Lecture 1 – AKJ – Summer 2013

Chapter 1
Consumer Behavior:
Its Origins and
Strategic Applications

Consumer Behavior,
Ninth Edition

Schiffman & Kanuk

"AKJ" CONSUMER BEHAVIOR IUB

 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

"AKJ" CONSUMER BEHAVIOR IUB 2

 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.

"AKJ" CONSUMER BEHAVIOR IUB 3

 Breaking it up
• Individuals or groups acquiring, using and
disposing of products, services, ideas, or
experiences
• Includes search for information and actual
purchase
• Includes an understanding of consumer
thoughts, feelings, and actions

"AKJ" CONSUMER BEHAVIOR IUB 4

Acquisition, Consumption and Disposal
• Acquisition • Consumption
– Receiving – Collecting
– Finding – Nurturing
– Inheriting – Cleaning
– Producing – Preparing
– purchasing – Displaying
– Storing
– Wearing
– Sharing

"AKJ" CONSUMER BEHAVIOR IUB 5

Acquisition, Consumption, Disposal
• Disposal
– Giving
– Throwing away
– Recycling
– depleting

"AKJ" CONSUMER BEHAVIOR IUB 6

Two Consumer Entities

"AKJ" CONSUMER BEHAVIOR IUB

Chapter One Slide 7
Government Buying

weblink

"AKJ" CONSUMER BEHAVIOR IUB 8

Development of the
Marketing Concept

"AKJ" CONSUMER BEHAVIOR IUB 9

Chapter One Slide
 The Production Concept
• Assumes that consumers are interested
primarily in product availability at low prices
• Marketing objectives:
– Cheap, efficient production
– Intensive distribution
– Market expansion

"AKJ" CONSUMER BEHAVIOR IUB 10

 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

"AKJ" CONSUMER BEHAVIOR IUB 11

 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

"AKJ" CONSUMER BEHAVIOR IUB 12

 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

"AKJ" CONSUMER BEHAVIOR IUB 13

 The Marketing Concept
Implementing the
Marketing Concept
• Consumer Research • The process and tools
• Segmentation used to study consumer
• Targeting behavior
• Positioning

"AKJ" CONSUMER BEHAVIOR IUB 14

 The Marketing Concept
Implementing the
Marketing Concept
• Consumer Research • Process of dividing the
• Segmentation market into subsets of
• Targeting consumers with
common needs or
• Positioning characteristics

"AKJ" CONSUMER BEHAVIOR IUB 15

Segmentation Used
by Sports Illustrated

"AKJ" CONSUMER BEHAVIOR IUB 16

 Think of a product that you regularly
purchase are highly segmented?
1) Shampoo is usually highly segmented.
2) There are products based on gender, hair type,
preferred smell, and price.
3) 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.

"AKJ" CONSUMER BEHAVIOR IUB 17

 The Marketing Concept
Implementing the
Marketing Concept
• Consumer Research The selection of one or
• Segmentation more of the segments to
• Targeting pursue
• Positioning

"AKJ" CONSUMER BEHAVIOR IUB 18

 The Marketing Concept
Implementing the
Marketing Concept
• Consumer Research • Developing a distinct image for
the product in the mind of the
• Segmentation consumer
• Targeting • Successful positioning includes:
• Positioning – Communicating the benefits
of the product
– Communicating a unique
selling proposition

"AKJ" CONSUMER BEHAVIOR IUB 19

This product is
positioned as
a solution to
facial redness.

"AKJ" CONSUMER BEHAVIOR IUB

The Marketing Mix

"AKJ" CONSUMER BEHAVIOR IUB

Chapter One Slide 21
Successful Relationships

Customer Customer
Value Retention

Customer
Satisfaction

"AKJ" CONSUMER BEHAVIOR IUB 22

 Successful Relationships
Value, Satisfaction,
and Retention
• Defined as the ratio between the
• Customer Value
customer’s perceived benefits
• Customer and the resources used to obtain
Satisfaction those benefits (gained vs. gave
up)
• Customer
• Perceived value is relative and
Retention
subjective
• Developing a value proposition is
critical
"AKJ" CONSUMER BEHAVIOR IUB 23
 Discussion Questions
• How does McDonald’s
create value for the
consumer?
• How do they
communicate this
value?

"AKJ" CONSUMER BEHAVIOR IUB

Chapter One Slide 24
 Discussion Questions
1.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.

1.They communicate this value

through television ads, in-store sign,
and their website.

"AKJ" CONSUMER BEHAVIOR IUB

Chapter One Slide 25
 Successful Relationships
Value, Satisfaction,
and Retention
• Customer • The individual's perception of the
performance of the product or
Value
service in relation to his or her
• Customer expectations.
Satisfaction • Customers identified based on loyalty
• Customer include loyalists, apostles, defectors,
terrorists, hostages, and mercenaries
Retention

"AKJ" CONSUMER BEHAVIOR IUB 26

Customers identified based on loyalty
When customers are highly satisfied, they can become
loyalists who continue to purchase

When customers are highly satisfied, they can also

become apostles, who provide very positive word-of-
mouth.

When customers are disappointed, they can become

defectors and move to the competition.

"AKJ" CONSUMER BEHAVIOR IUB 27

Customers identified based on loyalty
When customers are disappointed, they can also
become 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.

"AKJ" CONSUMER BEHAVIOR IUB 28

 Successful Relationships
Value, Satisfaction,
and Retention
• The objective of providing value is to
• Customer Value retain highly satisfied customers.
• Customer • Loyal customers are key
Satisfaction – They buy more products
• Customer – They are less price sensitive
Retention – They pay less attention to
competitors’ advertising
– Servicing them is cheaper
– They spread positive word of
mouth
"AKJ" CONSUMER BEHAVIOR IUB 29
 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

"AKJ" CONSUMER BEHAVIOR IUB

Chapter One Slide 30
Customer Profitability-Focused Marketing
• Platinum: heavy users, not price sensitive,
willing to try new offerings
• Gold: heavy users but not as profitable
because they are price sensitive, ask for
discounts, likely to buy from several providers.
• Iron: their spending volume and profitability
do not merit special treatment.
• Lead: these customers actually cost money.
They claim more attention than they deserve,
Negative WOM.
"AKJ" CONSUMER BEHAVIOR IUB 31
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.

"AKJ" CONSUMER BEHAVIOR IUB

Chapter One Slide 32
Impact of Digital Technologies

"AKJ" CONSUMER BEHAVIOR IUB

Chapter One Slide 33
A Simplified Model of Consumer Decision Making – Figure
34

1-1
"AKJ" CONSUMER BEHAVIOR IUB
 The end

"AKJ" CONSUMER BEHAVIOR IUB 35