1. Copyright © 2002 All rights reserved. 1 CHAPTER 1 The Customer: Key to Market Success

2. CHAPTER 1 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 2 The Importance of Understanding Customer Behavior A Key to Success  Satisfy customers  Adopt the marketing concept  Gain legitimacy in society

3. CHAPTER 1 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 3 Satisfying the Customer Adopt a Customer Culture  Incorporate customer satisfaction as an integral part of the corporate mission and utilize an understanding of customer behavior as input to all marketing plans and decisions

4. CHAPTER 1 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 4 Adopting the Marketing Concept Market Concept Principle Focus  Making what the customer wants or needs Selling Concept Principle Focus  Finding a buyer for the product  Selling the customer into exchanging money for the product vs.

5. CHAPTER 1 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 5 Gaining Legitimacy in Society A society supports businesses because they serve its members by catering to their needs and wants  Focus on the customer  Pay attention to customer behavior  Respond to customer needs, desires and preferences

6. Copyright © 2002 All rights reserved. 6 Customer Orientation …a thorough understanding of customers’ needs and wants, the competitive environment, and the nature of the market used to formulate all the firms’ plans and actions to create satisfied customers

7. CHAPTER 1 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 7 Competitive Advantages Through Customer Satisfaction Repeat Buying Higher Prices Loyalty in Crisis Word of Mouth New Product Innovation Corporate Performance One-Stop shopping GrowthProfits Customer Satisfaction

8. CHAPTER 1 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 8 Increased Profitability Advantages  Cost efficiencies from repeat customers  Price premiums from established customers  Customer loyalty in corporate crisis

9. CHAPTER 1 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 9 Increased Growth Advantages  Increased word of mouth  One-stop shopping  New product innovations

10. CHAPTER 1 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 10 Creates Pride in Employees Customer orientation has an effect on employee morale in the company  Satisfied employees create satisfied customers  Happy customers lead to employee happiness

11. CHAPTER 1 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 11 Customers: Types, Roles, and Behaviors Customer TypesRoles Mental Activities Physical Activities Business Households (consumers) Payers Users Buyers

12. CHAPTER 1 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 12 Customer Behavior Domain HOUSEHOLDBUSINESS SERVICES PRODUCTS Consumer Products Business Product Consumer Services Business Services

13. CHAPTER 1 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 13 Three Roles of the Customer User Payer Buyer

14. CHAPTER 1 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 14 Reasons for Role Specialization Lack of expertise Lack of time Lack of buying power Lack of access Lack of affordability When the product or service is subsidized by payers When the product or service is free

15. CHAPTER 1 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 15 Customer Needs and Wants Need arousal is driven by discomfort in a person’s physical and psychological conditions Wants occur when and because humans desire to take their physical and psychological conditions beyond the state of minimal comfort

16. CHAPTER 1 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 16 Determinants of Needs and Wants Customer Needs  Individual Traits  Genetics  Biogenics  Psychogenics  Market Traits  Climate  Topography  Ecology Customer Wants  Individual Context  Personal Financial Worth  Institutions  Culture  Market Context  Economy  Technology  Public Policy

17. CHAPTER 1 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 17 Matrix of Personal and Environmental Characteristics Personal Characteristics Environmental Characteristics PhysicalContextual Physical 1. Needs-driven markets (e.g., allergy medicine) 3. Personal needs and environmental wants (e.g., microwavable food) Contextual 2. Personal wants and environmental needs-driven markets (e.g., fur coat) 4. Wants-driven markets (e.g, theatre attendance)

18. CHAPTER 1 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 18 Market Value Market value is the potential of a product or service to satisfy customers’ needs and wants Value is created only if the product or service has the capability to satisfy a customer’s needs and wants

19. CHAPTER 1 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 19 Classification of Market Values Universal Values Personal Values

20. CHAPTER 1 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 20 Matrix of Values and Customer Roles CUSTOMER ROLES UserPayerBuyer UNIVERSAL VALUESPerformance ValuePrice ValueService Value PERSONAL VALUES Group specific Individual-specific Social value Emotional value Credit value Financing value Convenience value Personalization value

21. CHAPTER 1 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 21 Characteristics of Customer Value Values are instrumental Values are dynamic Values are hierarchical Diversity of customer values increases with hierarchy Values are synergistic Values are role-specific Values vary across customers

22. CHAPTER 1 PART 1 Customer Behavior: A Managerial Perspective Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 22 Value Synergy Best Universal value = (Performance) x (price) x (service value) and Best Personal value = (Social and emotional) x (convenience and personalization) x (credit and financing)

23. Conceptual Framework Payer UserBuyer Determinants of Customer Behavior: Personal Factors and Market Environment Chapter 2 Customer Attitudes: Cognitive and Affective Chapter 6 The Customer as Perceiver Chapter 4 Customer Motivation: Needs, Emotions, and Psychographics Chapter 5 The Customer as Learner Chapter 4 Trends in Determinants of Customer Behavior Chapter 3 Individual Customer Decision Making Chapter 8 Researching Customer Behavior Chapter 7 Group/Institution Customer Decision Making; Household, Business and Government Chapter 9 Customer Loyalty to Products, Brands and Stores Chapter 11 Relationship-based Buying Chapter 10 Online Customer Behavior Chapter 12 UNDERSTANDING CUSTOMER BEHAVIOR