©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. BABIN / HARRIS CB Value and the Consumer Behavior Value Framework CHAPTER 2 PART 1 1 ©TOOGA/THE IMAGE BANK/GETTY IMAGES

2 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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

3 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Outcomes Explain the way market characteristics like market segmentation and product differentiation affect marketing strategy. Analyze consumer markets using elementary perceptual maps. Justify consumers’ lifetime value as an effective focus for long-term business success. LO 4 LO 5 LO 6

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. LO 1 Describe the consumer value framework, including its basic components. 4

5 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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

6 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 2.1: The Consumer Value Framework (CVF) LO 1

7 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Internal Influences Psychology of the consumer LO 1 Personality of the consumer

8 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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

9 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Personality of the Consumer LO 1 Individual differences include things like personality and lifestyles.

10 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. External Influences: Interpersonal Influences Social Environment Situational Influences LO 1 ©JORGEN SCHYTTE/STILL PICTURES/PHOTOLIBRARY

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. LO 2 Define consumer value and compare and contrast two key types of value. 11

12 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 2.2 The Value Equation LO 2

13 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Consumer Value Value is a personal assessment of the net worth obtained from an activity. LO 2

14 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Types of Value LO 2 Utilitarian Hedonic

15 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Value What type of value do consumers get from this product? LO 2 ©DAVID YOUNG-WOLFF/PHOTOEDIT

16 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 2.3: Consumption Activities Can Fall into Any of These Categories LO 2

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. LO 3 Apply the concepts of marketing strategy and marketing tactics to describe the way firms go about creating value for consumers. 17

18 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 2.4: Business Strategy Exists at Different Levels LO 3

19 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Total Value Concept Why do you think Coca- Cola has such a large share of the market? LO 3 Source: “Coca-Cola Gains Market Share Over Pepsi; Soft Drink Industry Shows Modest Growth,” Food and Drink Weekly (March 3, 2003), accessed June 30, 2010.

20 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Total Value Concept Every product’s value is made up of the basic benefits, plus the augmented product, plus the “feel” benefits. LO 3 IMAGINECHINA VIA AP IMAGES

21 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Value Is Co-Created Value co-creation is the realization that a consumer is necessary and must pay a part in order to produce value. LO 3

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. LO 4 Explain they way market characteristics like market segmentation and product differentiation affect marketing strategy. 22

23 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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.

24 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 2.6 Total Market Sales and Sales within Market Segments LO 4

25 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Product Category Demand Chanel No. 5 is in high demand at about $250 an ounce. LO 4 IMAGE COURTESY OF THE ADVERTISING ARCHIVES

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. LO 5 Analyze consumer markets using elementary perceptual maps. 26

27 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 2.7 A Perceptual Map for a Local Rock Music Radio Market LO 5

©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. LO 6 Justify consumers’ lifetime value as an effective focus for long- term business success. 28

29 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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)

30 ©2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Authenticity Some consumers will recognize the real Stilton cheese from the pretenders and are willing to pay more for the real deal. ©ISTOCKPHOTO.COM/JUANMONINO LO 6