1 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2 1 Value and the Consumer Behavior Value Framework

2 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2 Learning Outcomes Describe the consumer value framework, including its basic components. Define consumer value and compare and contrast two key types of value. Apply the concepts of marketing strategy and marketing tactics to describe the way firms go about creating value for consumers. Explain the way market characteristics like market segmentation and product differentiation affect marketing strategy. LO 2-1 LO 2-2 LO 2-3 LO 2-4

3 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3 Learning Outcomes Analyze consumer markets using elementary perceptual maps. Justify consumers’ lifetime value as an effective focus for long-term business success. LO 2-5 LO 2-6

4 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 4 The consumer value framework (CVF) represents consumer behavior theory illustrating factors that shape consumption-related behaviors and ultimately determine the value associated with consumption The Consumer Value Framework (CVF)

5 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5 The Consumer Value Framework (CVF) ▮ Why do some consumers love one type of music and loathe another? Art? Design/décor? Food? People?

6 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. LO 2-1

7 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 7 Value and the CVF Components ▮ Value is at the heart of experiencing and understanding consumer behavior. ▮ Components of the CVF: Relationship quality Consumption process Internal influences External influences

8 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 8 Relationship Quality ▮ Reflects the connectedness between a consumer and a retailer, brand or service provider. ▮ High perceived value improves relationship quality. Derives from a CRM orientation. Loyal customers more profitable?

9 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 9 Your IPOD is calling! ▮ Apple has successfully capitalized on loyal consumer segments by extending their products to provide value to consumers in new ways. ▮ Apple, to Mac, to the iPod, to the iPhone, to the iPad. Next? ▮ Apple has successfully capitalized on loyal consumer segments by extending their products to provide value to consumers in new ways. ▮ Apple, to Mac, to the iPod, to the iPhone, to the iPad. Next?

10 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10 Consumption Process ▮ Deciding: What is needed What options for exchange are available The inevitable reaction to consumption ▮ Factors influencing this process: Internal influences External influences

11 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 11 Internal Influences ▮ Things that go on inside the consumer or that can be thought of as part of the consumer. The psychology of the consumer.  Ex: learning, memory, perception, attitudes The personality of the consumer.  Ex: lifestyles, values, motivation

12 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12 Psychology of the Consumer Cognition – The thinking or mental processes that go on as we process and store things that can become knowledge Affect – The feelings experienced during consumption activities or associated with specific objects

13 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Gimme a Break! You know the song. But why does it get stuck in your head? One researcher claims we try to solve an inconsistency in our brains – that’s why we keep replaying it, and replaying it, and… Other examples? You know the song. But why does it get stuck in your head? One researcher claims we try to solve an inconsistency in our brains – that’s why we keep replaying it, and replaying it, and… Other examples?

14 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 14 Personality of the Consumer ▮ Every consumer has certain characteristics and traits that help define them as an individual. ▮ Individual differences – include things like personality and lifestyle.

15 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 15 © 2009 South-Western, a division of Cengage Learning. External Influences: Interpersonal Influences ▮ External influences include the social and cultural aspects of life as a consumer. Social environment includes the people and groups who help shape a consumer’s everyday experiences.

16 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 16 External influences Situational influences - Unique to a time or place that can affect consumer decision making and the value received from consumption

17 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 17 Value ▮ A personal assessment of the net worth a consumer obtains from an activity ▮ …captures how much gratification a consumer receives from consumption. Marketing perspective  Relevant value - received from activities involving interactions between consumers and the firm or its products

18 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. LO 2-2

19 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 19 Types of Value Utilitarian Value Derived from a product that helps the consumer solve problems and accomplish tasks that are a part of being a consumer (practical, functional) Hedonic Value The immediate gratification that comes from experiencing some activity (emotion, fantasy)

20 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Value What type of value do consumers get from this product? ©DAVID YOUNG-WOLFF/PHOTOEDIT

21 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Value What type of value do consumers receive here?

22 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. LO 2-2

23 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. LO 2-3

24 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 24 Corporate Strategy Deals with how the firm will be defined and sets general goals Marketing Tactics Involve price, promotion, product, and distribution decisions Marketing Strategy The way a company goes about creating value for customers Business Strategy

25 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 25 Total Value Concept Why does Nike have such a large share of the market?

26 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 26 Total Value Concept Every product’s value is made up of the basic benefits, plus the augmented product, plus the “feel” benefits. Example: FedEx??

27 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 27 Total Value Concept ▮ Augmented product - The original product plus the extra things needed to increase the value from consumption ▮ Total value concept - Practiced when companies operate with the understanding that products provide value in multiple ways

28 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Market Segmentation and Product Differentiation Market segmentation is the separation of a market into groups based on different demand curves associated with each group. Product differentiation is a marketplace condition in which consumers do not view all competing products as identical to one another.

29 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Product Category Demand A market segment for many products will feature a positive price–quantity demand relationship Chanel No. 5 is in high demand at about $250 an ounce. IMAGE COURTESY OF THE ADVERTISING ARCHIVES

30 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 30 Product Positioning The way a product is perceived by a consumer. Perceptual map – used to depict the positioning of competing products graphically.

31 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

32 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Customer Lifetime Value (CLV) Customer lifetime value (CLV) represents the approximate worth of a customer to a company in economic terms. The overall, long-term profitability of an individual customer.