Understanding Customer Behavior 任維廉 教授 at NCTU, 2017

Outline 1. Marketing’s Customer Focus 2. Importance of Understanding Customer 3. Unit of Analysis 4. Modeling Customer Behavior 5. Forming Attitudes 6. Comparing and Evaluating Alternatives 7. Decision-making Stages 8. Customer Needs 9. Social Systems

1. Marketing’s Customer Focus Making the entire firm customer oriented! Marketing function affects customers more directly than any other functions. Managers throughout the organization must understand what customer want and will pay for, and must apply this information creatively in their decision making. Marketing is responsible for helping them understand their effect on customers. 1. Marketing’s Customer Focus 3

2. Importance of Understanding Customer Rapid social and technological changes, decline and emerging turnaround of many industries, Losing touch with the voice of customer (before their competitors). Managers sometimes assume: Their own personal experiences represent a larger market. They can treat changes in consumer behavior as isolated events rather than as part of a complex system of events. Research methods and thinking frameworks that have proved useful in the past are appropriate in the present. Customers know why their behavior has changed. 2. Importance of Understanding Customer 4

2. Importance of Understanding Customer Decision-making biases: Failure of success bias, Narrow cognitive peripheral vision. Well-educated, hardworking managers failure to: 1. anticipate the possibility of change among customers. 2. detect important changes soon after they occurred. 3. understand this changes once they became painfully event, 4. integrate the voice of customer in key decisions once the voice was understood. Managers must update and reexamine existing conceptions and assumptions about customers. 2. Importance of Understanding Customer 5

3. Unit of Analysis Types of Customers Individual Group Individual buying Family buying unit Household Organizational buyer Buying center Organization 3. Unit of Analysis

Key Roles Opinion leaders: expertise in a specific product category. Market mavens: generally, broad, cross-category advice. Innovators: very first to try. Gatekeepers Decision makers Implementers Users The effects of marketer-controlled communications on individuals are moderated by social and cultural processes. 3. Unit of Analysis 7

4. Modeling Customer Behavior 1. External stimuli (sales call, consumer reports) 2. Internal stimuli (a change in financial circumstance) 3. Decision processes (or defer, pending) 4, Choice outcome (purchase an automobile) 5. Implementation (Buick supplier) Customers have learned from their own or others’ experiences. This learning will affect their attention in future decision processes. 4. Modeling Customer Behavior 8

4 Types of Problem-solving Behavior Extensive Buying a new type of product. Limited Consumer already know what attributes are important. Routinized When consumer have had extensive experience purchasing the same product, and are satisfied with it. Exploratory New product appeared, customer feel the need to reevaluate the appropriateness of the current brand. 4. Modeling Customer Behavior 9

5. Forming Attitudes Fishbein’s multiattribute attitude model: Customer first generate a set of important beliefs about a brand based on external / internal stimuli. They are carried in memory and help customers to differentiate offerings into acceptable / unacceptable sets. Marketers may change customers’ attitudes: Make certain attributes more important than others, Increase the probability value associated with a positive evaluated belief, decrease the probability value associated with a negative evaluated belief. 5. Forming Attitudes 10

Fishbein’s Multiattribute Attitude Model 5. Forming Attitudes 11

6. Comparing and Evaluating Alternatives Simplifying strategies: Customers seemingly have limited capacities to evaluate and process information. 1. Affect referral (情感回溯): use an evaluation they recall from the past. 2. Lexicographic heuristic rule (挑選): The alternatives with the highest rating on the most important attributes is chosen. If two or more brands perform equal well on this attribute, then choose the 2nd important attributes. 3. Elimination by aspects model (淘汰): the alternative that performs most poorly on the highest priority attribute is eliminated. Then they selects the 2nd important attributes… 6. Comparing and Evaluating Alternatives 12

* Marketing implication: use 4 Ps to present products, 4.Conjunctive strategy (連結): sets up minimum cutoff points for each attributes (and). Disjunctive heuristic (or). 5. Linear compensatory model (線性加總): weights are multiplied by scores, then summed, the highest score is selected. (Fishbein) 6. Phased strategies (兩階段): (1) 連結 /淘汰 to eliminate some alternatives. (min. time / effort consuming) (2) 線性加總 (max. accuracy) * Marketing implication: use 4 Ps to present products, Guiding customers to use a set of heuristics that lead to favorable evaluation of our products. Designing products so as to be viewed favorably in accordance with heuristics customers already use. 6. Comparing and Evaluating Alternatives 13

Goals of Decision Making (Bettman et al, 1998) 1. Accuracy maximization 2. Justification maximization 3. Cognitive effort minimization 4. Negative emotion minimization * Jeff Bezos, Regret minimization framework, Investing is inherently an exercise in regret minimization. 6. Comparing and Evaluating Alternatives 14

7. Decision-making Stages Hierarchy of effects model: 1. An initial awareness of a product, 2. Development of further knowledge about it, 3. Leads to the creation of certain beliefs about the product, 4. Emergence of particular feelings or affect about it, 5. Translates into some intention to buy, 6. actual purchase behavior. Decision-making stages vary according to the manager. 7. Decision-making Stages 15

8. Customer Needs If external / internal stimuli are strong enough, people will seek more information. e.g., word-of-mouth communication, product demonstration. A performance gap may be perceived between an actual and a desired state of being: need. Need may arise from: 1. perceived a better performing alternative, 2. perceived the current product is no longer satisfactory. The greater the need, the greater the tendency to engage in decision processes. 8. Customer Needs 16

Marketing Implications: The willingness to seek understanding and use incomplete information imaginatively is important. By carefully examining their own personal experience and formal research (survey, 顯示性偏好，敘述性偏好, simulation), managers can: 1. formulate initial ideas, 2. obtain feedback, 3. develop more specific ideas, 4. obtain additional feedbacks, 5. refine ideas ….. 8. Customer Needs 17

9. Social Systems People tend to differentiate themselves from one another, and yet to group together on the basis of important similarities. e.g., 車子, NB. Market segments are subsets of customers who are homogeneous with respect to key thinking, behaviors, and other characteristics. Managers must determine what cultural / subcultural differences are important, and how to respond to such differences. 1. Universals 2. Distinctions 9. Social Systems 18

9. Social Systems 1. Universals Human / near universals: traits and behaviors are very nearly all societies. The universals represent a specific need. 1. identifying the relevant universals prior to introducing a product into a new cultural market. 2. ask whether in each market these universals manifest themselves in different ways that might changes in marketing mix. Fashion / food products relate to a widely held need of self- expression may help in developing a common promotional theme in several countries. (Zara, Nike vs. 李寧) 9. Social Systems 19

A Small Sample of Universals (Brown, 1991) Use metaphors Have a system of status and roles Divide labor by sex and age Create art and artistic activities Have standards by which beauty and ugliness are measured Have followers of leaders who are apathetic, regimented, “mature,” and autarkic Believe in the supernatural Categorize color Empathize Dominate Imagine Many organizations regularly survey their employees about their attitudes. Exhibit 14-3 shows an example of an actual attitude survey. 9. Social Systems 20

A Small Sample of Universals (2/3) Imitate outside influences Resist outside influences Compete individually and in groups Dance Sing Tell tales Change the language over time Need novelty Are curious Express emotion with our faces Interpret rather than merely observe human behavior Envy Many organizations regularly survey their employees about their attitudes. Exhibit 14-3 shows an example of an actual attitude survey. 9. Social Systems 21

A Small Sample of Universals (3/3) Use symbolic means to cope with envy Exchange Settle disputes Reciprocate (in both positive and negative [tit-for-tat] ways) Associate music with ritual Distinguish between public and private Are aggressive Get anxious Appreciate aesthetics Need privacy and silence occasionally Need to explain the world Feel pride, shame, amusement, and shock …… Many organizations regularly survey their employees about their attitudes. Exhibit 14-3 shows an example of an actual attitude survey. 9. Social Systems 22

2. Distinctions While there are important universals among all societies, they are often expressed or manifested in vary different ways. It may have to be designed, delivered and communicated in different ways with respect to that need. Can marketing mix be standardized across international boundaries? 1. Successful standardization is the exception, not the rule. 2. Some important differentiation is often required particularly in advertising. 9. Social Systems 23

A Study of Food Tests in 4 Countries Nearly all people in all societies have an explicit need for healthy food products and simultaneous need to indulge in the pleasures (less healthy) of foods. Study 1, survey (same picture in 4 countries) When a strawberry was add to a picture of a slice of cake, the cake was perceived as more appealing (than absent). When strawberries were added to a bowl of breakfast cereal, the cereal was perceived more healthy and natural (than absent). Many organizations regularly survey their employees about their attitudes. Exhibit 14-3 shows an example of an actual attitude survey. 9. Social Systems 24

Study 2, in-depth interviews Strawberry on the cake should be sliced, while remain whole when presented in the cereal in country A. But in country B, the reverse should be done. There were other fruits that had an even stronger impact. Marketing Implications: Initial testing implied that a standardized advertising approach would be warranted. By deeper analyses, differentiated promotional strategies in each country would be significantly more effective. Many organizations regularly survey their employees about their attitudes. Exhibit 14-3 shows an example of an actual attitude survey. 9. Social Systems 25

10. Conclusion To understand the voice of customer is a critical first step. (routine innovation vs. disruptive) Many concepts and tools, with imagination, are available to help us understand, predict, and influence customers. Back to basics: 沒有人喜歡被業務員施壓推銷， 世界上最好的業務是不賣東西的，他是幫客戶買東西， 故總會先摸清楚客戶為何要買？是否真的需要買？ Many organizations regularly survey their employees about their attitudes. Exhibit 14-3 shows an example of an actual attitude survey. 10. Conclusion 26

了解顧客真實需求! Using the Human Sciences to Solve Your Toughest Business Problems (2014, 天下） 慣性思考： 過去與現在，什麼或多少，量化數據，驗證假設。 e.g., 行銷現有明星商品，重點在效率、營運與銷售通路。 使用者意會 (sense-making)： 研究未來，為什麼，質化證據，探索現象。 e.g., 三星為何不能成為高階液晶電視的第一品牌？ 10. Conclusion 27

Adidas (梅西，厄齊爾) vs. Nike (里貝里，魯尼，伊涅斯塔，C羅，內馬爾) 運動產品設計的目的是幫運動員贏得比賽，故要應用科 技，提升功能。Impossible is nothing! 消費者行為變了，為何現在這麼多人上健身中心運動， 而不是參加運動競賽？ 其目的不再是求勝，而是身體健康，體重管理與維持身 材。從運動員的專屬品牌，轉型為一個包容性的品牌， 邀請所有人一同擁有更健康、美好的生活方式。All in! 10. Conclusion 28