1. © 2008 by Nelson, a division of Thomson Canada Limited 1 Customer Behaviour A Managerial Perspective First Canadian Edition Jagdish N. Sheth Emory University Banwari Mittal Northern Kentucky University Michel Laroche Concordia University

2. © 2008 by Nelson, a division of Thomson Canada Limited 2 CHAPTER 1 The Customer: Key to Market Success

3. © 2008 by Nelson, a division of Thomson Canada Limited 3 The Importance of Understanding Customer Behaviour A Key to Success A Key to Success  Satisfy customers  Adopt the marketing concept  Gain legitimacy in society

4. © 2008 by Nelson, a division of Thomson Canada Limited 4 Satisfying the Customer Adopt a Customer Culture Adopt a Customer Culture  Incorporate customer satisfaction as an integral part of the corporate mission and utilize an understanding of customer behaviour as input to all marketing plans and decisions

5. © 2008 by Nelson, a division of Thomson Canada Limited 5 Adopting the Marketing Concept Market Concept Market Concept Principal Focus  Making what the customer wants or needs Selling Concept Principal Focus Selling Concept Principal Focus  Finding a buyer for the product  Selling the customer into exchanging money for the product vs.

6. © 2008 by Nelson, a division of Thomson Canada Limited 6 Gaining Legitimacy in Society A society supports businesses because they serve its members by catering to their needs and wants A society supports businesses because they serve its members by catering to their needs and wants  Focus on the customer  Pay attention to customer behaviour  Respond to customer needs, desires and preferences

7. © 2008 by Nelson, a division of Thomson Canada Limited 7 Customer Orientation …a thorough understanding of customers’ needs and wants, the competitive environment, and the nature of the market used to formulate all the firms’ plans and actions to create satisfied customers.

8. © 2008 by Nelson, a division of Thomson Canada Limited 8 Competitive Advantages Through Customer Satisfaction Repeat Buying Higher Prices Loyalty in Crisis Word of Mouth New Product Innovation Corporate Performance One-Stop shopping GrowthProfits Customer Satisfaction

9. © 2008 by Nelson, a division of Thomson Canada Limited 9 Increased Profitability Advantages Advantages  Cost efficiencies from repeat customers  Price premiums from established customers  Customer loyalty in corporate crisis

10. © 2008 by Nelson, a division of Thomson Canada Limited 10 Increased Growth Advantages Advantages  Increased word of mouth  One-stop shopping  New product innovations

11. © 2008 by Nelson, a division of Thomson Canada Limited 11 Creates Pride in Employees Customer orientation has an effect on employee morale in the company Customer orientation has an effect on employee morale in the company  Satisfied employees create satisfied customers  Happy customers lead to employee happiness

12. © 2008 by Nelson, a division of Thomson Canada Limited 12 Customers: Types, Roles, and Behaviours Customer TypesRoles Mental Activities Physical Activities Business Households (consumers) Payers Users Buyers

13. © 2008 by Nelson, a division of Thomson Canada Limited 13 Customer Behaviour Domain HOUSEHOLDBUSINESS SERVICES GOODS Consumer Products BusinessProduct ConsumerServicesBusinessServices PRODUCTS include BOTH GOODS and SERVICES

14. © 2008 by Nelson, a division of Thomson Canada Limited 14 Three Roles of the Customer User User Payer Payer Buyer Buyer

15. © 2008 by Nelson, a division of Thomson Canada Limited 15 Reasons for Role Specialization Lack of expertise Lack of expertise Lack of time Lack of time Lack of buying power Lack of buying power Lack of access Lack of access Lack of affordability Lack of affordability When the product is subsidized by payers When the product is subsidized by payers When the product is free When the product is free

16. © 2008 by Nelson, a division of Thomson Canada Limited 16 Customer Needs and Wants Need arousal is driven by discomfort in a person’s physical and psychological conditions Need arousal is driven by discomfort in a person’s physical and psychological conditions Wants occur when and because humans desire to take their physical and psychological conditions beyond the state of minimal comfort Wants occur when and because humans desire to take their physical and psychological conditions beyond the state of minimal comfort

17. © 2008 by Nelson, a division of Thomson Canada Limited 17 Determinants of Needs and Wants Customer Needs Customer Needs  Individual Traits  Genetics  Biogenics  Psychogenics  Market Traits  Climate  Topography  Ecology Customer Wants Customer Wants  Individual Context  Personal Financial Worth  Institutions  Culture  Market Context  Economy  Technology  Public Policy

18. © 2008 by Nelson, a division of Thomson Canada Limited 18 Matrix of Personal and Environmental Characteristics Personal Characteristics Environmental Characteristics PhysicalContextual Physical 1. Needs-driven markets (e.g., allergy medicine) 3. Personal needs and environmental wants (e.g., microwavable food) Contextual 2. Personal wants and environmental needs-driven markets (e.g., fur coat) 4. Wants-driven markets (e.g, theatre attendance)

19. © 2008 by Nelson, a division of Thomson Canada Limited 19 Market Value Market value is the potential of a product to satisfy customers’ needs and wants Market value is the potential of a product to satisfy customers’ needs and wants Value is created only if the product has the capability to satisfy a customer’s needs and wants Value is created only if the product has the capability to satisfy a customer’s needs and wants

20. © 2008 by Nelson, a division of Thomson Canada Limited 20 Classification of Market Values Universal Values Universal Values Personal Values Personal Values

21. © 2008 by Nelson, a division of Thomson Canada Limited 21 Matrix of Values and Customer Roles CUSTOMER ROLES UserPayerBuyer UNIVERSAL VALUES Performance Value Price Value Service Value PERSONAL VALUES Group specific Group specific Individual-specific Individual-specific Social value Social value Emotional value Emotional value Credit value Credit value Financing value Financing value Convenience value Convenience value Personalization value Personalization value

22. © 2008 by Nelson, a division of Thomson Canada Limited 22 Characteristics of Customer Value Values are instrumental Values are instrumental Values are dynamic Values are dynamic Values are hierarchical Values are hierarchical Diversity of customer values increases with hierarchy Diversity of customer values increases with hierarchy Values are synergistic Values are synergistic Values are role-specific Values are role-specific Values vary across customers Values vary across customers

23. © 2008 by Nelson, a division of Thomson Canada Limited 23 Value Synergy Best Universal value = (Performance) x (price) x (service value) and Best Personal value = (Social and emotional) x (convenience and personalization) x (credit and financing)

24. Conceptual Framework Payer UserBuyer Determinants of Customer Behaviour: Personal Factors and Market Environment Chapter 2 Customer Attitudes: Cognitive and Affective Chapter 6 The Customer as Perceiver Chapter 4 Customer Motivation: Needs, Emotions, and Psychographics Chapter 5 The Customer as Learner Chapter 4 Trends in Determinants of Customer Behaviour Chapter 3 Individual Customer Decision Making Chapter 8 Researching Customer Behaviour Chapter 7 Institution Customer Decision Making; Household, Business and Government Chapter 9 Customer Loyalty to Products, Brands and Stores Chapter 11 Relationship-based Buying Chapter 10 Online Customer Behaviour Chapter 12 UNDERSTANDING CUSTOMER BEHAVIOUR