1. Consumer Behavior: Meeting Changes and Challenges
CHAPTER
ONE
Consumer Behavior: Meeting Changes and Challenges

2. Learning Objectives
To Understand What Consumer Behavior Is and the Different Types of Consumers.
To Understand the Relationship Between Consumer Behavior and the Marketing Concept, the Societal Marketing Concept, as Well as Segmentation, Targeting, and Positioning.
To Understand the Relationship Between Consumer Behavior and Customer Value, Satisfaction, Trust, and Retention.
To Understand How New Technologies Are Enabling Marketers to Better Satisfy the Needs and Wants of Consumers.
Here is an outline of the topics for Chapter One.
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Chapter One Slide

3. Learning Objectives (continued)
To Understand How Marketers Are Increasingly Able to Reach Consumers Wherever Consumers Wish to Be Reached.
To Understand How the World’s Economic Condition Is Leading to Consumption Instability and Change.
To Understand the Makeup and Composition of a Model of Consumer Behavior.
To Understand the Structure of This Book
Here is an outline of the topics for Chapter One.
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Chapter One Slide

4. To Which Segment of Consumers Will This Ad Appeal?
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Chapter One Slide 4

5. A Segment of Consumers Who are Environmentally Concerned
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Chapter One Slide 5

6. Consumer Behavior
The behavior that consumers display in searching for, purchasing, using, evaluating, and disposing of products and services that they expect will satisfy their needs.
Consumer Behavior includes all the decisions a consumer makes when spending their time and money. The what, why, when, where, and how of consumer purchases are examined in consumer behavior. It is not just individuals, but households, families, and groups that influence the decisions we make.
This web link takes you to Google’s shopping site which is still in BETA test mode. Google used to have a shopping portal, Froogle, which is no longer active. There are many online sites which influence us as consumers either in the information gathering, decision making, or final purchasing part of our decisions.
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Chapter One Slide

7. Organizational Consumer
Two Consumer Entities
Personal Consumer
The individual who buys goods and services for his or her own use, for household use, for the use of a family member, or for a friend.
Organizational Consumer
A business, government agency, or other institution (profit or nonprofit) that buys the goods, services, and/or equipment necessary for the organization to function.
The personal consumer is sometimes called the end user or ultimate consumer. This is you when you go to Best Buy to purchase a new television for your home. The organizational consumer is buying for the organization or to re-sell to the personal consumer. Although both types of consumer entities are important, we will be focusing on the personal consumer throughout these presentations.
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Chapter One Slide

8. Development of the Marketing Concept
Production Orientation
Sales Orientation
Marketing Concept
The marketing concept was developed over time through two other important business orientations called the production and the sales orientation. They will be discussed in more detail on the following slides.
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Chapter One Slide

9. Production Orientation “if we make it they will buy it.”
From the 1850s to the late 1920s
Companies focus on production capabilities
Consumer demand exceeded supply
Production Orientation
Sales Orientation
Marketing Concept
During the production orientation, companies wanted efficient production lines to mass produce products for the consumer. Because the demand was higher than the supply, consumers were content to get a product and were not focused on product variation. This was the time that the control was in the hands of the producers who said,
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Chapter One Slide

10. Production Orientation
Sales Orientation
From the 1930s to the mid 1950s
Focus on selling
Supply exceeded customer demand
Production Orientation
Sales Orientation
Marketing Concept
There was overproduction during the production orientation, which led to excess product. Although the products were still similar and there was little variation, during the sales orientation period, the manufacturers focused on selling the product which they had overproduced.
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Chapter One Slide

11. Production Orientation
Marketing Concept
1950s to current - Focus on the customer!
Determine the needs and wants of specific target markets
Deliver satisfaction better than competition
Production Orientation
Sales Orientation
Marketing Concept
Rather than focus on what can be manufactured, the focus shifts with the marketing concept to what consumers prefer. It became a time to put the customer first and to understand their needs and wants. With this information, marketers can deliver satisfaction to their target markets. We are remaining focused on the marketing concept today as marketers become more sophisticated in understanding the consumer and in delivering products that meet their needs.
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Chapter One Slide

12. Societal Marketing Concept
Considers consumers’ long-run best interest
Good corporate citizenship
The societal marketing concept was developed from the marketing concept. Marketers and consumers are increasingly taking stock of what is good for themselves, their family, their country, and the planet. Marketing looks for opportunities to provide products and services to help consumers reach their goals while also making profitable decisions for their companies. The image in this slide of a Siemens ad suggests the company is committed to developing products that are safe for customers and the environment.
This web link will take you to the “Cause Marketing Planner” assembled by promomagazine.com. It is rich with information about not-for-profit organizations for cause marketing campaigns.
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Chapter One Slide

13. The Marketing Concept Embracing the Marketing Concept
Consumer Research
Segmentation
Market Targeting
Positioning
The process and tools used to study consumer behavior
All companies must continually conduct research to understand the needs and priorities of their market segments. This web link will take you to the Association for Consumer Research, whose goal it is to advance consumer research and facilitate the exchange of scholarly information among members of academia, industry, and governments worldwide.
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Chapter One Slide

14. The Marketing Concept Implementing the Marketing Concept
Consumer Research
Segmentation
Market Targeting
Positioning
Process of dividing the market into subsets of consumers with common needs or characteristics
Consumer needs are shaped by the environment, culture, education, and life experiences. Marketers perform segmentation by looking for groups with common needs. Segmentation can be based on consumers’ demographics, product usage, geography, lifestyle, and many other characteristics and needs.
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Chapter One Slide

15. The Marketing Concept Implementing the Marketing Concept
Consumer Research
Segmentation
Market Targeting
Positioning
The selection of one or more of the segments identified to pursue
When a marketer chooses the segments that they will pursue, they have chosen a target market. Selection of the correct target market is critical to success of the product since the marketer has assumed that this group of consumers has a similar need with respect to their product or service.
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Chapter One Slide

16. The Marketing Concept Implementing the Marketing Concept
Consumer Research
Segmentation
Market Targeting
Positioning
Developing a distinct image for the product in the mind of the consumer
Successful positioning includes:
Communicating the benefits of the product
Communicating a unique selling proposition
Positioning is how the consumer thinks about your product versus the competitor’s product. Does yours have a sleeker design, or is it faster or more compact? The positioning is ultimately in the mind of the consumer but the marketer helps form the positioning through effective advertising and communication. Strong positioning differentiates your product from the competition and clearly tells the consumer how it will fulfill their needs better than other products on the market.
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Chapter One Slide

17. The Marketing Mix Product Price Place Promotion Marketing Mix
The marketing mix is one of the most important concepts in marketing. It thoroughly describes the product and the tools the company offers to consumers. The product includes the name, design, and features. The price includes the list price, discounts, and payment methods. Place is how a company will distribute their product and promotion is how they will let customers know about the product and its benefits.
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Chapter One Slide

18. Customer Value, Satisfaction, Trust, and Retention
Successful Relationships
Customer value
High level of customer satisfaction
Strong sense of customer trust
Customer retention
The goal of all marketers is to build and maintain successful relationships with their consumers. This occurs by offering a product which has benefits that the consumer values. In addition, they see the value of those benefits as exceeding the cost of the product – the cost in terms of money, time, and opportunity costs.
If a product delivers value, the company is likely to have a high level of customer satisfaction. They will trust the marketer and continue to purchase the product. In addition, they will tell others about the product and speak highly of it when asked or when reviewing the product online.
A company with strong customer relationships will be able to achieve a high level of customer retention – their customers will not defect to the competitor or stop using their product. They will retain these customer over time and will be more profitable due to these valuable loyal customers.
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Chapter One Slide

19. Successful Relationships
Value, Satisfaction,
Trust, and Retention
Defined as the ratio between the customer’s perceived benefits and the resources used to obtain those benefits
Perceived value is relative and subjective
Developing a value proposition is critical(statements of the value their product offers to consumers)
Customer Value
Customer Satisfaction
Customer Trust
Customer Retention
It is best to think of value as the consumers’ perception of what they gained vs. what they gave up to purchase a product or use a service. Marketers are developing value propositions which are. If the value propositions are clear and applicable to the consumer, they will understand the strength of the product benefits.
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Chapter One Slide

20. Successful Relationships
Value, Satisfaction,
Trust, and Retention
The individual's perception of the performance of the product or service in relation to his or her expectations.
Customer groups based on loyalty include loyalists, apostles, defectors, terrorists, hostages, and mercenaries
Customer Value
Customer Satisfaction
Customer Trust
Customer Retention
It is important to understand the role of customer expectations in customer satisfaction. If you fall below the consumer's expectations, then the consumer is not satisfied, but if you exceed expectations then you can create “customer delight.”
When customers are highly satisfied, they can become loyalists who continue to purchase or apostles, who provide very positive word-of-mouth. When customers are disappointed, they can become defectors and move to the competition or terrorists, who spread negative word-of-mouth. Some dissatisfied customers become hostages and stay with the company but are very unhappy. Mercenaries are satisfied but are not really considered loyal and will move from company to company.
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Chapter One Slide

21. L Loyalists who continue to purchase or apostles, who provide very positive word-of-mouth. When customers are disappointed, they can become defectors and move to the competition or terrorists, who spread negative word-of-mouth. Some dissatisfied customers become hostages and stay with the company but are very unhappy. Mercenaries are satisfied but are not really considered loyal and will move from company to company.

22. Successful Relationships
Value, Satisfaction,
Trust, and Retention
Establishing and maintaining trust is essential.
Trust is the foundation for maintaining a long-standing relationship with customers.
Customer Value
Customer Satisfaction
Customer Trust
Customer Retention
Customer trust is closely related to customer satisfaction. Trust in a company helps build loyalty. Consumer trust differs based on the media and the source of the message. This is seen in advertising where customers trust word-of-mouth much more than marketing messages that are from the marketer.
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Chapter One Slide

23. Successful Relationships
Value, Satisfaction,
Trust, and Retention
The objective of providing value is to retain highly satisfied customers.
Loyal customers are key
They buy more products
They are less price sensitive
Servicing them is cheaper
They spread positive word of mouth
Customer Value
Customer Satisfaction
Customer Trust
Customer Retention
Customer retention is an important strategy to all marketers. The goal is to make customers stay with your company and generate positive word of mouth about your service and products. The Internet and cell phones have helped marketers maintain closer relations with their consumers and have opened easier channels for the customer to contact the company if they have questions, problems, or suggestions.
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Chapter One Slide

24. Top 10 Ranked U.S. Companies in Terms of Consumers’ Trust and Respect of Privacy Table 1.2
Top 10 Companies
American Express
eBay
IBM
Amazon
Johnson & Johnson
Hewlett-Packard
U.S. Postal Service
Procter and Gamble
Apple
Nationwide
These are the top 10 out of the 20 companies listed in Table 1.2 in the text. These companies have achieved a high level of trust with their customers if they are on this list.
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25. Customer Profitability-Focused Marketing
Platinum
Gold
Iron
Lead
Tracks costs and revenues of individual consumers
Categorizes them into tiers based on consumption behavior
A customer pyramid groups customers into four tiers
You are probably familiar with segmentation based on demographics, such as age and gender. Another common segmentation scheme used by marketers is to segment customers by their profitability to the firm. With this method, marketers can offer higher-level services to their platinum customers who are more valuable to the marketer, more likely to try new offerings, and are often not price sensitive.
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Chapter One Slide

26. THE TRADITIONAL MARKETING CONCEPT
VALUE- AND RETENTION-FOCUSED MARKETING
Make only what you can sell instead of trying to sell what you make.
Use technology that enables customers to customize what you make.
Do not focus on the product; focus on the need that it satisfies.
Focus on the product’s perceived value, as well as the need that it satisfies.
Market products and services that match customers’ needs better than competitors’ offerings.
Utilize an understanding of customer needs to develop offerings that customers perceive as more valuable than competitors’ offerings.
Research consumer needs and characteristics.
Research the levels of profit associated with various consumer needs and characteristics.
Understand the purchase behavior process and the influences on consumer behavior.
Understand consumer behavior in relation to the company’s product.
Realize that each customer transaction is a discrete sale.
Make each customer transaction part of an ongoing relationship with the customer.
This is a portion of Table 1.3 from the text, which highlights the difference between the traditional marketing concept versus value-and-retention-focused marketing. The full details of this comparison can be found in the textbook.
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Chapter One Slide

27. Impact of Digital Technologies
Marketers
More products and services through customization
Instantaneous exchanges
Collect and analyze data
Consumers
Power
Information
Computers, phones, PDA, GPS, smart TV
The impact of digital technologies is tremendous. Not only has the computer changed the way companies transact with customers, but there are changes from cell phones, smart phones, and cable television. Think of how you see marketing messages if you are watching a movie through on-demand or playing an online video game.
Marketers can now transact in a one-to-one relationship with customers – offering product, prices, and messages that are tailored for that consumer. By gathering data on the consumer, the marketer has more information to tailor these offers and communication messages.
The consumer has more power because they have more information on competing products, prices, and reviews on product performance. This gives them more choices and more bargaining power with the marketer.
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Chapter One Slide

28. The Mobile Consumer Wireless Media Messages will expand as:
Penetration of Internet Usage Among Mobile Subscribers in 16 Countries - FIGURE 1.3
Wireless Media Messages will expand as:
Flat-rate data traffic increases
Screen image quality is enhanced
Consumer-user experiences with web applications improve
We all know how important our cell phones are to our daily functioning. We have already seen penetration of devices with better applications and screens through the iPhone and BlackBerry products. This will continue to grow in the near future and marketers’ challenge is to determine how to best use these devices to reach consumers.
This web link takes you to a great site called “Marketing Charts.” It has data on all sorts of marketing-related information, including interactive and mobile phone use.
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Chapter One Slide

29. Consumer Behavior Is Interdisciplinary
Psychology
Sociology
Social psychology
Anthropology
Economics
Consumer Behavior as a field of study emerged in the late 1960s. As you study consumer behavior this semester, you will realize the importance of all these fields. Given huge economic shifts in the world economy beginning in 2008, it is important to realize the effect of economic changes on the behavior of consumers.
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Chapter One Slide

30. A Simple Model of Consumer Decision Making - Figure 1.4
This model will guide your studies of consumer behavior. The input stage includes sources of information to the consumer – how they learn and are influenced by the marketer and their environment.
The process stage ties to the decision-making process the consumer undergoes when considering a purchase. It moves from the inputs to the psychological factors involved in recognizing a need, searching for information, and evaluating alternatives.
The output stage involves the actual purchase and the post-purchase evaluation. This post-purchase evaluation ties to the satisfaction topics discussed earlier in this presentation and the importance of customer loyalty to marketing’s profitability.
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Chapter One Slide

31. The input stage includes sources of information to the consumer – how they learn and are influenced by the marketer and their environment. The process stage ties to the decision-making process the consumer undergoes when considering a purchase. It moves from the inputs to the psychological factors involved in recognizing a need, searching for information, and evaluating alternatives. The output stage involves the actual purchase and the post-purchase evaluation. This post-purchase evaluation ties to the satisfaction topics discussed earlier in this presentation and the importance of customer loyalty to marketing’s profitability.

32. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.
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Chapter Seven Slide