1. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

2. Roger D. Blackwell Paul W. Miniard James F. Engel Consumer Behavior Requests for permission to make copies of any part of the work should be mailed to the following address: Permissions Department, Thomson Business and Economics 5109 Natorp Boulevard Mason, OH 45040 800–423–0563

3. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Consumer Behavior and Consumer Research CHAPTER 1

4. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. What Is Consumer Behavior? Activities people undertake when obtaining, consuming, and disposing of products and services

5. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Obtaining ConsumingDisposing ConsumerInfluencesOrganizationalInfluences Consumer Behavior

6. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. ConsumerInfluences Organizational Influences

7. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. ConsumerInfluences Organizational Influences Culture Ethnicity Personality Family Life-stage Values Income Available Resources Attitudes Opinions Feelings Motivations Past Experiences Peer Groups Knowledge Brand Product Features Advertising Word of Mouth Promotions Retail Displays Price Quality Service Store Ambiance Convenience Loyalty Programs Packaging Product Availability

8. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Obtaining ConsumingDisposing ConsumerInfluencesOrganizationalInfluences Consumer Behavior

9. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. ObtainingConsumingDisposing

10. ObtainingConsumingDisposing  How you decide you want to buy  Other products you consider buying  Where you buy  How you pay for product  How you transport product home  How you use the product  How you store the product in your home  Who uses the product  How much you consume  How product compares with expectations  How you get rid of remaining product  How much you throw away after use  If you resell items yourself or through a consignment store  How you recycle some products

11. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. OBTAINING  How you decide you want to buy  Other products you consider buying  Where you buy  How you pay for product  How you transport product home CONSUMING  How you use the product  How you store the product in your home  Who uses the product  How much you consume  How product compares with expectations DISPOSING  How you get rid of remaining product  How much you throw away after use  If you resell items yourself or through a consignment store  How you recycle some products CONSUMER INFLUENCES Culture Ethnicity Personality Family Life-stage Values Income Available Resources Attitudes Opinions Motivations Past Experiences Feelings Peer Groups Knowledge ORGANIZATIONAL INFLUENCES Brand Product Features Advertising Word of Mouth Promotions Retail Displays Price Quality Service Store Ambiance Convenience Loyalty Programs Packaging Product Availability Consumer Behavior

12. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. What Is Consumer Behavior? Activities people undertake when obtaining, consuming, and disposing of products and services A field of study that focuses on consumer activities

13. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. What Is Consumer Behavior? Activities people undertake when obtaining, consuming, and disposing of products and services A field of study that focuses on consumer activities Scope goes beyond just why and how people buy to include consumption analysis

14. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Consumption Analysis Why and how people use products in addition to why and how they buy

15. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. The Marketing Concept The process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives

16. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. The Marketing Concept The process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives Satisfaction with an exchange depends on satisfaction with consumption of product and the exchange of money

17. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Why Study Consumer Behavior?

18. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Why Study Consumer Behavior? Consumer Behavior Determines the Economic Health of a Nation

19. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Why Study Consumer Behavior? Consumer Behavior Determines the Economic Health of a Nation Consumer Behavior Determines the Success of Marketing Programs

20. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Why Study Consumer Behavior? Consumer Behavior Determines the Success of Marketing Programs Marketing can be used to influence brand choice and purchase, while Demarketing can influence people to stop harmful consumption “The Customer is King” Organization influenced by consumer needs and wants

21. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Why Study Consumer Behavior? Consumer Behavior Determines the Success of Marketing Programs Organizations that are Customer- centric use a total marketing approach to focus their resources on satisfying customers Marketing Process of transforming or changing an organization to have what people will buy

22. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Why Study Consumer Behavior? Consumer Behavior Determines the Economic Health of a Nation Consumer Behavior Determines the Success of Marketing Programs Consumer Behavior Determines the Economic Health of Everyone

23. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Why Study Consumer Behavior? Consumer Behavior Determines the Economic Health of Everyone The individual’s decisions as a consumer determine their economic health by making more effective consumption decisions while avoiding deceptive practices harmful to them

24. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Why Study Consumer Behavior? Consumer Behavior Determines the Economic Health of Everyone Public policy leaders and social commentators study consumer behavior to alleviate overconsumption and underconsumption by educating consumers about problems and providing assistance

25. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Educating Consumers About Crises

26. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Understanding consumers’ issues or problems and developing methods to reach and educate consumers Educating Consumers About Health

27. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Understanding consumers’ issues or problems and developing methods to reach and educate consumers Educating Consumers About Health

28. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Why Study Consumer Behavior? Consumer Behavior Determines the Economic Health of a Nation Consumer Behavior Determines the Success of Marketing Programs Consumer Behavior Determines the Economic Health of Everyone Consumer Behavior Helps Formulate Public Policy

29. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Understanding consumers’ needs to formulate public policy and predicting behavioral changes that follow Helps Formulate Public Policy Interest rates Warning labels Economics Social Welfare Family Planning Government Regulations Government Protection and Education Protection from Competitive Markets

30. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Why Study Consumer Behavior? Consumer Behavior Affects Personal Policy

31. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Why Study Consumer Behavior? Consumer Behavior Affects Personal Policy Personal policy includes how you behave towards others and in buying situations, your values and beliefs, and how you live your life A person’s economic quality of life is determined by personal policy

32. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Evolution of Consumer Behavior

33. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Evolution of Consumer Behavior Supply Chain: all the organizations involved in taking a product from inception to final consumption - Manufacturers - Wholesalers - Retailers - Facilitating Organizations

34. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Evolution of Consumer Behavior Supply Chain: all the organizations involved in taking a product from inception to final consumption - Manufacturers - Wholesalers - Retailers - Facilitating Organizations Consumers’ Increased Influence on Business

35. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Evolution of Consumer Behavior Wholesaler Manufacturer Retailer Consumer Manufacturing Orientation Consumer Orientation Selling Orientation Marketing Orientation U.S. 1750-1850 1850-WWII 1970-2000 2000+ Europe 1750-1850 1760-WWII 1970-2000 2000+

36. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Evolution of Consumer Behavior Wholesaler Manufacturer Retailer Consumer Manufacturing Orientation Consumer Orientation Selling Orientation Marketing Orientation Consumers’ Increasing Influence U.S. 1750-1850 1850-WWII 1970-2000 2000+ Europe 1750-1850 1760-WWII 1970-2000 2000+

37. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Manufacturing Orientation Evolution of Consumer Behavior

38. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Manufacturing Orientation Selling Orientation Evolution of Consumer Behavior

39. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Manufacturing Orientation Selling Orientation Marketing Orientation Evolution of Consumer Behavior

40. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Manufacturing Orientation Selling Orientation Marketing Orientation - Motivation research - Positivism - Postmodernism Evolution of Consumer Behavior

41. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Evolution of Consumer Behavior Manufacturing Orientation Selling Orientation Marketing Orientation Consumer Orientation

42. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Consumer Orientation Beyond a marketing focus How all organizations in a demand chain adapt to changing consumer lifestyles and behaviors bringing product design, logistics, manufacturing, and retailing together Role of consumers in shaping many aspects of life—society, government, social programs, health cares, and other areas

43. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Consumer Research: Methods of Studying Consumer Behavior

44. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Consumer Research Methods Observation

45. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Consumer Research Methods Observation Observing consumer behaviors in different situations such as natural or artificial settings

46. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Consumer Research Methods Observation In-home observation: examining how and when consumers use and consume products in their households Shadowing: following and observing consumers in the shopping and consumption processes. Researchers may ask questions about reasons for behaviors Physiological methods: Techniques borrowed from medicine, psychology and other sciences including cameras to measure eye movement, galvanic skin response, and MRI

47. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Consumer Research Methods Interviews and Surveys

48. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Consumer Research Methods Interviews and Surveys Surveys: efficient method for gathering information from a large sample of consumers by asking questions and recording responses (telephone and Internet surveys, mall intercepts, and mail questionnaires)

49. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Consumer Research Methods Interviews and Surveys Surveys: efficient method for gathering information from a large sample of consumers by asking questions and recording responses (telephone and Internet surveys, mall intercepts, and mail questionnaires) Focus Groups: a group discussion led by a moderator skilled in persuading consumers to thoroughly discuss a topic of interest

50. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Consumer Research Methods Interviews and Surveys Surveys: efficient method for gathering information from a large sample of consumers by asking questions and recording responses (telephone and Internet surveys, mall intercepts, and mail questionnaires) Focus Groups: a group discussion led by a moderator skilled in persuading consumers to thoroughly discuss a topic of interest Longitudinal Studies: repeated measures of activities over time to determine changes in opinions, buying, and consumption behaviors

51. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Consumer Research Methods Experimentation Measuring cause-and-effect relation- ships by manipulating independent variables to determine the effects of changes on dependent variables - Laboratory experiment - Field experiment

52. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Consumer Research Methods Experimentation

53. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Consumer Research Methods Experimentation Attempts to understand cause-and-effect relationships by carefully manipulating independent variables to determine how these changes affect dependent variables - Laboratory experiment - Field experiment Independent variables might include number of advertisements and package design Dependent variables might include purchase intent or behavior

54. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Consumer Research Methods Consumption Research

55. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Consumer Research Methods Consumption Research Builds on the three primary research methods to examine how people use products and services rather than how they buy them

56. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Understanding How Consumers Use Products

57. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Consumer Research Methods Consumption Research Builds on the three primary research methods to examine how people use products and services rather than how they buy them May use ethnographic tools to under- stand how values and culture influence usage of products and other behaviors

58. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Consumer Research Methods Consumption Research Builds on the three primary research methods to examine how people use products and services rather than how they buy them May use ethnographic tools to under- stand how values and culture influence usage of products and other behaviors May identify new uses for existing products or new product to satisfy unmet or changing consumer needs

59. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. The Underlying Principles of Consumer Behavior The Consumer Is Sovereign

60. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. The Underlying Principles of Consumer Behavior The Consumer Is Sovereign The Consumer Is Global

61. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. The Underlying Principles of Consumer Behavior The Consumer Is Sovereign The Consumer Is Global Consumers Are Different; Consumers Are Alike

62. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Consumers appear different but respond in similar ways to brands

63. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Consumers appear different but respond in similar ways to brands

64. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. The Underlying Principles of Consumer Behavior The Consumer Is Sovereign The Consumer Is Global Consumers Are Different; Consumers Are Alike The Consumer Has Rights

65. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Consumer Bill of Rights

66. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Challenges for the Future Gathering and interpreting information that organizations need to meet changing needs of consumers Developing effective consumer research methods to capture changes in trends and lifestyles Understanding consumer behavior from a broader perspective as an important part of life

67. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

68. Roger D. Blackwell Paul W. Miniard James F. Engel Consumer Behavior Requests for permission to make copies of any part of the work should be mailed to the following address: Permissions Department, Thomson Business and Economics 5109 Natorp Boulevard Mason, OH 45040 800–423–0563

69. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. CHAPTER 2 Creating Marketing Strategies for Customer- Centric Organizations

70. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Consumer Analysis The process of understanding consumer trends, global consumer markets, models to predict purchase and consumption patterns, and communication methods to reach target markets most effectively

71. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Strategy A decisive allocation of resources (capital, technology, and people) in a particular direction

72. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Customer-Centric Organizations A strategic commitment to focus every resource of the firm on serving and delighting profitable customers

73. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Characteristics of Customer- Centric Organizations Shared Vision and Values Cross-Functional Integration System-Wide Simultaneous Training Customer Based Metrics

74. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Characteristics of Customer- Centric Organizations Shared Vision and Values Cross-Functional Integration System-Wide Simultaneous Training Customer Based Metrics The goal of a customer-centric organization is to provide a consumer with more value than its competitors

75. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Value The difference between what consumers give up (pay with time, money, or other resources) for a product and the benefits they receive

76. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Marketing Strategy Involves the allocation of resources to develop and sell products or services that consumers will perceive to provide more value than competitive products or services

77. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Where Does Consumer Behavior Fit In?

78. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Marketing Strategy Involves the allocation of resources to develop and sell products or services that consumers will perceive to provide more value than competitive products or services The process includes market analysis, market segmentation, brand strategy, and implementation with the consumer at the core

79. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Implementation in Marketplace Marketing Mix Product, Brand, Price, Place Promotion, and 7Rs Market Analysis Consumer Company Environmental Political/Legal Segmentation Demographic Situational Psychographic

80. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Market Analysis The process of analyzing changing consumer trends, current and potential competitors, company strengths and resources, and the technological, legal, and economic environments

81. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Market Analysis The process of analyzing changing consumer trends, current and potential competitors, company strengths and resources, and the technological, legal, and economic environments One goal is to minimize the number of failed products introduced to the market by better understanding the wants and needs of the market

82. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Market Analysis: Consumer Insight and Product Development Consumer Insight: an understanding of consumers’ expressed and unspoken needs and realities that affect how they make life, brand, and product choices. Combines fact (from research) and intuition to yield an insight that can lead to a new product, existing product innovation, brand extension, or revised communication plan

83. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Market Analysis: Consumer Environment Includes demographic trends, personal and group influences, knowledge, attitudes, motivation, purchase and consumption patterns, changing consumer needs, wants, and lifestyles

84. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Market Analysis: Consumer Environment Includes demographic trends, personal and group influences, knowledge, attitudes, motivation, purchase and consumption patterns, changing consumer needs, wants, and lifestyles Changes in the consumer environment can lead to new product ideas, product adaptations, new packaging or new services to help consumers meet their changing needs -iPod Accessories

85. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Market Analysis: Corporate Strengths and Resources Resources: - Financial - Technological - Personnel / managerial - Production - Development and design - Research - Marketing / advertising

86. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Market Analysis: Corporate Strengths and Resources Resources: - Financial - Technological - Personnel / managerial - Production - Development and design - Research - Marketing / advertising -Proctor and Gamble once developed everything internally. Currently 35% of its innovations are based on licensing and strategic acquisitions

87. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Market Analysis: Current and Potential Competitors - Who are current competitors and which firms are likely to become competitors? - What are advantages/disadvantages of competitors and competitive products? -What do alternative scenarios show of how competitors react to new products or innovations?

88. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Market Analysis: Market Environment Physical Conditions Government Stability and Regulations Market Environment Technology State of Economy

89. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Implementation in Marketplace Marketing Mix Product, Brand, Price, Place Promotion, and 7Rs Market Analysis Consumer Company Environmental Political/Legal Segmentation Demographic Situational Psychographic

90. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Market Segmentation Process of identifying groups of people who behave in similar ways to each other, but somewhat differently than other groups

91. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Inferring Other Behaviors From Product Usage

92. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Inferring Other Behaviors From Product Usage

93. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Market Segmentation Process of identifying groups of people who behave in similar ways to each other, but somewhat differently than other groups Results in market segment: a group of consumers with similar behaviors and needs that differ from those of the entire mass market Goal: minimize variance within groups and maximize variance between groups Opposite of market aggregation

94. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Market Segmentation Market aggregation: when organizations choose to market and sell the same product or service to all customers (also known as mass marketing)

95. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Market Segmentation Identifying Segments

96. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Market Segmentation Increasing diversity in consumer needs and wants leads to mass customization: customizing goods for individual customers in high volumes and at relatively low costs

97. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Market Segmentation Increasing diversity in consumer needs and wants leads to mass customization: customizing goods for individual customers in high volumes and at relatively low costs Key is understanding which customized features customers value the most

98. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Market Segmentation Increasing diversity in consumer needs and wants leads to mass customization: customizing goods for individual customers in high volumes and at relatively low costs Key is understanding which customized features customers value the most Ability to reach “segment of one”

99. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Market Segmentation Segmentation can increase customer satisfaction and profitability - decreases marketing expenses - increases value (and therefore price) to consumers

100. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Criteria for Choosing Segments Measurability: ability to obtain information about the size, nature, and behavior of a market segment Accessibility: degree to which segments can be reached, either through targeted advertising and communication programs or multiple retail channels

101. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Criteria for Choosing Segments Substantiality: size of the market—is it large enough to be profitable? Congruity: how similar members within the segment exhibit behaviors or characteristics that correlate with consumption behavior

102. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Bayesian Analysis Statistical technique based on a theorem that expresses uncertainty in probability terms Allows consumer analysts to make “educated guesses” on how the human mind affects behavior or “why people buy” Analyzes data collected from point-of- sale (POS) scanners to identify patterns of behavior that define market segments

103. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Implementation in Marketplace Marketing Mix Product, Brand, Price, Place Promotion, and 7Rs Market Analysis Consumer Company Environmental Political/Legal Segmentation Demographic Situational Psychographic

104. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Market Mix Strategies: Product Product: the total bundle of utilities (or benefits) obtained by consumers in the exchange process

105. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Market Mix Strategies: Product Product: the total bundle of utilities (or benefits) obtained by consumers in the exchange process Internal considerations External considerations

106. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Market Mix Strategies: Product Internal considerations include: - What are the costs of developing, producing, distributing, and selling the product? External considerations include: - What form of product best serves consumption patterns for the target segment - What packaging will most likely attract consumers and fulfill transportation, usage, and disposal of the product? - How will consumers compare this product to competitive or substitute products?

107. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Market Mix Strategies: Place Place: physical distribution and location of sale - Where will consumers expect and want to buy this product? - What are the most effective outlets through which to sell the product and how best to get it there?

108. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Market Mix Strategies: Price Price: total bundle of disutilities (costs) given up by consumers in exchange for the product

109. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Market Mix Strategies: Price Pricing considerations include: - What is the best pricing policy for the product or for the store? - How will consumers react to Everyday Low Prices or promotional prices? - Is it more important to have the “lowest price” or prices in the range consumers expect to pay? - What effect does price reduction or price ending have on perceived quality of product? - What does pricing policy need to be to maintain a healthy profit margin?

110. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Market Mix Strategies: Promotion Promotion: activities involved in selling a product, including advertising, public relations, sales promotions, and personal sales - What message should be sent to consumers? - Which forms of communication will best reach specific segments? - What type of communication should occur at various stages of purchase and consumption - How should different product attributes be positioned through different forms of media?

111. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Market Mix Strategies: Brand Brand: A product or product line, store, or service with an identifiable set of benefits, wrapped in a recognizable personality Functional elements Emotional elements Brand Promise

112. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Market Mix Strategies: Brand Functional elements - Performance, quality, price, reliability, logistics Does the brand solve a problem as expected and do what it is supposed to do? Emotional elements - I mage, personality, style, evoked feelings Does the brand create an emotional connections between the customer and the product or firm? Brand Promise What can consumer expect in exchange for their money?

113. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Market Mix Strategies: Brand Brand: A product or product line, store or service with an identifiable set of benefits, wrapped in a recognizable personality Brand Equity Brand Personality Brand Protection

114. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Market Mix Strategies: Brand Brand Equity Difference in value created by the brand minus the cost of creating the brand Brand Personality Reflection consumers see of themselves or think will develop by using a brand Brand Protection By promising a certain outcome, brands reduce the risk to consumers that the product may not deliver as expected

115. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Transforming Customers into Friends and Fans

116. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Implementation in Marketplace Marketing Mix Product, Brand, Price, Place Promotion, and 7Rs Market Analysis Consumer Company Environmental Political/Legal Segmentation Demographic Situational Psychographic

117. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Strategy Implementation Even the best strategies are worthless if not implemented well in the marketplace

118. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Strategy Implementation Even the best strategies are worthless if not implemented well in the marketplace 7Rs for formulation and implementation

119. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Customer Loyalty and Customer Relationship Management

120. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. It is less costly and easier to keep a customer than it is to create a new one Customer Loyalty

121. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. It is less costly and easier to keep a customer than it is to create a new one Loyal customers generate superior margins and recruit additional customers Customer Loyalty

122. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. It is less costly and easier to keep a customer than it is to create a new one Loyal customers generate superior margins and recruit additional customers With increased choices, consumers are becoming more fickle and less loyal Customer Loyalty

123. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. It is less costly and easier to keep a customer than it is to create a new one Loyal customers generate superior margins and recruit additional customers With increased choices, consumers are becoming more fickle and less loyal Consumer feel entitled to try new brands and switching behavior increases Customer Loyalty

124. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. It is less costly and easier to keep a customer than it is to create a new one Loyal customers generate superior margins and recruit additional customers With increased choices, consumers are becoming more fickle and less loyal Consumer feel entitled to try new brands and switching behavior increases To retain current customers, firms must focus on customer expectations of future benefits Customer Loyalty

125. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Customer Relationship Management Process of managing all the elements of the relationship a firm has with its customers and potential customers with CRM solutions and enterprise systems

126. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Customer Relationship Management Implementing CRM

127. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Customer Relationship Management Implementing CRM - Identify all customers and the nature of contacts with them - Identify which types of customers are most profitable - Identify and understand behaviors of the most profitable customers - Manage contact with most profitable customers - Manage firm activities including strategies and tactics to please the most profitable customers

128. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Customer Relationship Management Provides the ability to calculate the Customer Lifetime Value - The value to the company of a customer over the whole time the customer relates to the company

129. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Global Marketing Strategy

130. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Global Marketing Strategy Thinking Globally: involves ability to understand markets beyond one’s own country of origin with respect to: Sources of demand Sources of supply Management & marketing methods

131. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Global Marketing Strategy Organizations must understand markets on a global basis in terms of people Consumers have a myriad array of foreign-made and globally branded products Cultural, ethnic, and motivation variables also affect consumer decisions

132. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Global Marketing Strategy Can marketing be standardized?

133. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Global Marketing Strategy Can marketing be standardized? - Can a firm use the same marketing program in all target countries, or must it create a different program for each? - Which are greater—the similarities among or differences between consumers in different countries? - How do advantages of economies of scale and unified brand image compare to advantages of culture-specific messages?

134. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Global Marketing Strategy Cross-Cultural analysis: the comparison of similarities and differences in behavioral and physical aspects of cultures

135. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Global Marketing Strategy Cross-Cultural analysis: the comparison of similarities and differences in behavioral and physical aspects of cultures Cultural empathy: the ability to understand the inner logic and coherence of other ways of life and refrain from judging other value systems

136. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Global Marketing Strategy Cross-Cultural analysis: the comparison of similarities and differences in behavioral and physical aspects of cultures Cultural empathy: the ability to understand the inner logic and coherence of other ways of life and refrain from judging other value systems Ethnography: describing and understanding consumer behavior by interviewing and observing consumers in real- world situations

137. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Global Marketing Strategy Intermarket segmentation: the identification of groups of customers who transcend traditional market or geographic boundaries (similar segments around the world) Intermarket segmentation plays a key role in understanding the similarities and differences between consumers and countries that become the foundation of market standardization

138. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Global Advertising Effectiveness Global advertising sends the same message to consumers around the world Localized campaigns adapt messages to the norms of the different cultures

139. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Global Advertising Effectiveness Global advertising sends the same message to consumers around the world Localized campaigns adapt messages to the norms of the different cultures When is global advertising most effective? - Message is based on similar lifestyle - Ad appeals to basic human needs and emotions - Product satisfies universal needs and desires

140. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Global Advertising Effectiveness Global advertising sends the same message to consumers around the world Localized campaigns adapt messages to the norms of the different cultures When is global advertising most effective? Language problems may occur, but back- translation, visual language, and local experts (advice) helps overcome them

141. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Global Advertising Effectiveness Before choosing a brand name, marketers should consider the following:

142. COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license. Global Advertising Effectiveness Before choosing a brand name, marketers should consider the following: - Does the name of the product have another meaning in one or more of the countries where it might be marketed? - Can the name be pronounced everywhere? - Is the name close to that of a foreign brand, or does it duplicate another product sold in other markets? - If the product is distinctly American, will national pride and prejudice work against the acceptance of the product?