Consumer Behavior, Ninth Edition Schiffman & Kanuk MKT 344 Chapter 1 Consumer Behavior: Meeting Changes and Challenges

 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

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

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

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

Production Concept Selling Concept Product Concept Marketing Concept

 Assumes that consumers are interested primarily in product availability at low prices  Marketing objectives of the companies:  Cheap, efficient production  Intensive distribution  Market expansion (don’t focus on product innovation or product expansion) Copyright 2007 by Prentice Hall

 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:  A short-sighted and inward looking approach to marketing that focuses on the needs of the company instead of defining the company and its products in terms of the customers' needs and wants. Copyright 2007 by Prentice Hall

 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

 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

 Consumer Research  The process and tools used to study consumer behavior  Segmentation  Targeting  Positioning Copyright 2007 by Prentice Hall Implementing the Marketing Concept

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

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

Copyright 2007 by Prentice Hall 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

 Product  Price  Place  Promotion Copyright 2007 by Prentice Hall

Customer Value Customer Satisfaction Customer Retention

 Customer Value  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 ▪ Value proposition: an innovation, service, or feature intended to make a company or product attractive to customers. ▪ Lexus: value proposition: delivering quality, zero defects in manufacturing, superior personal post purchase service Value, Satisfaction, Trust and Retention

 Customer Satisfaction  The individual's perception of the performance of the product or service in relation to his or her expectations.  Types of customers based on loyalty: ▪ Loyalists: keep purchasing and very loyal ▪ Apostles: provide positive word of mouth ▪ Defectors: neutral of merely satisfied ▪ Terrorists: spread negative word of mouth ▪ Hostages: unhappy customers but sticking to the company for some reason like monopoly or low price etc ▪ Mercenaries: satisfied by not loyal. Can switch any time Value, Satisfaction, Trust and Retention

 Trust:  Customer trust depends on: ▪ Other customers’ positive word of mouth ▪ Newspaper ▪ Customer opinion posted online ▪ Brand website ▪ Ads before movies ▪ Search engine ad ▪ Online banner ad ▪ text ads on mobile phone  Delight: when trust is low, company try to set things right to the customers and give the customer a vibe that s/he is very much valued Copyright 2007 by Prentice Hall Value, Satisfaction, Trust and Retention

 Customer Retention  Strategy of customer retention is designed to make it in the best interest of customers to stay with a company rather than switch to another company  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 ▪ They spread positive word of mouth Copyright 2007 by Prentice Hall Value, Satisfaction, Trust and Retention

 Retention:  Selective relationship: ▪ Ranking customers in terms of profitability. i.e. focusing on customers who purchase frequently and a regular customer will get intensive customer service; moderate purchaser will have limited customer service and irregular customers will be ignored ▪ Customer profitability focused marketing: Tracks costs and revenues of individual consumers Copyright 2007 by Prentice Hall Value, Satisfaction, Trust and Retention

Platinum: Heavy users Gold: heavy user but not profitable, price sensitive, ask for discounts Iron: light user and not profitable Lead: wants more attention than the spending, spread negative WOM  Retention:  Customer profitability focused marketing: Tracks costs and revenues of individual consumers  Customer pyramid Value, Satisfaction, Trust and Retention

 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

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