Consumer Behavior: Meeting Changes and Challenges CHAPTER ONE

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”. The what, why, when, where, and how of consumer purchases It is not just individuals, but households, families, and groups that influence the decisions we make 2Chapter One Slide

Two Consumer Entities 3 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. Chapter One Slide

Development of the Marketing Concept 4 Production Orientation Sales Orientation Marketing Concept Chapter One Slide The marketing concept was developed over time through two other important business orientations called the production and the sales orientation

Production Orientation From the 1850s to the late 1920s Consumer demand exceeded supply (consumers were content to get a product and were not focused on product variation) Companies focus on production capabilities to mass produce the product for the consumers and reduce the cost. No need for selling efforts “if we make it they will buy it.” 5Chapter One Slide

Sales Orientation From the 1930s to the mid 1950s Supply exceeded customer demand (overproduction) Producers produce similar products (no variation) Focus on selling The aggressive selling problems Copyright 2010 Pearson Education, Inc. 6Chapter One Slide

Marketing Concept 1950s to current - Focus on the customer! Determine the needs and wants of specific target markets (customer is a king) Deliver satisfaction better than competition, delivering the customers with products that meet their needs and what they prefer. We are remaining focused on the marketing concept today 7Chapter One Slide

Societal Marketing Concept 8Chapter One Slide The societal marketing concept was developed from the marketing concept. It Considers consumers’ long-run best interest Marketers and consumers are increasingly focusing on 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.

Societal Marketing Concept 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. Chapter One Slide9

The Marketing Concept Consumer Research Market Segmentation Market Targeting Positioning The process and tools used to study consumer behavior to understand his need preferences and priorities. Copyright 2010 Pearson Education, Inc. implementing the Marketing Concept Chapter One Slide10

The Marketing Concept Consumer Research Market Segmentation Market Targeting Positioning Process of dividing the market into subsets of consumers with common needs or characteristics Market Segmentation can be based on consumers’ demographics, product usage, geography, lifestyle social classes … etc. Implementing the Marketing Concept Chapter One Slide11

The Marketing Concept Consumer Research Market Segmentation Market Targeting Positioning The selection of one or more of the segments identified to pursue Selection of the correct target market is critical to success of the product since it is assumed that consumers have need with respect to the product or service. Implementing the Marketing Concept Chapter One Slide12

The Marketing Concept Consumer Research Segmentation Market Targeting Positioning Developing a distinct image for the product in the mind of the consumer versus the competitors’ products. Successful positioning includes: – Communicating the benefits of the product – Communicating a unique selling proposition Copyright 2010 Pearson Education, Inc. Implementing the Marketing Concept Chapter One Slide13

Marketer’s main benefit of studying consumer behavior 14Chapter One Slide Producing the right product Selling the product with a right price Making the products available At a the right time and in the right place Providing consumers with product information and where to buy + encouraging consumers to by the products (promotion)

The Marketing Mix ProductPrice PlacePromotion Marketing Mix 15Chapter One Slide

successful customer relationship 16Chapter One Slide The right marketing mix to a potential consumers leads to customer successful relationship: -Customer value -Customer satisfaction -Customer trust -Customer retention (loyalty)

Customer Value, Satisfaction, Trust, and Retention Copyright 2010 Pearson Education, Inc. 17 Successful Relationships Customer value High level of customer satisfaction Strong sense of customer trust Customer retention Chapter One Slide

Successful customer Relationships Customer Value Customer Satisfaction Customer Trust Customer 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 (statement) is critical to communicate value the product offers to consumers. Chapter One Slide18

Successful customer Relationships Customer Value Customer Satisfaction Customer Trust Customer 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 Chapter One Slide19

Customer loyalty groups 20Chapter One Slide Loyalists: who continue to purchase Apostles: who provide very positive word-of- mouth. Mercenaries: are satisfied but are not really considered loyal and will move from company to company. Hostages: Some dissatisfied customers who stay with the company but are very unhappy. Terrorists: who spread negative word-of-mouth. Defectors: disappointed customers who move to the competition.

Successful Relationships Customer Value Customer Satisfaction Customer Trust Customer Retention Copyright 2010 Pearson Education, Inc. Establishing and maintaining trust is essential to build loyalty. When you are satisfied you trust, and when you trust, you become loyal Trust is the foundation for maintaining a long- standing relationship with customers. Chapter One Slide21

Top 10 Ranked U.S. Companies in Terms of Consumers’ Trust Top 10 Companies American Express eBay IBM Amazon Johnson & Johnson Hewlett-Packard U.S. Postal Service Procter and Gamble Apple Nationwide Chapter One Slide 26

Successful Relationships Customer Value Customer Satisfaction Customer Trust Customer Retention The objective of providing value is to retain highly satisfied customers (loyal customers). Loyal customers are key – They buy more products – They are less price sensitive – Servicing them is cheaper – They spread positive word of mouth Chapter One Slide23

Consumer Behavior Is Interdisciplinary Psychology Sociology Social psychology Anthropology Economics Copyright 2010 Pearson Education, Inc. 24Chapter One Slide

A Simple Model of Consumer Decision Making - Figure 1.4 Chapter One Slide25 Copyright 2010 Pearson Education, Inc.

Components of consumer decision making model 26Chapter One Slide input stage includes sources of information to the consumer – how they learn and are influenced by the marketer and their environment. 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. 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.