
Firm – reaction of the target market
to the total product produces an
image of the
product/brand/organization.
Individual – the process results in
some level of need satisfaction,
financial expenditure, attitude
development/change, and/or
behavioral changes.

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Market Analysis Components

1. The Consumers

2. The Company

3. The Competitors

4. The Conditions

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 Market Analysis Components

The Consumers
It is not possible to anticipate
and react to customers’ needs
and desires without a complete
understanding of consumer
behavior.
behavior
Discovering customers’ needs
is a complex process, but it can
often be accomplished by
marketing research.

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Market Analysis Components

The Company
A firm must fully understand its own ability to meet customers
needs. This involves evaluating all aspects of the firm including:
• financial condition
• general managerial skills
• production capabilities
• R&D capabilities
• technological sophistication
• reputation, and
• marketing skills

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Market Analysis Components

The Competitors
It is not possible to consistently
do a better job of meeting
customer needs than the
competition without a thorough
understanding of the
competition’s capabilities and
strategies.
This requires the same level of
knowledge of a firm’s key
competitors that is required on
one’s own firm.

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Market Analysis Components

The Conditions
The state of the economy, the
physical environment,
government regulations, and
technological developments
affect consumer needs and
expectations as well as
company and competitor
capabilities.

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Market Segmentation

Market segmentation is
a portion of a larger
market whose needs
differ from the larger
market.

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Market Segmentation

Market Segmentation Involves Four Steps:

1. Identifying Product-Related Need Sets

2. Grouping Customers with Similar Need Sets

3. Describing Each Group

4. Selecting an Attractive Segment(s) to Serve

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Market Segmentation
Product-Related Need Sets
Organizations approach market segmentation with a set
of current and potential capabilities.
The term need set is used to reflect the fact that most
products in developed economies satisfy more than one
need.
Customer needs are not restricted to product features but
also include types and sources of product information,
outlets where the product is available, product price, the
image of the product or firm, and even where and how the
product is produced.

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Market Segmentation

Customers with Similar Need Sets

The next step is to group consumers with similar need sets.
These consumers can be
grouped into one segment
as far as product features
and perhaps even product
image are concerned
despite sharply different
demographics.

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Market Segmentation

Description of Each Group

Once consumers with similar
need nets are identified, they
should be described in terms of
demographics, lifestyles, and
media usage.
In order to design an effective
marketing program, it is
necessary to have a complete
understanding of the potential
customers.

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Market Segmentation

Attractive Segment(s) to Serve

Target market - segment(s) of the

larger market on which we will focus
our market effort.
This decision is based on our ability to
provide the selected segment(s) with
superior customer value at a profit.
Each market segment requires its own
marketing strategy.

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Market Segmentation
Market Segment Attractiveness Worksheet

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Marketing Strategy

Marketing Strategy is the answer to the question:
How will we provide superior customer value to our
target market?

This requires the formulation of a consistent marketing
mix,
mix which includes the
1. Product
2. Price
3. Communications
4. Distribution,
Distribution and
5. Services

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Marketing Strategy

The Product
A product is anything a
consumer acquires or might
acquire to meet a perceived
need.
Consumers are generally
buying need satisfaction,
not physical product
attributes.

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Marketing Strategy

Communications
Marketing communications include advertising, the sales
force, public relations, packaging, and any other signals
that the firm provides about itself and its products.

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Marketing Strategy

Price
Price is the amount of money
one must pay to obtain the
right to use the product.
Price sometimes serves as a
signal of quality
Consumer cost is everything
the consumer must surrender
in order to receive the
benefits of owning/using the
product.

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Marketing Strategy

Distribution

Distribution means having the

product available where target
customers can buy it. This is
essential to the product’s
success.
Good channel decisions require
a sound knowledge of where
target customers shop for the
product.

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Marketing Strategy

Service
Service refers to auxiliary or
peripheral activities that are
performed to enhance the
primary product or primary
service.
Auxiliary services cost money
to provide, so it is essential
that the firm furnish only those
services that provide value to
the target customers.

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Consumer Decisions

The consumer decision process intervenes between

the marketing strategy,
strategy as implemented in the
marketing mix,
mix and the outcomes.
outcomes
The firm can succeed only if consumers see a need
that its product can solve, become aware of the
product and its capabilities, decide that it is the best
available solution, proceed to buy it, and become
satisfied with the result of the purchase.

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Outcomes

1. Firm Outcomes

2. Individual Outcomes

3. Society Outcomes

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Outcomes

Firm Outcomes
The product position is the image of the product or brand
in the consumer’s mind relative to competing products
and brands.
Sales are a critical outcome, as they produce the revenue
necessary for the firm to continue in business.
Customer satisfaction remains a concern for marketers.
Retaining customers requires that they be satisfied with
their purchase and use of the product.

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Outcomes

Creating Satisfied Customers

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Outcomes

Individual Outcomes
Need satisfaction
The most obvious outcome of the consumption process
for an individual, whether or not a purchase is made, is
some level of satisfaction of the need that initiated the
consumption process.
Injurious consumption, the dark side of consumer
behavior, occurs when individuals or groups make
consumption decisions that have negative consequences
for their long-run well-being.

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Outcomes

Society Outcomes
Economic Outcomes
The cumulative impact of consumers’ purchase decisions, including the
decision to forgo consumption, is a major determinant of the state of a
given country’s economy.
Physical Environment Outcomes
Consumers make decisions that have a major impact on the physical
environments of both their own and other societies.
Social Welfare
Consumer decisions affect the general social welfare of a society,
including having a major impact on the overall quality of life in a society.

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