1. Copyright © 2002 All rights reserved. 1 CHAPTER 3 Trends in Determinants of Customer Behavior

2. CHAPTER 3 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 2 Factors that Influence Customer Behavior Three factors that are expected to cause the most significant change in customer behavior are:  Changes in demographics  Advances in technology  Changes in public policy

3. CHAPTER 3 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 3 Conceptual Framework Payer UserBuyer Demographics Aging population Women in the workforce Single-person households Declining middle-class Ethnic diversity Geographic distribution Public Policy Pragmatism over ideology Rights of passive consumers Regional economic integration Technology Control over information Smart products Access to products Mass customization

4. CHAPTER 3 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 4 Benefits of Anticipating Trends in Customer Behavior Anticipating trends can give companies a key strategic advantage By sighting a trend, the industry can create a market by channeling a latent need Anticipating trends creates positive public opinion for the company and the industry, portraying them as responsive

5. CHAPTER 3 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 5 Demographic Trends Aging of the population Rise in number of working women Increase in single-person households Decline of the middle class Increase in ethnic diversity Geographic redistribution

6. CHAPTER 3 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 6 Aging of the Population Populations age for two key reasons  Birth rate is declining  Life expectancy is rising The aging population has concerns:  Wellness  Financial well-being  Safety and security  Recreational needs

7. CHAPTER 3 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 7 Women in the Workforce Effects of the working women trend:  A significant change in the resources of a household  Time shortage: lack of free time  Time shift: the time when nonwork-related activities may be pursued  A shift in the lifestyle of families  With both spouses working, households have turned into roommate families

8. CHAPTER 3 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 8 Single-person Household Implications of the living alone trend include:  Loneliness  Self-respect and autonomy  Cocooning  Impulse buying

9. CHAPTER 3 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 9 The Declining Middle Class Four key implications:  An increasing range in prices of products  More customer militancy  Affordability  The neo rich

10. CHAPTER 3 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 10 Ethnic Diversity Two distinct implications:  Segmented markets  Cultural diversity

11. CHAPTER 3 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 11 Geographic Redistribution Geographical redistribution separates different generations in different space and time zones  Increases gaps both within and between generations People living in different areas of the country reflect different values, lifestyles, and attitudes  Regional marketing responds to and feeds the differences by exposing newly arrived residents to regional tastes

12. CHAPTER 3 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 12 Technological Trends Technology is shaping future customer values Advances in technology have already given customers  Increased access to information  Newer generations of products  Automation of transaction processes to provide customers with greater flexibility and control  Access to some customized products

13. CHAPTER 3 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 13 Customer Responses to New Technology Technological developments will stimulate changes in customer behavior  Customers will:  Take on the role of coproducers  Engage in disintermediation  Engage in outsourcing  Engage in automation of consumption

14. CHAPTER 3 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 14 Trends in Public Policy Economic pragmatism is prevailing over ideology Many governments are concerned with protection of passive consumers Governments on an international level are pursuing regional economic integration

15. CHAPTER 3 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 15 The Government’s Role in the National Economy Historically, three ideologies have shaped the government’s role in national economic affairs  Political  Religious  Central planning

16. CHAPTER 3 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 16 Implications of Ideology vs. Economic Pragmatism Economic Pragmatism Government ownership + regulation Limited product and service offerings Locally produced products and services Ideology (political, religious, central planning) Greater competition due to privatization & deregulation Better products & lower prices due to greater competition Internationalization of products & services due to open boundaries Economic Pragmatism

17. CHAPTER 3 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 17 Implications for Customer Behavior Greater competition  Customer orientation is a must All three customer roles will benefit  The payer by lower prices  The user by better products  The buyer by ease of doing business More standardization

18. CHAPTER 3 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 18 Implications of the Trends for the Three Customer Roles The foregoing trends in demographics, technology, and public policy will influence all three customer roles  User  Payer  Buyer

19. CHAPTER 3 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 19 Influence of Major Trends in Demographics on the Three Customer Roles UserPayerBuyer DEMOGRAPHICS Aging populationIncreased health and security and recreational needs. Cost containment for health-care needs a high concern. Home delivery and convenience in buying important. Working womenTime-saving appliances; cooking, cleaning, child care outsourced. Affordability somewhat improved. Male-female role specialization in buying further diluted. Single-person households Social and emotional values in products acquire prominence. Better affordability.More impulse and experiential buying. Declining middle classDemand for extreme upscale and downscale merchandise. Financing progressively more important. More diligent buying effort among the expanded downscale customer groups. Increasing ethnic diversity Greater ethnic diversity in customer tastes. Cross-ethnic differences in affordability. Expected customer service levels differ across ethnic groups. Geographic redistribution Greater regional diversity in customer tastes.

20. CHAPTER 3 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 20 UserPayerBuyer TECHNOLOGY Access to informationMore customized products.Better information on competitor prices. Product search on the Internet. Product information on demand. Smart productsSmart products with memory for users preferences. New methods of identity verification ensure security against frauds. Automated purchase Buying direct from the factory. Liberated customer behavior Buyers will need to be technology-savvy. Mass customized lifestyles Influence of Major Trends in Technology on the Three Customer Roles

21. CHAPTER 3 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 21 Influence of Major Trends in Public Policy on the Three Customer Roles UserPayerBuyer PUBLIC POLICY Economic pragmatismBetter products due to open-market economy. Better prices due to competitive economy. Easier access to global products. Easier to do business with companies. Rights of passive consumersConsumers assured protection against passive consumption. Financial penalties for offensive consumption. Access to societally harmful product/services made more difficult. Regional economic integrationSeasonal products available for year round consumption. Exposure to diverse consumption cultures. More economically produced and more economically priced products and services. Easier to acquire products and services from diverse consumption cultures Local availability of global products.

22. CHAPTER 3 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 22 Overall Implications for Marketers The economy will become more service-oriented requiring companies to make significant changes:  Measure customer value of products and services in terms of time and money  Make safety and quality, and courteous efficiency an integral part of the service offered  Adopt mass customization  Offer instant marketing