01 Meeting Changes and Challenges

CHAPTER
ONE
Consumer Behavior:
Meeting Changes and
Challenges
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.
The what, why, when, where, and how of consumer

purchases are examined in consumer behavior.
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter One Slide 2
Two Consumer Entities
Development of the
Marketing Concept
Production Orientation
• From the 1850s to the late 1920s

• Companies focus on production capabilities
• Consumer demand exceeded supply
This was the time that the control was in

the hands of the producers who said, “if
we make it they will buy it.”
Sales Orientation
• From the 1930s to the mid 1950s

• Focus on selling
• Supply exceeded customer demand
the manufacturers focused on selling the

product which they had overproduced
Marketing Concept
• 1950s to current - Focus on the customer!

• Determine the needs and wants of specific
target markets
• Deliver satisfaction better than competition
Understanding the consumer and in

delivering products that meet their needs
Societal Marketing Concept
• Considers consumers’
long-run best interest
• Good corporate
citizenship
The Marketing Concept
Embracing the Marketing
Concept
• Consumer Research • The process and tools
• Segmentation used to study consumer
• Market Targeting behavior
• Positioning
Implementing the
Marketing Concept
• Consumer Research • Process of dividing the
• Segmentation market into subsets of
• Market Targeting consumers with
common needs or
• Positioning characteristics
Implementing the
Marketing Concept
• Consumer Research The selection of one or
• Segmentation more of the segments
• Market Targeting identified to pursue
• Positioning
Implementing the
Marketing Concept
• Consumer Research • Developing a distinct image for
the product in the mind of the
• Segmentation consumer
• Market Targeting • Successful positioning includes:
• Positioning – Communicating the benefits
of the product
– Communicating a unique
selling proposition
The Marketing Mix
Customer Value, Satisfaction, Trust,
and Retention
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
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
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall mercenaries Chapter One Slide 16
Customer Satisfaction
Loyalists • When customers are highly satisfied,
they continue to purchase
Apostles • Provide very positive word-of-mouth
Defectors • When customers are disappointed, they
move to the competition
Terrorists • Who spread negative word-of-mouth
Hostages • Dissatisfied customers and they stay with
the company but are very unhappy
Mercenaries • Satisfied but are not really considered
loyal and will move from company to
company 17
The Customer Satisfaction
Loyalty Relationship
100 Apostle
Zone of Affection
Loyalty (Retention)
80
Zone of Indifference Near Apostle

60
40 Zone of Defection
20
Terrorist 0
1 2 3 4 5
Very Dissatisfied Neither Satisfied Very
Dissatisfied Satisfied
Satisfaction
Source: Adapted from Thomas O. Jones and W. Earl Sasser, Jr., “Why Satisfied Customers Defect,”
Harvard Business Review, November-December 1995, p. 91.
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.
Value, Satisfaction, • The objective of providing
Trust, and Retention value is to retain highly
satisfied customers.
• Customer Value
• Loyal customers are key
• Customer
– They buy more products
Satisfaction
– They are less price
• Customer Trust sensitive
• Customer – Servicing them is cheaper
Retention
– They spread positive
word of mouth
Top 10 Ranked U.S. Companies in Terms of
Consumers’ Trust and Respect of Privacy
Table 1.2
Top 10 Companies
• American Express
• eBay
• IBM
• Amazon
• Johnson & Johnson
• Hewlett-Packard
• U.S. Postal Service
• Procter and Gamble
• Apple
• Nationwide
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
Segmentation scheme used by
marketers is to segment customers by
their profitability to the firm
Effective Tiering of Service
The Customer Pyramid
Good Relationship
Which segment sees high value in
Customers
our offer, spends more with us over
time, costs less to maintain, and
Platinum
spreads positive word-of-mouth?
Gold
Which segment costs us time,
Iron effort, and money, yet does not
provide return we want? Which
segment is difficult to do
Lead business with?
Poor Relationship
Customers Source: Valarie A Zeithaml, Roland T Rust, and Katharine N. Lemon, “The Customer Pyramid: Creating
and Serving Profitable Customers,” California Management Review 43, no. 4, Summer 2001, pp.118–
142.
THE TRADITIONAL MARKETING CONCEPT VALUE- AND RETENTION-FOCUSED
MARKETING
Make only what you can sell instead of trying Use technology that enables customers to
to sell what you make. customize what you make.
Do not focus on the product; focus on the Focus on the product’s perceived value, as well
need that it satisfies. as the need that it satisfies.
Market products and services that match Utilize an understanding of customer needs to
customers’ needs better than competitors’ develop offerings that customers perceive as
offerings. 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 Understand consumer behavior in relation to

and the influences on consumer behavior. the company’s product.
Realize that each customer transaction is a Make each customer transaction part of an
discrete sale. ongoing relationship with the customer.
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

Chapter One Slide 24
Impact of Digital Technologies
The Mobile Consumer
Penetration of Internet Usage Among Mobile
• Wireless Media Subscribers in 16 Countries - FIGURE 1.3
Messages will
expand as:
– Flat-rate data traffic
increases
– Screen image
quality is enhanced
– Consumer-user
experiences with
web applications
improve
Consumer Behavior Is
Interdisciplinary
A Simple Model of Consumer Decision Making - Figure 1.4
This model will

guide our studies
of consumer
behavior

01 Meeting Changes and Challenges

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CHAPTER

• The behavior that consumers display in

The what, why, when, where, and how of consumer

• From the 1850s to the late 1920s

This was the time that the control was in

• From the 1930s to the mid 1950s

the manufacturers focused on selling the

• 1950s to current - Focus on the customer!

Understanding the consumer and in

Zone of Indifference Near Apostle

Understand the purchase behavior process Understand consumer behavior in relation to

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall

This model will

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