Chapter 1 Consumer Behavior: Its Origins and Strategic Applications Copyright 2007 by Prentice Hall

Copyright 2007 by Prentice Hall 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 Copyright 2007 by Prentice Hall

Copyright 2007 by Prentice Hall 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. Copyright 2007 by Prentice Hall

Copyright 2007 by Prentice Hall Personal Consumer The individual who buys goods and services for his or her own use, for household use, for the use of a family member, or for a friend. Copyright 2007 by Prentice Hall

Organizational Consumer A business, government agency, or other institution (profit or nonprofit) that buys the goods, services, and/or equipment necessary for the organization to function. Copyright 2007 by Prentice Hall

Development of the Marketing Concept Production Concept Product Concept Selling Concept Marketing Concept Copyright 2007 by Prentice Hall

The Production Concept Assumes that consumers are interested primarily in product availability at low prices Marketing objectives: Cheap, efficient production Intensive distribution Market expansion Copyright 2007 by Prentice Hall

Copyright 2007 by Prentice Hall 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 Copyright 2007 by Prentice Hall

Copyright 2007 by Prentice Hall 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 Copyright 2007 by Prentice Hall

Copyright 2007 by Prentice Hall 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 Copyright 2007 by Prentice Hall

Copyright 2007 by Prentice Hall Discussion Question What two companies do you believe grasp and use the marketing concept? Why do you believe this? Copyright 2007 by Prentice Hall

Copyright 2007 by Prentice Hall The Marketing Concept Implementing the Marketing Concept Consumer Research Segmentation Targeting Positioning The process and tools used to study consumer behavior Two perspectives: Positivist approach Interpretivist approach Copyright 2007 by Prentice Hall

Copyright 2007 by Prentice Hall The Marketing Concept Implementing the Marketing Concept Consumer Research Segmentation Targeting Positioning Process of dividing the market into subsets of consumers with common needs or characteristics Copyright 2007 by Prentice Hall

Copyright 2007 by Prentice Hall Discussion Question What products that you regularly purchase are highly segmented? What are the different segments? Why is segmentation useful to the marketer for these products? Copyright 2007 by Prentice Hall

Copyright 2007 by Prentice Hall The Marketing Concept Implementing the Marketing Concept Consumer Research Segmentation Targeting Positioning The selection of one or more of the segments to pursue Copyright 2007 by Prentice Hall

Copyright 2007 by Prentice Hall The Marketing Concept Implementing the Marketing Concept Consumer Research Segmentation Targeting Positioning Developing a distinct image for the product in the mind of the consumer Successful positioning includes: Communicating the benefits of the product Communicating a unique selling proposition Copyright 2007 by Prentice Hall

This product is positioned as a solution to facial redness.

Copyright 2007 by Prentice Hall The Marketing Mix Product Price Place Promotion Copyright 2007 by Prentice Hall

Successful Relationships Customer Value Customer Retention Customer Satisfaction Copyright 2007 by Prentice Hall

Successful Relationships Value, Satisfaction, and Retention Defined as the ratio between the customer’s perceived benefits and the resources used to obtain those benefits Perceived value is relative and subjective Developing a value proposition is critical Customer Value Customer Satisfaction Customer Retention Copyright 2007 by Prentice Hall

Copyright 2007 by Prentice Hall Discussion Question How does McDonald’s create value for the consumer? How do they communicate this value? Copyright 2007 by Prentice Hall

Successful Relationships Value, Satisfaction, and Retention The individual's perception of the performance of the product or service in relation to his or her expectations. Customers identified based on loyalty include loyalists, apostles, defectors, terrorists, hostages, and mercenaries Customer Value Customer Satisfaction Customer Retention Copyright 2007 by Prentice Hall

Successful Relationships Value, Satisfaction, and Retention The objective of providing value is to retain highly satisfied customers. Loyal customers are key They buy more products They are less price sensitive They pay less attention to competitors’ advertising Servicing them is cheaper They spread positive word of mouth Customer Value Customer Satisfaction Customer Retention Copyright 2007 by Prentice Hall

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 Copyright 2007 by Prentice Hall

Traditional Marketing Concept Value and Retention Focused Marketing Traditional Marketing Concept Vs. Value and Retention Focused Marketing Table 1-2 Traditional Marketing Concept Value and Retention Focused Marketing Make only what you can sell instead of trying to sell what you make Use technology that enables customers to customize what you make Do not focus on the product; focus on the need that it satisfies Focus on the product’s perceived value, as well as the need that it satisfies Market products and services that match customers’ needs better than competitors’ offerings Utilize an understanding of customer needs to develop offerings that customers perceive as more valuable than Copyright 2007 by Prentice Hall

Impact of Digital Technologies Consumers have more power and access to information Marketers can gather more information about consumers The exchange between marketer and customers is interactive and instantaneous and goes beyond the PC. Marketers must offer more products and services Copyright 2007 by Prentice Hall

Societal Marketing Concept Marketers adhere to principles of social responsibility in the marketing of their goods and services; that is, they must endeavor to satisfy the needs and wants of their target markets in ways that preserve and enhance the well-being of consumers and society as a whole. Copyright 2007 by Prentice Hall

A Simplified Model of Consumer Decision Making – Figure 1-1 Copyright 2007 by Prentice Hall