Value and the Consumer Behaviour Value Framework CHAPTER 2 BABIN / MURRAY CB PART 1 Value and the Consumer Behaviour Value Framework CHAPTER 2 ©TOOGA/THE IMAGE BANK/GETTY IMAGES Copyright © Nelson Education Ltd. 2014

Learning Outcomes LO1 LO2 LO3 Describe the Consumer Value Framework, including its basic components. Define consumer value and compare and contrast two key types of value. Apply the concepts of marketing strategy and marketing tactics to describe the way firms go about creating value for consumers. LO1 LO2 LO3 Copyright © Nelson Education Ltd. 2014

Learning Outcomes LO4 LO5 LO6 Explain the way market characteristics like market segmentation and product differentiation affect marketing strategy. Analyze consumer markets using elementary perceptual maps. Justify consumers’ lifetime value as an effective focus for long-term business success. LO4 LO5 LO6 Copyright © Nelson Education Ltd. 2014

Describe the Consumer Value Framework, including its basic components. LO1 Describe the Consumer Value Framework, including its basic components. Copyright © Nelson Education Ltd. 2014

The Consumer Value Framework (CVF) LO1 Represents consumer behaviour theory illustrating factors that shape consumption-related behaviours and ultimately determine the value associated with consumption. Copyright © Nelson Education Ltd. 2014

Exhibit 2.1: The Consumer Value Framework (CVF) LO1 Relationship quality is a key component of value. Ask students for examples of companies that have done this well. How did they accomplish this? Copyright © Nelson Education Ltd. 2014

Internal Influences LO1 Psychology of the consumer Personality of the consumer Psychology: How consumers process and react to information, form attitudes, remember. Personality: What makes individuals different—includes motivation, values, individual lifestyle, and emotion. Copyright © Nelson Education Ltd. 2014

Psychology of the Consumer Cognition—the thinking or mental processes that go on as we process and store things that can become knowledge. Affect—refers to the feelings experienced during consumption activities or associated with specific objects. Copyright © Nelson Education Ltd. 2014

Personality of the Consumer LO1 Individual differences include things like personality and lifestyles. Copyright © Nelson Education Ltd. 2014

External Influences: Interpersonal Influences LO1 Social Environment Situational Influences Social environment includes reference groups, opinion leaders (friends, family, celebrities). Situational influences on purchase decisions include store design, lighting, music, etc. Copyright © Nelson Education Ltd. 2014

Define consumer value and compare and contrast two key types of value. LO2 Define consumer value and compare and contrast two key types of value. Copyright © Nelson Education Ltd. 2014

Exhibit 2.2 The Value Equation LO2 Copyright © Nelson Education Ltd. 2014

Consumer Value LO2 Value is a personal assessment of the net worth obtained from an activity. Value is subjective, influenced by factors such as expectations and consumer personality. The same consumption experience can be assessed very differently by two individuals. Copyright © Nelson Education Ltd. 2014

Types of Value Utilitarian Hedonic LO2 While some products deliver purely functional value (a clean floor) and others purely hedonic (the pleasure of seeing your favourite band perform live), many products and services combine both kinds of value. Ask for examples. Copyright © Nelson Education Ltd. 2014

Exhibit 2.3: Consumption Activities Can Fall into Any of These Categories LO2 Ask students to describe the utilitarian and hedonic elements of a restaurant. Copyright © Nelson Education Ltd. 2014

LO3 Apply the concepts of marketing strategy and marketing tactics to describe the way firms go about creating value for consumers. Copyright © Nelson Education Ltd. 2014

Exhibit 2.4: Business Strategy Exists at Different Levels LO3 Copyright © Nelson Education Ltd. 2014

Total Value Concept LO3 Why do you think Coca-Cola has such a large share of the market? Blind taste tests have proven that many loyal consumers cannot distinguish their preferred cola on taste alone. Where does loyalty come from? Copyright © Nelson Education Ltd. 2014

Total Value Concept LO3 Every product’s value is made up of the basic benefits, plus the augmented product, plus the “feel” benefits. Challenge students to list elements of hedonic, utilitarian, and “negative” value. Note how many link to each other (e.g., well-designed engine provides functional value—transportation, hedonic value—thrill of driving, and negative value—speeding tickets). IMAGINECHINA VIA AP IMAGES Copyright © Nelson Education Ltd. 2014

Value Is Co-Created LO3 Value co-creation is the realization that a consumer is necessary and must play a part in order to produce value. Copyright © Nelson Education Ltd. 2014

LO4 Explain the way market characteristics like market segmentation and product differentiation affect marketing strategy. Copyright © Nelson Education Ltd. 2014

Market Segmentation and Product Differentiation LO4 Product differentiation is a marketplace condition in which consumers do not view all competing products as identical to one another. Market segmentation is the separation of a market into groups based on different demand curves associated with each group. Copyright © Nelson Education Ltd. 2014

Exhibit 2.6: Total Market Sales and Sales within Market Segments LO4 Orange line: segment is highly price sensitive Green line: segment is not price sensitive Violet line: segment is price sensitive BUT volume goes DOWN as price goes down (good opportunity to discuss price as signal of quality; premium positioning, etc.) Copyright © Nelson Education Ltd. 2014

Product Category Demand LO4 Chanel No. 5 is in high demand at about $250 an ounce. Would sales of Chanel No. 5 drop if the price were lowered? Copyright © Nelson Education Ltd. 2014

Analyze consumer markets using elementary perceptual maps. LO5 Analyze consumer markets using elementary perceptual maps. Copyright © Nelson Education Ltd. 2014

Exhibit 2.7: A Perceptual Map for a Local Rock Music Radio Market Stars indicate ideal mix of news/talk and type of music for six segments. Each radio station in the market is plotted according to its format. Ask students to identify the best place to position a new station. Ask them which stations should tweak their format to better serve an identified segment. Students could also develop a perceptual map for restaurants or stores in their area. Copyright © Nelson Education Ltd. 2014

LO6 Justify consumers’ lifetime value as an effective focus for long-term business success. Copyright © Nelson Education Ltd. 2014

Customer Lifetime Value (CLV) LO6 Customer lifetime value (CLV) represents the approximate worth of a customer to a company in economic terms. CLV = npv(sales-costs) + npv(equity) Copyright © Nelson Education Ltd. 2014

Authenticity LO6 Some consumers will recognize the real Stilton cheese from the pretenders and are willing to pay more for the real deal. Copyright © Nelson Education Ltd. 2014

Value and Baseball: The Toledo Mud Hens Watch this clip to see how the Toledo Mud Hens increase consumer value. Copyright © Nelson Education Ltd. 2014