Consumer Behavior, Eighth Edition SCHIFFMAN & KANUK Chapter 1 Introduction: The Impact of the Digital Revolution on Consumer Behavior

Opening Vignette

Objectives of One-to-One Marketing To attain customers Sell them more products Make a profit

Digital Revolution in the Marketplace Allows customization of products, services, and promotional messages like never before Enhances relationships with customers more effectively and efficiently

Changes in the Business Environment Increased consumer power Access to information More products and services Interactive and instant exchanges Access to customer patterns and preferences Evolution to other -Web connection PDAs HDTV Mobile phones

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. It focuses on how individuals make decisions to spend their resources – time, money and effort – on consuming products and services.

Consumer Behavior It includes what they buy, why they buy it, when they buy it, where they buy it, how often they buy it, how often they use it, how they evaluate it, and how they dispose it.

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, i.e., end users or ultimate consumers.

Organizational Consumer When profit & not-for-profit businesses, government agencies and institutions buy products & services in order to run their organizations, i.e., they are intermediary consumers.

Development of the Marketing Concept Production Concept Product Concept Selling Concept Marketing Concept

The Production Concept Assumes that consumers are interested primarily in product availability at low prices. Here demand is excessively higher than supplies. Marketing objectives: Cheap, efficient production Intensive distribution Market expansion

The Product Concept Assumes that consumers will buy the product that offers them the highest quality, the best performance, and the most features. Demand is still greater than supply. Marketing objectives: Quality improvement Addition of features Tendency toward Marketing Myopia

The Selling Concept Assumes that consumers are unlikely to buy a product unless they are aggressively persuaded to do so. Now supply is catching up with demand. Marketing objectives: Sell, sell, sell Lack of concern for customer needs and satisfaction

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. Now, supplies are greater than demand. Marketing objectives: Profits through customer satisfaction

Business Leaders Who Understood Consumer Behavior Alfred Sloan, General Motors Colonel Sanders, KFC Ray Kroc, McDonald’s

The Marketing Concept A consumer-oriented philosophy that suggests that satisfaction of consumer needs provides the focus for product development and marketing strategy to enable the firm to meet its own organizational goals.

BOC BD VIEW OF THEIR CUSTOMERS Customers are the most important person in our business. Customer is not dependent upon us; we are dependent upon him/her. Customer is not an interruption of work – he/she is the purpose of it. Customer does us a favor when he/she buys from us – we are not doing him/her a favor. Customer is part of our business – not an outsider. Customer is not a cold statistic – he is a flesh & blood human being with feeling and emotions like our own. Customer is not someone to argue with or match wit with. Customer is one who brings us his/her wants – it is our job to fulfill his/her need.

Implementing the Marketing Concept Consumer Research Marketing Research Segmentation Targeting Positioning: Marketing Mix: Product, Price, Place, Promotion, Packaging, People, etc Value = Perceived Benefits / Resources Used Satisfaction Retention

Consumer Research The process and tools used to study consumer behavior. Two perspectives: Positivist approach Interpretivist approach

Segmentation, Targeting, and Positioning Segmentation: process of dividing the market into subsets of consumers with common needs or characteristics Targeting: selecting one ore more of the segments to pursue Positioning: developing a distinct image for the product in the mind of the consumer

Successful Positioning Communicating the benefits of the product, rather than its features Communicating a Unique Selling Proposition for the product

The Marketing Mix Product Price Place Promotion

Successful Relationships Customer Value Customer Retention Customer Satisfaction

Types of Customers Loyalists Apostles Defectors Terrorists Hostages Mercenaries

Customer Profitability-Focused Marketing Tier 1: Platinum Tier 2: Gold Tier 3: Iron Tier 4: Lead

Societal Marketing Concept A revision of the traditional marketing concept that suggests that 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.

The Societal Marketing Concept All companies prosper when society prospers. Companies, as well as individuals, would be better off if social responsibility was an integral component of every marketing decision. Requires all marketers adhere to principles of social responsibility.

Evaluation of Alternatives Consumer Decision Making Firm’s Marketing Efforts 1. Product 2. Promotion 3. Price 4. Channels of distribution Sociocultural Environment 1. Family 2. Informal sources 3. Other noncommercial sources 4. Social class 5. Subculture and culture Input External Influence Need Recognition Prepurchase Search Evaluation of Alternatives Psychological Field 1. Motivation 2. Perception 3. Learning 4. Personality 5. Attitudes Consumer Decision Making Process Experience Figure 1-1: A Model of Consumer Decision Making Purchase 1. Trial 2. Repeat purchase Post-Decision Behavior Output Postpurchase Evaluation