Lecture 3

Customer Value
Consumer Markets
Traditional versus Modern Organization
Customer-Perceived Value (CPV)
• Value proposition:
– The whole cluster of benefits a company promises
to deliver

• Value Delivery System:

– Includes all the experiences the customer will
have on the way to obtaining and using the
offering
• Customer Lifetime Value (CLV):
– The net present value of the stream of future
profits expected over the customer’s lifetime
purchase

• Customer Relationship Management (CRM):

– Using Information System to carefully manage and
maximize customer loyalty
 What is Consumer Behavior?

The study of individuals, groups, or organizations

and the processes they use to
select, secure, use, and dispose of
products, services, experiences, or ideas to
satisfy needs and the impacts that these
processes have on the consumer and society.
Why is a Consumer Important?

7
What influences consumer behavior?
• Cultural factors
• Social factors
– Reference groups, family, cliques etc.
• Personal factors
– Age and stage in the life cycle
– Occupation and economic circumstances
– Personality and self-concept
– Lifestyle and values
Overall Model Of Consumer Behavior
 External Influences

• Cross-cultural variations
• The changing society
• Values
• Demographics
• Subcultures
• Families and households
• Group influence
 Cultural values of relevance to consumer
behavior
• Other-oriented values
• Environment-oriented values
• Self-oriented values
 Other-oriented values

• Individual/collective
• Youth/age
• Extended/limited family
• Masculine/feminine
• Cooperative/competitive
• Diversity/uniformity
 Environment-oriented values

• Cleanliness
• Performance/status
• Tradition/change
• Risk taking/security
• Problem solving/fatalistic
• Admire/overcome nature
 Self-oriented values

• Active/passive
• Sensual gratification/ abstinence
• Material/nonmaterial
• Hard work/leisure
• Postponed gratification/ immediate gratification
• Religious/secular
 Group influence

• Group variables
– Membership: yes/no
– Strength of social tie
• Primary: family and friends
• Secondary: neighborhood
– Type of contact: online/offline
– Attraction: desirability
 Nature of Reference Group influence

• Informational
• Normative
• Identification
 Internal Influences

• Perception
• Learning, memory and positioning
• Motivation, personality and emotion
• Attitudes
• Self-concept and lifestyle
Information Processing for
Consumer Decision Making
 The Nature of Perception

• Exposure: when a stimulus comes within

range of our sensory receptor nerves
– Random vs. Deliberate

• Attention: when the stimulus activates one or

more sensory receptor nerves and the
resulting sensations go to the brain for
processing
– Low vs. High Involvement

• Interpretation: the assignment of meaning to

sensations
– Low vs. High Involvement
 Stimulus Factors

 Size and Intensity – influence the probability

of paying attention

 Color and Movement – serve to attract

attention

 Position – placement of the object in a

person’s visual field
 The Impact of Size
on Advertising Readership
 Stimulus Factors

 Isolation – the separation of a stimulus object

from other objects

 Format – manner in which the message is

presented

 Contrast – the tendency to attend more

closely to stimuli that contrast with their
background
Use of Isolation and Contrast
• Selective Attention
• Selective Distortion
• Selective Retention
• Subliminal Perception
 Learning

• Conditioning
– Classical
– Operant
 Motivation

• Maslow’s hierarchy of needs

• McGuire’s Psychological Motives
 Motivation (continued)

• Consumers do not buy products: instead they buy

motive satisfaction or problem solution

• Do marketers create need? Or they creates demand?

 Emotion in Ad

• Emotional contents in ads enhances their attention,

attraction and maintenance capabilities

• Dimension
– Pleasure: desire, joy etc.
– Arousal: interest, activation etc.
– Dominance: sadness, anger etc.
 Memory

• Short-term Memory (STM)

• Long-term Memory (LTM)

• Memory Retrieval
 Attitude

• Components
– Cognitive (beliefs)
– Affective (feelings)
– Behavioral (response tendencies)

• Attitude formation and change

– Source characteristics: credibility, sponsorship
– Appeal characteristics: Fear, Humor, Emotional
 Moderating effects

• Low involvement consumer decision making

• Variety seeking buying behavior
 Behavioral Decision Theory and
Behavioral Economics
• Decision Heuristics
– Availability
– Representativeness
– Anchoring and adjustment
• Framing
– Manner in which choices are presented to and seen
by a decision maker
– in comparative advertising
– Mental Accounting