CHAPTER

ONE
Consumer Behavior:
Meeting Changes and
Challenges
 OBJECTIVE OF THE COURSE

The primary purpose of the course is to

provide the student with a usable,
managerial understanding of CB so that
he/she can understand and explain self
and others as consumers.

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 Two Consumer Entities

Organizational
Personal Consumer
Consumer
• The individual who • A business,
buys goods and government agency,
services for his or her or other institution
own use, for (profit or nonprofit)
household use, for that buys the goods,
the use of a family services, and/or
member, or for a equipment necessary
friend. for the organization to
function.

Chapter One Slide 4

 CONSUMER BEHAVIOR

The mental, emotional and physical

activities engaged in when
selecting, purchasing, using and
disposing of products and services
to satisfy needs.

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 External
Decision Process
Influences Experience &
Culture Acquisition Problem Recognition
Sub-culture
Demographics Information Search
Social Status
Reference Groups Evaluation of
Family
Alternatives
Marketing
Activities
Self Purchase Decision
Concept Needs

And Post-Decisional
Desire
Conflict
Internal Life Styles
Influences Outlet Selection and
Perception Purchase Act
Learning
Memory Use Behavior
Motives
Personality Experience &
Acquisition Post-Use Feelings
Emotions
Attitudes and Reactions
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 Consumer Behavior Is
Interdisciplinary

Psychology

Economics Sociology

Social
Anthropology
psychology

Chapter One Slide 7

 Why Study
Consumer Behavior?
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 Very simply,
understanding
consumer behavior
is good business!!
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 The Marketing Mix

Product Price

Marketing
Mix

Place Promotion

Chapter One Slide 10

Customer Value, Satisfaction, Trust,
and Retention

Successful Relationships
High level Strong
Customer of sense of Customer
value customer customer retention
satisfaction trust

Chapter One Slide 11

 Successful Relationships
Value, Satisfaction,
• Defined as the ratio between
Trust, and Retention the customer’s perceived
• Customer Value benefits and the resources
• Customer used to obtain those
Satisfaction benefits
• Customer Trust • Perceived value is relative
and subjective
• Customer
Retention • Developing a value
proposition is critical

Chapter One Slide 12

 Successful Relationships
Value, Satisfaction,
Trust, and Retention
• The individual's perception
• Customer of the performance of the
Value product or service in
• Customer relation to his or her
Satisfaction expectations.
• Customer Trust • Customer groups based on
• Customer loyalty include loyalists,
Retention apostles, defectors,
terrorists, hostages, and
mercenaries Chapter One Slide 13
 CUSTOMER SATISFACTION
• Customer satisfaction with customer behavior identified several types of customer.
– Loyalists: who keep purchasing.
– Apostles: (messenger) whose experiences exceed their expectations and who
provide very positive word of mouth about the company to others.
– Defectors: who feel neutral or merely satisfied and are likely to stop doing
business with the company.
– Terrorists: who have had negative experiences with the company and who
spread negative word of mouth.
– Hostages: who are unhappy customers who stay with the company because of
a monopolistic environment or low prices and who are difficult and costly to
deal with because of their frequent complaints.
– Mercenaries: who are very satisfied customers but who have no real loyalty
to the company and may defect because of a lower price elsewhere or on
impulse.

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 Successful Relationships
Value, Satisfaction,
Trust, and Retention • Establishing and
• Customer Value maintaining trust is
• Customer essential.
Satisfaction
• Trust is the
• Customer Trust
foundation for
• Customer
Retention maintaining a long-
standing relationship
with customers.
Chapter One Slide 15
 Successful Relationships
Value, Satisfaction, • The objective of providing
Trust, and Retention value is to retain highly
satisfied customers.
• Customer Value
• Loyal customers are key
• Customer
Satisfaction – They buy more products
• Customer Trust – They are less price
sensitive
• Customer
Retention – Servicing them is
cheaper
– They spread positive
word of mouth
Chapter One Slide 16
 CUSTOMER RETENTION
• In almost all business situations, it is more
expensive to win new customers than to keep
existing ones.
– loyal customers buy more products
– Loyal customers are less price sensitive and pay less
attention to competitor’s advertising.
– Servicing, existing customers who are familiar with
the firm’s offerings and processes is cheaper.
– Loyal customers spread positive word of mouth and
refer other customers.
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 Customer Profitability-Focused
Marketing
• Tracks costs and
revenues of Platinum
individual consumers
• Categorizes them Gold
into tiers based on
consumption Iron
behavior
• A customer pyramid Lead
groups customers
into four tiers

Chapter One Slide 18

 CUSTOMER RETENTION
• A study was advocated using a “customer pyramid”, where customers
are grouped into four tiers.
– The platinum tier: includes heavy users who are not price sensitive
and who are willing to try new offerings.
– The gold tier: consists of customers who are heavy users but not as
profitable because they are more price sensitive than those do in the
higher tier. They ask for more discounts, and are likely to buy from
several providers.
– The iron tier: consists of customers whose spending volume and
profitability do not merit special treatment from the company.
– The lead tier: includes customers who actually cost the company
money because they claim more attention than is merited by their
spending, tie up company resources and spread negative word of
mouth.
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 Impact of Digital Technologies

Marketers Consumers

• More products and • Power

services through • Information
customization • Computers, phones, PDA,
• Instantaneous exchanges GPS, smart TV
• Collect and analyze data

Chapter One Slide 20

 DECISION PROCESSING

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