1. 1-1 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

2. 1-2 PART I: INTRODUCTION

3. 1-3 CHAPTER 1 CONSUMER BEHAVIOR AND MARKETING STRATEGY

4. 1-4 Consumer Behavior and Marketing Strategy Consumer behavior Consumer behavior is the study of individuals, groups, or organizations and the processes they use to select, secure, use, and dispose of products, services, experiences, or ideas to satisfy needs and the impacts that these processes have on the consumer and society.

5. 1-5 Applications of Consumer Behavior 1.Marketing Strategy 2.Regulatory Policy 3.Social Marketing 4.Informed Individuals

6. 1-6 Applications of Consumer Behavior Marketing Strategy  consumer behavior  Marketing strategies and tactics are based on explicit or implicit beliefs about consumer behavior.   Decisions based on explicit assumptions and sound theory and research are more likely to be successful than are decisions based solely on implicit intuition.  consumer behavior  Knowledge of consumer behavior can be an important competitive advantage and can greatly reduce the odds of bad decisions and market failures!

7. 1-7 Applications of Consumer Behavior Regulatory Policy   Various regulatory bodies exist to develop, interpret, and/or implement policies designed to protect and aid consumer.  consumer behavior  Effective regulation of many marketing practices requires an extensive knowledge of consumer behavior.

8. 1-8 Applications of Consumer Behavior Social Marketing   Social marketing is the application of marketing strategies and tactics to alter or create behaviors that have a positive effect on the targeted individuals or society as a whole.  consumer behavior  As is true for commercial marketing strategy, successful social marketing strategy requires a sound understanding of consumer behavior.

9. 1-9 Applications of Consumer Behavior Informed Individuals   Most economically developed societies are referred to as consumption societies. Most individuals in these societies spend more time engaged in consumption than any other activity, including work or sleep.  consumer behavior  Knowledge of consumer behavior can enhance our understanding of our environment and ourselves.   Such an understanding is essential for sound citizenship, effective purchasing behavior, and reasoned business ethics.

10. 1-10 Marketing Strategy and Consumer Behavior Customer value Customer value is the difference between all the benefits derived from a total product and all the costs of acquiring those benefits. Providing superior customer value requires the organization to do a better job of anticipating and reacting to customer needs than the competition does.

11. 1-11 Marketing Strategy and Consumer Behavior

12. 1-12 Marketing Strategy and Consumer Behavior Marketing Strategy Marketing Strategy begins with an analysis of the market the organization is considering, requiring a detailed analysis of the: organization’s capabilities strengths and weaknesses of competitors economic and technological forces current and potential customers Step 1. Market Analysis

13. 1-13 Marketing Strategy and Consumer Behavior On the basis of the consumer analysis, the organization identifies groups of individuals, households, or firms with similar needs. These market segments are described in terms such as demographics, media preferences, geographic location, etc. Management then selects the segment(s) to target. Step 2. Market Segmentation

14. 1-14 Marketing Strategy and Consumer Behavior Marketing Strategy Marketing Strategy seeks to provide the customer with more value than the competition, while still producing a profit for the firm. total product Marketing strategy is formulated in terms of the marketing mix, which involves determining the product features, price, communications, distribution and services that will provide customers with superior value, resulting in the total product. Step 3. Marketing Strategy

15. 1-15 Marketing Strategy and Consumer Behavior total product The total product is presented to the target market, which is consistently engaged in processing information and making decisions designed to maintain or enhance its lifestyle or performance. lifestyle centers Many firms are wrapping experiences around their traditional products and service in order to sell them better. For example, retailers have been moving to lifestyle centers in an effort create a more pleasing shopping experience. Step 4. Consumer Decision Process

16. 1-16 Marketing Strategy and Consumer Behavior Society Society – the cumulative effect of the marketing process affects economic growth, pollution, social problems. Firm Firm – reaction of the target market to the total product produces an image of the product/brand/organization. Individual Individual – the process results in some level of need satisfaction, financial expenditure, attitude development/change, and/or behavioral changes. Step 5. Outcomes

17. 1-17 Market Analysis Components 1.The Consumers 2.The Company 3.The Competitors 4.The Conditions

18. 1-18 Market Analysis Components The Consumers consumer behavior It is not possible to anticipate and react to customers’ needs and desires without a complete understanding of consumer behavior. Discovering customers’ needs is a complex process, but it can often be accomplished by marketing research.

19. 1-19 Market Analysis Components The Company A firm must fully understand its own ability to meet customers needs. This involves evaluating all aspects of the firm including: financial condition general managerial skills production capabilities R&D capabilities technological sophistication reputation, and marketing skills

20. 1-20 Market Analysis Components The Competitors It is not possible to consistently do a better job of meeting customer needs than the competition without a thorough understanding of the competition’s capabilities and strategies. This requires the same level of knowledge of a firm’s key competitors that is required on one’s own firm.

21. 1-21 Market Analysis Components The Conditions The state of the economy, the physical environment, government regulations, and technological developments affect consumer needs and expectations as well as company and competitor capabilities.

22. 1-22 Market Segmentation Market segmentation Market segmentation is a portion of a larger market whose needs differ from the larger market.

23. 1-23 Market Segmentation Market Segmentation Involves Four Steps: 1. 1.Identifying Product-Related Need Sets 2. 2.Grouping Customers with Similar Need Sets 3. 3.Describing Each Group 4. 4.Selecting an Attractive Segment(s) to Serve

24. 1-24 Market Segmentation Product-Related Need Sets market segmentation Organizations approach market segmentation with a set of current and potential capabilities. need set The term need set is used to reflect the fact that most products in developed economies satisfy more than one need. Customer needs are not restricted to product features but also include types and sources of product information, outlets where the product is available, product price, the image of the product or firm, and even where and how the product is produced.

25. 1-25 Market Segmentation Customers with Similar Need Sets The next step is to group consumers with similar need sets. These consumers can be grouped into one segment as far as product features and perhaps even product image are concerned despite sharply different demographics.

26. 1-26 Market Segmentation Description of Each Group Once consumers with similar need nets are identified, they should be described in terms of demographics, lifestyles, and media usage. In order to design an effective marketing program, it is necessary to have a complete understanding of the potential customers.

27. 1-27 Market Segmentation Attractive Segment(s) to Serve Target market Target market - segment(s) of the larger market on which we will focus our market effort. This decision is based on our ability to provide the selected segment(s) with superior customer value at a profit. Each market segment requires its own marketing strategy.

28. 1-28 Marketing Strategy  Marketing Strategy  Marketing Strategy is the answer to the question: How will we provide superior customer value to our target market?  marketing mix  This requires the formulation of a consistent marketing mix, which includes the 1.Product 2.Price 3.Communications 4.Distribution 4.Distribution, and 5.Services

29. 1-29 Marketing Strategy The Product A product is anything a consumer acquires or might acquire to meet a perceived need. Consumers are generally buying need satisfaction, not physical product attributes.

30. 1-30 Marketing Strategy Communications Marketing communications Marketing communications include advertising, the sales force, public relations, packaging, and any other signals that the firm provides about itself and its products.

31. 1-31 Marketing Strategy Price Price Price is the amount of money one must pay to obtain the right to use the product. Price Price sometimes serves as a signal of quality Consumer cost Consumer cost is everything the consumer must surrender in order to receive the benefits of owning/using the product.

32. 1-32 Marketing Strategy Distribution Distribution Distribution means having the product available where target customers can buy it. This is essential to the product’s success. Good channel decisions require a sound knowledge of where target customers shop for the product.

33. 1-33 Marketing Strategy Service Service Service refers to auxiliary or peripheral activities that are performed to enhance the primary product or primary service. services Auxiliary services cost money to provide, so it is essential that the firm furnish only those services that provide value to the target customers.

34. 1-34 Consumer Decisions marketing strategy marketing mixoutcomes The consumer decision process intervenes between the marketing strategy, as implemented in the marketing mix, and the outcomes. The firm can succeed only if consumers see a need that its product can solve, become aware of the product and its capabilities, decide that it is the best available solution, proceed to buy it, and become satisfied with the result of the purchase.

35. 1-35 Outcomes 1.Firm Outcomes 2.Individual Outcomes 3.Society Outcomes

36. 1-36 Outcomes Firm Outcomes product position The product position is the image of the product or brand in the consumer’s mind relative to competing products and brands. Sales are a critical outcome, as they produce the revenue necessary for the firm to continue in business. Customer satisfaction Customer satisfaction remains a concern for marketers. Retaining customers requires that they be satisfied with their purchase and use of the product.

37. 1-37 Outcomes Creating Satisfied Customers

38. 1-38 Outcomes Individual Outcomes Need satisfaction consumption process The most obvious outcome of the consumption process for an individual, whether or not a purchase is made, is some level of satisfaction of the need that initiated the consumption process. Injurious consumption,, Injurious consumption, the dark side of consumer behavior, occurs when individuals or groups make consumption decisions that have negative consequences for their long-run well-being.

39. 1-39 Outcomes Society Outcomes Economic Outcomes The cumulative impact of consumers’ purchase decisions, including the decision to forgo consumption, is a major determinant of the state of a given country’s economy. Physical Environment Outcomes Consumers make decisions that have a major impact on the physical environments of both their own and other societies. Social Welfare Consumer decisions affect the general social welfare of a society, including having a major impact on the overall quality of life in a society.

40. 1-40 The Nature of Consumer Behavior Overall Conceptual Model of Consumer Behavior

41. 1-41 The Nature of Consumer Behavior External Influences The following are the major external influences: Culture Demographics and social stratification Ethnic, religious, and regional subcultures Families and households Groups

42. 1-42 The Nature of Consumer Behavior Internal Influences Internal influences include: Perception Learning Memory Motives Personality Emotions Attitudes

43. 1-43 The Nature of Consumer Behavior Self-Concept and Lifestyle Self-concept Self-concept is the totality of an individual’s thoughts and feelings about oneself. Lifestyle Lifestyle is how one lives, including the products one buys, how one uses them, what one thinks about them, and how one feels about them.

44. 1-44 The Nature of Consumer Behavior Situations and Consumer Decisions Consumer decisions Consumer decisions result from perceived problems and opportunities. consumer behavior. Consumer problems arise in specific situations and the nature of the situation influences the resulting consumer behavior. Using Outdoor Media to Trigger Problem Recognition