Chapter 1 Consumers Rule CONSUMER BEHAVIOR, 9e Michael R. Solomon 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Chapter Objectives When you finish this chapter, you should understand why: Consumers use products to help them define their identities in different settings. Consumer behavior is a process. Marketers need to understand the wants and needs of different consumer segments. The Web is changing consumer behavior. 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Chapter Objectives (continued) Consumer behavior relates to other issues in our lives. Consumer activities can be harmful to individuals and to society. Many different types of specialists study consumer behavior. There are two major perspectives that seek to understand and study consumer behavior. 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Aspects of Consumer Behavior Segmented by marketers by demographics Influenced by peer groups Exposed to competing brands seeking her loyalty Evaluates products by the appearance, taste, texture, smell 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

What is Consumer Behavior? Consumer behavior: the study of the processes involved when individuals or groups select, purchase, use, or dispose of products, services, ideas, or experiences to satisfy needs and desires. 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Figure 1.1 Stages in the Consumption Process 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Actors in Consumer Behavior A consumer is a person who identifies a need or desire, makes a purchase, and then disposes of the product. Purchaser versus user versus influencer Organization/group as consumer 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Consumers’ Impact on Marketing Understanding consumer behavior is good business Understanding people/organizations to satisfy consumers’ needs Knowledge and data about customers: Help to define the market Identify threats/opportunities to a brand 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Segmenting Consumers: Demographics Demographics: statistics that measure observable aspects of a population, such as Age Gender Family structure Social class/income Race/ethnicity Geography 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Redneck Bank Targets by Social Class People who belong to the same social class are approximately equal in terms of their incomes and social standing in the community. This bank boastfully targets rednecks. 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Discussion What are some products or services that are widely used by your social group? Do these products or services help you form bonds with your group? If yes, give examples. Are there any product or services you would avoid because of the social group you belong to? 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Segmenting Consumers: Lifestyles Psychographics The way we feel about ourselves The things we value The things we do in our spare time Consumers may have very different lifestyles. How we choose to spend our spare time can also help marketers to better target us. 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Tapping into Consumer Lifestyles Relationship marketing: interact with customers regularly; give them reasons to maintain a bond with the company Database marketing: tracking specific consumers’ buying habits and crafting products and messages tailored precisely to people’s wants Marketers realize that a key to success is building relationships between brands and customers. This belief represents the philosophy of relationship marketing. Relationship marketing is made easier by our ability to track consumer buying habits in computer databases. For instance, Wal-Mart stores massive amounts of information on the people who shop at its stores and the company uses the data to fine-tune its offerings. 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Popular Culture Music Movies Sports Books Celebrities Entertainment Marketers influence preferences for movie and music heroes, fashions, food, and decorating choices. 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Consumer-Generated Content When everyday people voice their opinions about products, brands, and companies on blogs, podcasts, and social networking sites such as Facebook CGC, short for consumer-generated content, really refers to anything that people create and share. It includes blog posts, pictures, videos, ads made by consumers, and much more. It has been harnessed by marketers to invite consumers to help brands create ads. Doritos has been very successful with this strategy. 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

The Meaning of Consumption People often buy products not for what they do, but for what they mean Consumers can develop relationships with brands: Self-Concept Attachment Nostalgic Attachment People use products to reflect who they are and what’s important to them as well as for the functional aspects of the products. Role theory explains this somewhat by pointing out that people play a variety of roles in life. They may buy specific products to fit the roles. People also develop relationships with brands. There are four types of relationships a person might develop with a brand. These are identified in the slide. The self-concept attachment means that the product helps to establish the user’s identity. The nostalgic attachment means that the product serves as a link to a past self. The interdependence relationship is based on the product being a part of the user’s daily routine. The love relationship means that the product elicits emotional bonds of warmth, passion, or other strong emotion. Interdependence Love 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

The Global Consumer The global consumer culture is one that unites people with a common devotion to Brand name consumer goods Movie stars Celebrities Leisure activities Many multinational household firms are household names in multiple countries. Much of this interconnectedness is related to the ubiquitous networks, which can be thought of as U-commerce, around us. RFID tags contain computer chips and a small antenna to let the chip communicate with a network. Such technology helps our global commerce center run more smoothly. 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Virtual Brand Communities C2C e-commerce in addition to B2B and B2C “Wired” Americans spend… Less time with friends/family Less time shopping in stores More time working at home after hours 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Marketing Ethics and Public Policy Business ethics: rules of conduct that guide actions in the marketplace Cultural differences in ethics: Codes of ethics less formal in Mexico U.S. Foreign Corrupt Practices Act prohibits use of bribery by U.S. businesspeople—no matter where they’re doing business Bribery commonly practiced in other countries It can be difficult to avoid ethical conflicts because our thoughts of what is right and wrong vary among people, organizations, and cultures. 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Sample of Federal Legislation Intended to Enhance Consumers’ Welfare Year Act 1951 Fur Product Labeling Act 1953 Flammable Fabrics Act 1958 National Traffic and Safety Act Automobile Information Disclosure Act 1966 Fair Packaging and Labeling Act Child Protection Act 1967 Federal Cigarette Labeling and Advertising Act Year Act 1968 Truth-in-Lending Act 1969 National Environmental Policy Act 1972 Consumer Products Safety Act 1975 Consumer Goods Pricing Act Magnuson-Moss Warranty-Improvement Act 1990 Nutrition Labeling and Education Act 1998 Internet Tax Freedom Act 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Do Marketers Create Artificial Needs? Objective of marketing: create awareness that needs exist, not to create needs versus Need: a basic biological motive Want: one way that society has taught us that the need can be satisfied Marketing is commonly criticized as trying to convince consumers that they need something when they really don’t. This is an ethical issue. Marketers respond to this question by pointing out that the need already exists in the consumer, but marketers recommend ways to satisfy the need. 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Are Advertising & Marketing Necessary? Does advertising foster materialism? Products are designed to meet existing needs; Advertising only helps to communicate their availability Yes, we can say that advertising and marketing are necessary because consumers may not know that solutions to problems exist without the information provided by advertising and marketing. This is the view of the economics of information perspective. It points out that there is an economic cost to searching for information. Advertising helps consumers by reducing search time. 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Do Marketers Promise Miracles? Advertisers simply do not know enough about people to manipulate them The failure rate for new products ranges from 40-80%. Although people may think that advertisers use magic to sell products, marketers are only successful when they promote good products. 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Discussion Advertisers are often blamed for promoting a materialistic society by making their products as desirable as possible. Do you agree with this? If yes, is materialism a bad thing? If no, what are your reasons? 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Public Policy & Consumerism Concern for the welfare of consumers Department of Agriculture Federal Trade Commission Food and Drug Administration Securities and Exchange Commission A summary of important consumer protection legislation is provided in Table 1.1. Environmental Protection Agency 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Consumer Activism Culture jamming is a strategy to disrupt efforts by the corporate world to dominate our cultural landscape. Adbusters Media Foundation publishes the Adbusters magazine and website. It is an organization of consumer activists who seek to culture jam the work of the corporate world in order to protect consumers and our shared environment. Adbusters sponsors many initiatives including Buy Nothing Day and TV Turnoff Week. 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Consumerism & Consumer Research JFK’s “Declaration of Consumer Rights” (1962) The right to safety The right to be informed The right to redress The right to choice Social Marketing Green Marketing President John F. Kennedy began our modern era of consumerism when he created the Declaration of Consumer Rights in 1962. Consumerism began in the 1960s but has continued strong. Today we have social marketing and green marketing which are outshoots of the earlier developments. Social marketing strategies use techniques marketers normally employ to sell beer or detergent to encourage positive behaviors such as increased literacy and to discourage negative activities like drunk driving. Green marketing means trying to protect or enhance the natural environment as the company goes about its business activities. Consumer researchers even use their research now as a way to solve problems rather than just study problems. This is known as transformative consumer research or participatory action research. 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

The Consumer “Dark Side” terrorism Addictive consumption Compulsive consumption Consumed consumers Sometimes consumers are their own worst enemies. Despite regulations and research, there are consumer actions related to marketing that are harmful. Consumers may be the perpetrators and targets of terrorism such as the cyanide lacing of Tylenol tablets. Consumers may experience addition. Consumer addition is a physiological or psychological dependency on products or services. Some say that social networking and texting are addictive. Compulsive consuption refers to repetitive shopping, often excessive, as an antidote to tension, anxiety, depression or boredom. There are three common elements to destructive consumer behavior. First, the behavior is not done by choice. Second, the gratification from the behavior is short-lived. Lastly, the person experiences guilt or regret afterwards. Consumed consumers are those who are exploited by others. Examples are prostitutes and babies for sale. Not only are many consumer behaviors destructive to self or society, they are also illegal. Some estimate the cost of crimes consumers commit against businesses at $40 billion per year. Shrinkage is the term used to refer to the loss of inventory due to shoplifting. Illegal activities 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Interdisciplinary Research Issues in Consumer Behavior Disciplinary Focus Product Role Experimental Psychology Perception, learning, and memory processes Clinical Psychology Psychological adjustment Microeconomics/Human Ecology Allocation of individual or family resources Social Psychology Behavior of individuals as members of social groups Sociology Social institutions and group relationships Macroeconomics Consumers’ relations with the marketplace Semiotics/Literary Criticism Verbal and visual communication of meaning Demography Measurable characteristics of a population History Societal changes over time Cultural Anthropology Society’s beliefs and practices Consumer behavior relies upon many research fields. 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Figure 1.2 Disciplines in Consumer Research MICRO CONSUMER BEHAVIOR (INDIVIDUAL FOCUS) Experimental Psych Clinical Psychology Developmental Psych Human Ecology Microeconomics Social Psychology Sociology Macroeconomics Semiotics/Literary Criticism Demography History Cultural Anthropology Consumer behavior involves many different disciplines This figure provides a glimpse at some of the disciplines working in the field and the level at which each tackles research issues. The fields closer to the top of the pyramid concentrate on individual behavior. Those toward the base are more interested in the aggregate activities that occur among large groups of people. MACRO CONSUMER BEHAVIOR (SOCIAL FOCUS) 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Table 1.3 Positivist versus Interpretivist Approaches Assumptions Positivist Approach Interpretivist Approach Nature of reality Objective, tangible Single Socially constructed Multiple Goal Prediction Understanding Knowledge generated Time free Context-independent Time-bound Contest dependent View of causality Existence of real causes Multiple, simultaneous shaping events Research relationship Separation between researcher and subject Interactive, cooperative with researcher being part of phenomenon under study We call a set of beliefs that guide our understanding of the world a paradigm. Some belief consumer behavior is in the midst of a paradigm shift, which occurs when a competing paradigm challenges the dominant set of assumptions. The basic set of assumptions underlying the dominant paradigm is positivism or modernism. It emphasizes that human reason is supreme and there is a single, objective truth that science can discover. The newer paradigm of interpretivism (or postmodernism) questions these assumptions. This perspective argues that societal beliefs deny the complex social and cultural world in which we really live. 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Figure 1.3 Wheel of Consumer Behavior The plan of the book goes from micro to macro. We will depict the topic as the wheel of consumer behavior. 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Chapter Summary Consumer behavior is a process. Consumer use products and brands to define their identity to others. Consumers from different segments have different needs and wants. Consumer activities can be harmful. Consumer behavior benefits from several fields. There are two major perspectives guiding our study of consumer behavior. We’ve covered several key concepts in this chapter. Consumer behavior is the study of the processes involved when individuals or groups select, purchase, use, or dispose of products, services, ideas, or experiences to satisfy needs and wants. Consequently, it is a broad field. 4/16/2017 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall