© 2009 South-Western, a division of Cengage Learning. Chapter 2: Value and the Consumer Behavior Value Framework BABIN / HARRIS

© 2009 South-Western, a division of Cengage Learning.2-2 Learning Outcomes 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. LO 1 LO 2 LO 3

© 2009 South-Western, a division of Cengage Learning.2-3 Learning Outcomes Explain the way market characteristics like market segmentation and product differentiation affect marketing strategy. Analyze consumer markets using elementary perceptual maps. Justify adopting the concept of consumers’ lifetime value as an effective long-term orientation for many firms. LO 4 LO 5 LO 6

© 2009 South-Western, a division of Cengage Learning. LO 1 Describe the consumer value framework, including its basic components.

© 2009 South-Western, a division of Cengage Learning.2-5 The Consumer Value Framework (CVF) Represents consumer behavior theory illustrating factors that shape consumption related behaviors and ultimately determine the value associated with consumption. LO 1

© 2009 South-Western, a division of Cengage Learning.2-6 Exhibit 2.1: The Consumer Value Framework (CVF) LO 1

© 2009 South-Western, a division of Cengage Learning.2-7 Your IPOD is Calling! Apple has successfully capitalized on loyal consumer segments by extending their products to provide value to consumers in new ways.

© 2009 South-Western, a division of Cengage Learning.2-8 Internal Influences Psychology of the consumer LO 1 Personality of the consumer

© 2009 South-Western, a division of Cengage Learning.2-9 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. LO 1

© 2009 South-Western, a division of Cengage Learning.2-10 Gimme a Break! You know the song. But why does it get stuck in your head? One researcher claims we try to solve an inconsistency in our brains – that’s why we keep replaying it, and replaying it, and…

© 2009 South-Western, a division of Cengage Learning.2-11 Personality of the Consumer Individual differences include things like personality and lifestyles. LO 1

© 2009 South-Western, a division of Cengage Learning.2-12 External Influences: Interpersonal Influences Social Environment Situational Influences LO 1

© 2009 South-Western, a division of Cengage Learning. LO 2 Define consumer value and compare and contrast two key types of value.

© 2009 South-Western, a division of Cengage Learning.2-14 Consumer Value Value is a personal assessment of the net worth obtained from an activity. LO 2

© 2009 South-Western, a division of Cengage Learning.2-15 Types of Value LO 2 Utilitarian Hedonic

© 2009 South-Western, a division of Cengage Learning.2-16 Value What type of value do consumers get from this product? LO 2

© 2009 South-Western, a division of Cengage Learning.2-17 Caribou Coffee knows it’s not just about the coffee! LO 2

© 2009 South-Western, a division of Cengage Learning.2-18 Exhibit 2.2 The Value Equation LO 2

© 2009 South-Western, a division of Cengage Learning.2-19 Value LO 2 What type of value do consumers receive here?

© 2009 South-Western, a division of Cengage Learning.2-20 Exhibit 2.3: Consumption Activities Can Fall Into Any of These Categories LO 2

© 2009 South-Western, a division of Cengage Learning. LO 3 Apply the concepts of marketing strategy and marketing tactics to describe the way firms go about creating value for consumers.

© 2009 South-Western, a division of Cengage Learning.2-22 Exhibit 2.4: Business Strategy Exists at Different Levels LO 3

© 2009 South-Western, a division of Cengage Learning.2-23 Total Value Concept Why do you think Coca- Cola has such a large share of the market? LO 3

© 2009 South-Western, a division of Cengage Learning.2-24 Total Value Concept Every product’s value is made up of the basic benefits, plus the augmented product, plus the “feel” benefits. LO 3

© 2009 South-Western, a division of Cengage Learning. LO 4 Explain they way market characteristics like market segmentation and product differentiation affect marketing strategy.

© 2009 South-Western, a division of Cengage Learning.2-26 Market Segmentation and Product Differentiation Market segmentation is the separation of a market into groups based on different demand curves associated with each group. LO 4 Product differentiation is a marketplace condition in which consumers do not view all competing products as identical to one another.

© 2009 South-Western, a division of Cengage Learning.2-27 Elasticity Cheaper products don’t always outsell their higher-priced alternatives. LO 4

© 2009 South-Western, a division of Cengage Learning. LO 5 Analyze consumer markets using elementary perceptual maps.

© 2009 South-Western, a division of Cengage Learning.2-29 Exhibit 2.7 A Perceptual Map LO 5

© 2009 South-Western, a division of Cengage Learning. LO 6 Justify adopting the concept of a consumers’ lifetime value as an effective long-term orientation for many firms.

© 2009 South-Western, a division of Cengage Learning.2-31 Customer Lifetime Value (CLV) Customer lifetime value (CLV) represents the approximate worth of a customer to a company in economic terms. LO 6 CLV = npv(sales-costs) + npv(equity)

© 2009 South-Western, a division of Cengage Learning.2-32 E-Segments Hedonic Value Do you make purchases on-line? Utilitarian Value