CHAPTER 1

Consumer Behavior: Its Origins and Strategic Applications

EAR!I!" OB#ECTI$ES
After studying this chapter students should be able to:
1. Understand the impact of the digital revolution on general consumer behavior.
2. Define consumer behavior.
3. Identify the two maor approaches to the study of consumer behavior.
!. Understand the development of the mar"eting concept.
#. Understand the role of consumer research in the study of consumer behavior.
$. Understand how segmentation% targeting% and positioning are used in the study of
consumer behavior.
&. Define customer value% satisfaction% and retention.
'. Discuss the role of ethics in mar"eting.
(. Describe the societal mar"eting concept.
1). *riefly discuss the three interloc"ing stages of consumer decision+ma"ing.
CHAPTER S%&&AR'

,he study of consumer behavior enables mar"eters to understand and predict consumer
behavior in the mar"etplace- it is concerned not only with what consumers buy but also
with why% when% where% and how they buy it. .onsumer research is the methodology used
to study consumer behavior- it ta"es place at every phase of the consumption process:
before the purchase% during the purchase% and after the purchase.
.onsumer behavior is interdisciplinary- that is% it is based on concepts and theories about
people that have been developed by scientists in such diverse disciplines as psychology%
sociology% social psychology% cultural anthropology% and economics.
.onsumer behavior has become an integral part of strategic mar"et planning. ,he belief
that ethics and social responsibility should also be integral components of every
mar"eting decision is embodied in a revised mar"eting concept/the societal mar"eting
concept/that calls on mar"eters to fulfill the needs of their target mar"ets in ways that
improve society as a whole.
CHAPTER O%TI!E
I!TRO(%CTIO!
1. .onsumer behavior has changed dramatically in the past decade.
3#
2. 0or e1ample% the use of the Internet has allowed consumers to order online% receive
information without leaving their homes% and sell products without advertising in the
local newspaper.
3. All of these new ways of selling products and services became available to consumers
during the past fifteen years and are the result of digital technologies. ,hey e1ist
today because they reflect an understanding of consumer needs and consumer
behavior.
!. Consumer )ehavior is defined as the behavior that consumers display in searching
for% purchasing% using% evaluating% and disposing of products and services that they
e1pect will satisfy their needs.
*****Use Key Term consumer )ehavior Here; Use Learning Objective #2 Here*****
a2 .onsumer behavior focuses on how individuals ma"e decisions to spend their
available resources on consumption+related items.
b2 As consumers% we play a vital role in the health of the economy/local% national%
and international.
c2 3ar"eters need to "now everything they can about consumers.
d2 3ar"eters need to understand the personal and group influences that affect
consumer decisions and how these decisions are made.
e2 3ar"eters need to not only identify their target audiences% but they need to "now
where and how to reach them.
#. ,he term consumer )ehavior is often used to describe two different "inds of
consuming entities: the personal consumer and the organi4ational consumer.
a2 ,he personal consumer buys goods and services for his or her own use% for the
use of the household% or as a gift for a friend.
i2 5roducts are bought for final use by individuals 6referred to as end users or
ultimate consumers2.
b2 ,he organi+ational consumer/includes profit and not+for+profit businesses%
government agencies% and institutions% all of which must buy products%
e7uipment% and services in order to run their organi4ations$. Despite the
importance of both categories of consumers% individuals and organi4ations% this
boo" will focus on the individual consumer% who purchases for his or her own
personal use or for household use. a2 8nd+use consumption is perhaps the
most pervasive of all types of consumer behavior.
*****Use Learning Objective #3 Here *****
(E$EOP&E!T O, THE &AR-ETI!" CO!CEPT A!( THE (ISCIPI!E
O, CO!S%&ER BEHA$IOR
1. ,he field of consumer behavior is rooted in the mar.eting concept% a business
orientation that evolved in the 1(#)s through several alternative approaches toward
doing business referred to% respectively% as the production concept% the product
concept% and the selling concept.
3$
*****Use Key Term mar.eting concept Here*****
2. ,he production concept is characteri4ed as the concept used by 9enry 0ord in the
early 1())s.
a2 0ord produced a car for :'#) in an era when only the wealthy could afford a car.
b2 ,he assembly line concept allowed him to reduce the price to :3$).
c2 *ecause of 0ord;s products% Americans developed the nation;s e1tensive
highway system and% eventually% suburbs and their adacent shopping malls.
d2 ,he production concept assumes that consumers are mostly interested in product
availability at low prices.
i2 Implicit mar"eting obectives are cheap% efficient production% and intensive
distribution systems.
ii2 ,his concept ma"es sense when consumers are more interested in obtaining
the product than they are in specific features.
3. ,he product concept assumes that consumers will buy the product that offers them
the highest 7uality% the best performance% and the most features.
a2 A product orientation leads the company to strive constantly to improve the
7uality of its product and to add new features that are technically feasible
without finding out first whether or not consumers really want these features.b2
,his concept leads to <mar"eting myopia%= that is% a focus on the product rather
than on the consumer needs it presumes to satisfy.
i2 >ailroads are often used as an e1ample of mar"eting myopia.
ii2 A more modern e1ample of mar"eting myopia might be the 5DA.
!. ,he selling concept is a natural e1tension of the production and product concepts. In
this concept% mar"eting;s primary focus is selling the product6s2 that it has
unilaterally decided to produce.
a2 A hard sell approach is often used to persuade consumers to buy something
6even if they do not really want it2.
b2 A negative of this concept is that consumers may not return for repeat sales
because they may not have wanted the product to begin with.
c2 ,his approach is typically used by the mar"eters of unsought goods 6such as life
insurance2.
*****Use Learning Objective #4 Here; Use Exercise #3 Here*****
The &ar.eting Concept
1. ,he field of consumer behavior is rooted in a mar"eting strategy that evolved in the
late 1(#)s.
2. Instead of trying to persuade customers to buy what the firm had already produced%
mar"eting+oriented firms found that it was a lot easier to produce only products they
had first confirmed% through research% that consumers wanted.
a2 ,his consumer+oriented concept came to be "nown as the mar.eting concept.
b2 .onsumer needs and wants became the firm;s primary focus.
3&
,he "ey assumption:
c2 ,o be successful% a company must determine the needs and wants of specific
target mar"ets and deliver the desired satisfactions better than the competition.
3. ,he mar"eting concept is based on the premise that a mar"eter should ma"e what it
can sell% instead of trying to sell what it has made.
a2 ,he older selling concept focused on the needs of the seller.
b2 ,he mar"eting concept focuses on the needs of the buyer.
*****Use Learning Objective #4 Here; Use Discussion uestion #2 Here; Use
Exercise #3 Here; Use Tab!e "#" Here*****
Implementing the &ar.eting Concept
1. ,he widespread adoption of the mar"eting concept by American business fed the
need to study consumer behavior.
2. ,hey discovered that consumers were highly comple1 individuals% subect to a variety
of psychological and social needs 7uite apart from their survival needs.
a2 ,he needs and priorities of different consumer segments differed dramatically%
and in order to design new products and mar"eting strategies that would fulfill
consumer needs% they had to study consumers and their consumption behavior in
depth.
3. ,he term consumer research represents the process and tools used to study
consumer behavior.
Segmentation/ Targeting/ and Positioning
1. ,he focus of the mar"eting concept is consumer needs.
2. ,he mar"eter must adapt the image of its product so that each mar"et segment
perceives the product as better fulfilling its specific needs than competitive products.
a2 ,he three elements of this strategic framewor" are: mar"et segmentation%
targeting% and positioning.
3. &ar.et segmentation is the process of dividing a mar"et into subsets of consumers
with common needs or characteristics.
!. &ar.et targeting is the selection of one or more of the segments identified for the
company to pursue.
#. Positioning refers to the development of a distinct image for the product or service in
the mind of the consumer% an image that will differentiate the offering from
competing ones and s7uarely communicate to the target audience that the particular
product or service will fulfill their needs better than competing brands.
a2 ?uccessful positioning centers around two "ey principles:
i2 ,he first principle says that the mar"eter should communicate the benefits
that the product will provide rather than the product;s features.
ii2 ,he second principle states that because there are many similar products in
almost any mar"etplace% an effective positioning strategy must develop and
communicate a <uni7ue selling 5roposition=/a distinct benefit or point of
difference/for the product or service.
3'
*****Use Key Terms mar.et segmentation/ mar.et targeting/ and positioning Here;
Use Learning Objective #$ Here; Use Discussion uestion #2 Here*****
The &ar.eting &i0
1. ,he mar.eting mi0 consists of a company;s service and@or product offerings to
consumers and the methods and tools it selects to accomplish the e1change.
2. 0our basic elements 6"nown as the 1our Ps2 include:
a2 ,he product/features% designs% brands% pac"aging% etc.
b2 ,he price/list price 6including discounts% allowances% and payment methods2
c2 ,he place/distribution of the product or service
d2 Promotion/advertising% sales promotion% public relations% and sales efforts
designed to build awareness of and demand for the product or service
*****Use Key Term mar.eting mi0 Here; Use Discussion uestion #2 Here; Use
Tab!e "#" Here*****
C%STO&ER $A%E/ SATIS,ACTIO!/ A!( RETE!TIO!
1. ?ince the 1(#)s many companies have successfully adopted the mar"eting concept.
2. ,he mar"etplace is now increasingly competitive.
3. ?avvy mar"eters today reali4e that in order to outperform competitors they must
achieve full profit potential from each and every consumer.
a2 An e1change with a consumer is part of a customer relationship% not ust a
transaction.
!. ,hree drivers of successful relationships between mar"eters and consumers are:
a2 Customer value
b2 9igh levels of customer satis1action
c2 *uilding a structure of customer retention
*****Use Learning Objective #% Here; Use Exercise #" Here*****
Providing Customer $alue
1. Customer value is defined as the ratio between the customer;s perceived benefits
6economic% functional% and psychological2 and the resources 6monetary% time% effort%
psychological2 used to obtain those benefits.
a2 5erceived value is relative and subective.
b2 Developing a value proposition is the core of successful positioning.
*****Use Key Term customer value Here; Use Learning Objective #% Here; Use
Exercise #" Here*****
3(
Customer Satis1action
1. Customer satis1action is the individual;s perception of the performance of the
product or service in relation to his or her e1pectations.
2. ,he concept of customer satisfaction is a function of customer e1pectations.
3. Aith respect to customer satisfaction there might be several types of customers:
a2 o3alists/completely satisfied customers who "eep purchasing
b2 Apostles/those whose e1periences e1ceed their e1pectations and who provide
very positive word of mouth about the company to others
c2 (e1ectors/those who feel neutral or merely satisfied and are li"ely to stop
doing business with the company
d2 Terrorists/those who have had negative e1periences with the company and
who spread negative word of mouth
e2 Hostages/unhappy customers who stay with the company because of no
choice 6or other reasons2
f2 &ercenaries/very satisfied customers but who have no real loyalty to the
company and may defect
*****Use Key Term customer satis1action Here; Use Learning Objective #% Here; Use
Exercise #" Here*****
Customer Retention
1. ,he overall obective of providing value to customers continuously and more
effectively than the competition is to have and to retain highly satisfied customers.
2. ,his strategy of customer retention ma"es it in the best interest of customers to stay
with the company rather than switch to another firm
3. In almost all business situations% it is more e1pensive to win new customers than to
"eep e1isting ones.
!. ?tudies have shown that small reductions in customer defections produce significant
increases in profits because:
a. Boyal customers buy more products.
b. Boyal customers are less price sensitive and pay less attention to competitors;
advertising.
c. ?ervicing e1isting customers% who are familiar with the firm;s offerings and
processes% is cheaper.
d. Boyal customers spread positive word+of+mouth and refer other customers.
#. ?ophisticated mar"eters build selective relationships with customers% based on where
customers ran" in terms of profitability% rather than merely strive to <to retain
customers.=
$. Customer pro1ita)ilit341ocused mar"eting trac"s costs and revenues of individual
customers and then categori4es them into tiers based on consumption behaviors that
are specific to a company;s offerings.
!)
*****Use Key Term customer retention Here; Use Learning Objective #% Here; Use
Discussion uestion #4 Here; Use Exercise #" Here; Use
Tab!e "#2 Here&&&&&
THE I&PACT O, (I"ITA TECH!OO"IES O!
&AR-ETI!" STRATE"IES
1. (igital technologies allow much greater customi4ation of products% services% and
promotional messages than older mar"eting tools.
2. ,hey enable mar"eters to adapt the elements of the mar"eting mi1 to consumer;s
needs more 7uic"ly and efficiently% and to build and maintain relationships with
customers on a much greater scale.
3. Cnline communication and emerging digital technologies have introduced several
drastic changes into the business environment.
a2 .onsumers have more power than ever before.
b2 .onsumers have access to more information then ever before.
c2 3ar"eters can offer more services and products than ever before.
d2 ,he e1change between mar"eters and customers is increasingly interactive and
instantaneous.
e2 3ar"eters can gather more information about consumers more 7uic"ly and
easily.
f2 Impact reaches beyond the 5.+based connection to the Aeb.
*****Use Learning Objective #" Here; Use Discussion uestion #2 Here*****
Challenges &ar.eters ,ace
1. ,he digital revolution in the mar"etplace% and its impact on consumer behavior%
presents many challenges for today;s mar"eters.
2. ?ome suggest that because virtual competition eliminates distance and location+based
benefits% online sellers will compete almost e1clusively on the basis of price for
branded merchandise. ,his statement leads to the 7uestion% <Does this mean that
competitive differentiation will become meaningless in the virtual mar"etplaceD=
&AR-ETI!" ETHICS A!( SOCIA RESPO!SIBIIT'
1. ,he societal mar.eting concept re7uires that all mar"eters adhere to principles of
social responsibility in the mar"eting of their goods and services.
2. A restructured definition of the mar"eting concept 6to reflect social responsibility2
would be to fulfill the needs of the target audience in ways that improve society as a
whole while fulfilling the obectives of the organi4ation.
a2 A serious deterrent to the societal mar"eting concept is a short+term orientation
toward increased mar"et share and 7uic" profits.
!1
b2 ,he societal mar"eting concept advocates a long+term perspective% recogni4ing
that all companies that incorporate ethical behavior and social responsibility in
all of their business dealing attract and maintain loyal consumer support over the
long term.
3. ,he primary purpose for studying consumer behavior as part of a mar"eting
curriculum is to understand why and how consumers ma"e their purchase decisions.
!. ,hese insights enable mar"eters to design more effective mar"eting strategies%
especially today when advanced technologies enable mar"eters to collect more data
about consumers and target them more precisely.
*****Use Key Term societal mar.eting concept Here; Use Learning Objective #'
Here; Use Discussion uestion 3 Here; Use Exercise #2 Here*****
#. ,o avoid e1ploiting consumers% mar"eters should develop a code of ethics/many
have accomplished this tas".
$. It is better to self+regulate than to be regulated by government.
&. &ar.eting ethics and social responsi)ilit3 are important components of
organi4ational effectiveness.
*****Use Key Terms mar.eting ethics and social responsi)ilit3 Here; Use Learning
Objective #( Here*****
Consumer Behavior and (ecision &a.ing Are Interdisciplinar3
1. .onsumer behavior was a relatively new field of study in the mid+to+late 1($)s.
2. 3ar"eting theorists borrowed heavily from concepts developed in other scientific
disciplines:
a2 5sychology/the study of the individual
b2 ?ociology/the study of groups
c2 ?ocial psychology/the study of how an individual operates in groups
d2 Anthropology/the influence of society on the individual
e2 8conomics/to form the basis of this new mar"eting discipline
3. 3any early theories concerning consumer behavior were based on economic theory%
the idea that individuals act rationally to ma1imi4e their benefits 6satisfactions2 in the
purchase of goods and services.
!. Bater research discovered that consumers are ust as li"ely to purchase impulsively%
and to be influenced not only by family% friends% advertisers and role models% but by
mood% situation% and emotion.
*****Use Discussion uestion #) Here*****
A Simpli1ied &odel o1 Consumer (ecision4&a.ing
1. ,he process of consumer decision4ma.ing can be viewed as three distinct but
interloc"ing stages: the input stage% the process stage% and the output stage.
!2
2. ,he input stage influences the consumer;s recognition of a product need and consists
of two maor sources of information:
a2 ,he firm;s mar"eting efforts 6the product itself% its price% promotion% and where
it is sold2
b2 ,he e1ternal sociological influences on the consumer 6family% friends%
neighbors% other informal and noncommercial sources% social class% cultural and
subcultural memberships2
3. ,he process stage focuses on how consumers ma"e decisions.
a2 ,he psychological factors inherent in each individual 6motivation% perception%
learning% personality% attitude2 affect how the e1ternal inputs influence the
consumer;s recognition of a need% prepurchase search for information% and
evaluation of alternatives.
b2 ,he e1perience gained through evaluation of alternatives% in turn% affects the
consumer;s e1isting psychological attributes.
!. ,he output stage of the consumer decision+ma"ing model consists of two closely+
related post decision activities:
a2 5urchase behavior% which can be a trial purchase or a repeat purchase
b2 ,he postpurchase evaluation of the product feeds directly into the consumer;s
e1perience in the process stage of the model.
*****Consumer decision-making is examined in greater depth in Chapter 16*****
*****Use Key Term consumer decision4ma.ing Here; Use Learning Objective #"*
Here; Use Discussion uestion #) Here+ Use ,igure "#" Here*****
THE PA! O, THIS BOO-
,he boo" is divided into four parts% as follows:
1. 5art I gives an Introduction to the ?tudy of .onsumer *ehavior.
2. 5art II discusses the .onsumer as an Individual.
3. 5art III e1amines .onsumers in ,heir ?ocial and .ultural ?ettings.
!. 5art IE synthesi4es all of the variables discussed earlier into the .onsumer Decision+
3a"ing 5rocess.
Part 1
1. .hapter 1 introduces the reader to the study of consumer behavior as an
interdisciplinary science% the reasons for the development of consumer behavior as an
academic discipline and an applied science% and it introduces a simplified model of
consumer decision+ma"ing.
2. .hapter 2 e1amines the methodology of consumer research% including the
assumptions underlying 7ualitative and 7uantitative research approaches.
3. .hapter 3 discusses the process of mar"et segmentation% including the demographic%
sociocultural% and psychographic bases for segmenting mar"ets.
!3
Part 5
1. .hapter ! discusses how individuals are motivated.
2. .hapter # e1amines the impact of individual personality characteristics on consumer
behavior.
3. .hapter $ e1plores consumer perception.
!. .hapter & e1amines how consumers learn.
#. .hapter ' discusses consumer attitudes.
$. .hapter ( concludes 5art 2 with an e1amination of the communications process and
consumer persuasion.
Part 6
1. .hapter 1) focuses on consumers as members of society% subect to varying e1ternal
influences on their buying behavior% such as their group and family memberships.
2. .hapter 11 loo"s at social class.
3. .hapters 12 and 13 e1amine the broad cultural and specific subcultural groups to
which members of society belong.
!. ,he importance of cross+cultural consumer research to international mar"eting is
e1plored in .hapter 1!.
Part 7

1. .hapter 1# discusses the consumer;s reactions to innovation and change and
describes the process by which new products are adopted and become diffused
throughout society.
2. .hapter 1$ is an in+depth discussion of consumer decision+ma"ing that shows how all
the psychological and sociocultural variables discussed in 5arts 2 and 3 influence the
consumer;s decision+ma"ing process.
(ISC%SSIO! 8%ESTIO!S
19 (escri)e the interrelationship )et:een consumer )ehavior as an academic
discipline and the mar.eting concept-
,he term consumer )ehavior refers to the behavior that consumers display in
searching for% purchasing% using% evaluating and disposing of products and services
that they e1pect will satisfy their needs. ,he study of consumer behavior is the study
of how individuals ma"e consumption+related decisions. ,he "ey assumption
underlying the mar.eting concept is that a company must determine the needs and
wants of specific target mar"ets% and deliver the desired satisfaction better than the
competition. ,he mar"eting concept is based on the premise that a mar"eter should
ma"e what they can sell% instead of trying to sell what they have made. ,hus% a
company which adopts the mar"eting concept must continuously research and
!!
monitor its customers; and potential clients; needs and consumption+related behavior
in order to develop% effectively promote% and deliver products and services which
satisfy clients needs better than the competition.
59 (escri)e the interrelationship )et:een consumer research/ mar.et segmentation
and targeting/ and the development o1 the mar.eting mi0 1or the manu1acturer
o1 high de1inition T$ sets9
Consumer research describes the process and tools used to study consumer
behavior. *roadly spea"ing% there are two theoretical perspectives that guide the
development of consumer research methodology: the positivist approach 6obective
and empirical causal research2 and the interpretivist approach 67ualitative and based
on small samples2.
,he focus of the mar"eting concept is consumer needs. ,hree elements for creating a
strategic framewor" for discovering and analy4ing those needs are mar"et
segmentation% mar"et targeting% and positioning. &ar.et segmentation is the process
of dividing a mar"et into subsets of consumers with common needs or characteristics.
*ecause most companies have limited resources% few companies can pursue all of the
segments identified for the company to pursue. &ar.et targeting is selecting one or
more of the segments identified for the company to pursue. *ecause many companies
have adopted the mar"eting concept% the mar"etplace is filled with many products and
services claiming to satisfy consumer needs. Positioning is developing a distinct
image for the product or service in the mind of the consumer% an image that will
differentiate the offering from competing ones and s7uarely communicate to
consumers that the particular product or service will fulfill their needs better than
competing brands. ,he mar.eting mi0 consists of a company;s service and@or
product offerings to consumers and the methods and tools it selects to accomplish the
e1change. 5roduct% price% place% and promotion are the elements that ma"e up this
mi1.
In answering this 7uestion% students need to thin" about the need or want for a high
definition ,E set. As thought starters% the instructor may as" the students% <what
segment of the mar"et is most interested in this higher 7uality% newer technology
televisionD Ahat segment also has the resources to purchase a high definition ,ED=
,hese 7uestions should get the conversation started.
69 (e1ine the societal mar.eting concept and discuss the importance o1 integrating
mar.eting ethics into the compan3;s philosoph3 and operations9
!#
,he societal mar"eting concept re7uires that all mar"eters adhere to principles of
social responsibility in the mar"eting of their goods and services- that is% they should
endeavor to satisfy the needs and wants of their target mar"ets in ways that preserve
and enhance the well+being of consumers and society as a whole.
,he societal mar"eting concept advocates a long+term perspective% recogni4ing that
all companies would be better off in a stronger% healthier society% and that companies
that incorporate ethical behavior and social responsibility in all of their business
dealings attract and maintain loyal consumer support over the long term. 8thical and
socially responsible practices are simply good business% resulting not only in a
favorable image% but ultimately in increased sales.
79 (iscuss the interrelationships among customer e0pectations and satis1action/
perceived value/ and customer retention9 <h3 is customer retention essential=
5erceived value is relative and subective while customer satisfaction is the
individual;s perception of the performance of the product or service in relation to his
or her e1pectation. ,he concept of customer satisfaction is a function of customer
e1pectations. .ustomers whose e1periences match e1pectations will be satisfied and
customers whose e1pectations are e1ceeded will be very satisfied or delighted.
,he overall obective of providing value to customers continuously and more
effectively than to competition is to have and to retain highly satisfied customers.
,his is called customer retention. ,he purpose of customer retention is to ma"e it
the best interest of customers to stay with the company rather than switch to another
firm. ,he reason that customer retention is essential is that in almost all business
situations% it is more e1pensive to win new customers than to "eep e1isting ones.
>9 (iscuss the role o1 social and )ehavioral sciences in developing the consumer
decision4ma.ing model9
.onsumer behavior was a relatively new field of study in the mid+ to late+1($)s.
*ecause it had no history or body of research of its own% mar"eting theorists
borrowed heavily from concepts developed in other scientific disciplines. ,hese
disciplines were psychology 6the study of the individual2% sociology 6the study of
groups2% social psychology 6the study of how an individual operates in groups2%
anthropology 6the influence of society on the individual2% and economics. 3any early
theories concerning consumer behavior were based on economic theory on the notion
that individuals act rationally to ma1imi4e their benefits 6satisfactions2 in the
purchase of goods and services. Bater research discovered that consumers are ust as
li"ely to purchase impulsively and to be influenced not only by family% friends%
!$
advertisers% and role models% but also by mood% situation% and emotion. All of these
factors combine to form a comprehensive model of consumer behavior that reflects
both the cognitive and emotional aspects of consumer decision+ma"ing.
?9 Appl3 each o1 the t:o models depicted in Ta)le 145 @i9e9/ traditional mar.eting
and value and retention mar.eting2 to the mar.eting o1 cellular phone services9
'ou ma3 :ant to incorporate into 3our ans:er the e0periences that 3ou and
3our peers have had in selecting cellular communication providers9
?tudents are free to create with this discussion 7uestion. ?tudents should% however%
observe the differences between the two approaches outlined in ,able 1+2. Ahile
using the traditional mar"eting concept is a useful and correct approach 6see features2%
it does not incorporate modern technology the way the value and retention concept
does. Interactivity is also important to the value and retention model.
Cne way to ma"e this e1ercise fun is to bring ads from cellular phone services to
class. As" students if they can identify the approaches being used. Fe1t% as" them to
change the approach observed to the other approach using information found in ,able
1+2. ,his will aid students in learning the advantages and disadvantages of both
concepts.
EAERCISES
19 'ou are the mar.eting manager o1 Citi)an.;s Online Ban.ing (ivision9 Ho:
:ould 3ou appl3 the concepts o1 providing value and customer satis1action and
retention to designing and mar.eting e11ective online )an.ing=
Instructor;s Discussion
In order to answer this 7uestion% students should refer to ,able 1+2 6to get ideas on
value and retention+focused mar"eting2. ,hey should especially ta"e notice of the use
of information technology% databases% interactive communications% and usage of
satisfaction surveys. ?tudents might also wish to be aware of the introductory remar"s
to the chapter on the digital revolution and how this revolution might apply to the
e1ercise. Fote that customer value is defined as being the ratio between the
customer;s perceived benefits 6economic% functional% and psychological2 and the
resources 6monetary% time% effort% and psychological2 used to obtain those benefits.
5erceived value is relative and subective. .itiban" would need to develop a value
proposition 6uni7ue selling proposition2 for its service. Ahat ideas do students have
for doing thisD
!&
Customer satis1action is the individual;s perception of the performance of the
product or service in relation to his or her e1pectations. .onsumers often differ
drastically with respect to the degree of satisfaction obtained. Ahat are the factors
that would ensure customer satisfaction with online ban"ing 6security% speed%
accuracy% etc.2D
Bastly% students should carefully analy4e customer retention. Ahat types of customers
would the ban" most li"e to haveD 9ow could the ban" retain these customers with
their online ban"ing serviceD
59 ocate t:o e0amples @e9g9/ advertisements/ articles/ etc92 depicting practices
that are consistent :ith the societal mar.eting concept and t:o e0amples o1
)usiness practices that contradict this concept9 E0plain 3our choices9
Instructor;s Discussion
,he societal mar.eting concept is described as being one where the mar"eter is
re7uired to adhere to the principles of social responsibility in the mar"eting of their
goods and services- that is% they should endeavor to satisfy the needs and wants of
their target mar"ets in ways that preserve and enhance the well+being of consumers
and society as a whole. ,hus% the restructured definition of the mar"eting concept
calls on mar"eters to fulfill the needs of the target audience in ways that improve
society as a whole% while fulfilling the obectives of the organi4ation. A serious
deterrent to widespread implementation of the societal mar"eting concept is the short+
term orientation embraced by most business e1ecutives in their drive for increased
mar"et share and 7uic" profits.
?tudents should be clear as to why e1amples fit the pro and con approaches. Cpen the
discussion with a clear definition of what the societal mar"eting concept is 6see
above2. Fe1t% match this concept to the supplied advertisements or articles. .onclude
the discussion with comments on the applicability of the concept to modern business.
69 Appl3 each o1 the concepts 1eatured in the section descri)ing the development o1
the mar.eting concept to manu1acturing and mar.eting high4de1inition T$s9
!'
Instructor;s Discussion
,he concepts to be reviewed are the production concept 6assumes that the consumer
is mostly interested in product availability at low prices2% the product concept
6assumes that consumers will buy the product that offers them the highest 7uality% the
best performance% and the most features2% the selling concept 6assumes that consumers
are unli"ely to buy the product unless they are aggressively persuaded to do so2% and
the mar"eting concept 6assumes that for a company to be successful it must determine
the wants and needs of specific target mar"ets and deliver the desired satisfactions
better than the competition2. Fote that if the discussion is to be e1tended to the
societal mar"eting concept review material is found in 81ercise 2 above.
*efore students ma"e their application have them read ,able 1+1 for additional
business views toward the concepts. As an additional thought 7uestion% have students
analy4e 9enry 0ord;s famous statement% <consumers can have any color of car they
wish as long as it is blac".=
S9T9A9R9 PRO#ECTS
Ethical Issues in Consumer Behavior
.-T-/-0- 1roject #"
9G> *loc" is the #))+pound gorilla of individual income ta1 preparation. ,he company
has a significant presence in the U.?. mar"et 6especially during the spring ta1 season2.
9G> *loc" has always been an aggressive competitor in this highly competitive mar"et.
A trade organi4ation for accountants believes that 9G> *loc" became too aggressive
when it ran an ad campaign that showed a consumer running in a dar" alley confronted
with neon signs flashing <5restige .5A%= <,a1es 9ere%= and <,a1 .onsortium.= ,he
consumer appears confused and frightened. At the end of the alley a solution to the fear
and confusion appeared in the form of a warm and friendly 9G> *loc" sign that
promised that consumers do not have to pay until they are completely satisfied. Fon+
*loc" .5A professionals 7uestion whether 9G> *loc" has fairly represented their
businesses and consumer policies.
a. Is this form of advertising ethicalD Ahy or why notD
b. Aith respect to what you have learned about ethics in the chapter% what suggestions
do you have for 9G> *loc"D
!(
Instructor;s Discussion
,he 9G> *loc" case is a good e1ample of aggressive mar"eting that might e1ceed
acceptable limits. ,he ad is much different than the 9G> *loc" approach used on their
Aeb site 6see www.hrbloc".com2. .ould a code of ethics help 9G> *loc"D 5ossibly.
.5A professionals do not see themselves as neon sign merchants nor do they believe that
the average citi4en has complaints with their preparation practices or guarantees. Ahen
does innuendo and appearance become unethicalD ,his should be an interesting issue for
the students to discuss. It will also be a good way to introduce the concept of a code of
ethics. 6?ee the e1ercise below for more wor" on a code of ethics.2
.-T-/-0- 1roject #2
3any consumers trust their medical supply needs to Hohnson G Hohnson. Hohnson G
Hohnson is very clear as to its mission and commitment to the health and safety of its
customers. ,he company is often cited as an e1ample of how to do things right with
respect to relations with customers and the public. Hohnson G Hohnson has gone so far as
to construct a company credo that it features on its Aeb site 6see www.n.com : Eiew
Cur .redo2.
a. Assume that you have ust been hired as a customer relations e1pert by Hohnson G
Hohnson to answer a growing number of complaints that HFH products are over+
priced and have lost their sense of value for the consumer. ,he complainants cite
lower priced private labels and store brands as illustrations of frustrations with HFH.
As one consumer states% <A band aid is ust a band aid after allI= Ahat would be
your responseD
b. 9ow could you use the Hohnson G Hohnson .redo to aid you in your responseD
Instructor;s Discussion
0irst% all students should read the HFH .redo. ,he .redo itself can be the discussion in
this 7uestion. Fe1t% students must carefully thin" about the scenario that has been
presented. 9ow could the company use its commitment to 7uality as an answerD 9ow
could the company comment without disparaging the competitionD 9ow can the company
focus on value 6see ,able 1+2 for additional information2D ,a"e the two to three best
responses and read them in class. An additional aid is to download the HFH .redo and
prepare it as a handout. Ahat does the HFH .redo say about the company;s commitment
to ethical behaviorD
Small "roup ProBects
.-T-/-0- 1roject #3
#)
Aho designed the chic"en sandwichD According to information provided on the .hic"+
fil+A Aeb site 6www.chic"+fil+a.com2 it was .hic"+fil+A founder ,ruett .athy. 3r.
.athy is also "nown for his uni7ue approach to the fast food business. ,his uni7ue
approach has at its center an appreciation of family values 6the restaurants are closed on
?undays and all children;s toys emphasi4e values rather than gimmic"s or cartoon
characters2. After visiting the company Aeb site% your group;s assignment is to list the
ways that .hic"+fil+A provides customer value% satisfaction% and retention for its
customers. Cnce this is done% decide which of the two concepts displayed in ,able 1+2
most appropriately describe the mar"eting approach of this company. *e sure to ustify
your decision.
Instructor;s Discussion
,he student group should not have a problem listing the ways that .hic"+fil+A provides
customer value and satisfaction. >etention may ta"e longer. *y ma"ing the attempt%
however% students will appreciate the chapter comments more fully. After the list is
complete% the second assignment sounds easy. ?tudents should% however% observe that
.hic"+fil+A matches both of the two concepts rather well. ,he astute student will see that
.hic"+fil+A may still have some way to go with respect to technological application to
the business% databases% and customer segmentation. Hust because a company emphasi4es
value does not mean that it fulfills the right+hand side of ,able 1+2. Does any other fast
food company do a better obD 5robably not.
.-T-/-0- 1roject #4
Fi"e is not ust for males. ,his shoe giant% as can be seen by .ase Cne and the opening
comments to the chapter% has made great strides in mar"et segmentation% customi4ation%
and customer relationship development. ,he result is that Fi"e is also a premier female
shoe company. Jour group assignment is split your team and analy4e Fi"e. ,o do this%
one team should review the www.ni"e.com Aeb site and analy4e its contents based on its
appeals to the male mar"et segment 6i.e.% styles% language% colors% celebrity endorsers%
games% customer relationships% etc.2. ,he second team should analy4e the Fi"e Koddess
Aeb site at www.ni"egoddess.com. As with ,eam Cne% ,eam ,wo should analy4e the
Aeb site based on its appeals to the female segment 6i.e.% styles% language% colors%
celebrity endorsers% games% customer relationships% etc.2. ,he two teams should now
match their findings and write a summary report. Ahat has Fi"e learned about mar"et
segments and mar"et targetsD 9ow do the two Aeb sites assist Fi"e in its mar"eting
effortsD
Instructor;s Discussion
#1
,his e1ercise gives two small groups within a larger group the chance to e1plore Fi"e;s
mar"eting efforts to two distinct mar"et segments. .ase Cne and the opening comments
to the chapter supply additional information about the company. If you would li"e to add
additional comparison criteria% feel free to do so. *e sure to as" students what they have
learned about consumer behavior from the Fi"e Aeb sites. ,his e1ercise will also give
groups a chance to learn to wor" with each other and will pave the way for future group
participation proects.
%sing the Internet to Stud3 Consumer Behavior
.-T-/-0- 1roject #)
1. Ahat is your favorite flavor of Bifesaver;s candyD ,he five traditional flavors are
about to change and the Aeb surfer will aid in the change process. Bifesaver;s has
designed its Aeb site to be one that is fun and interactive. ,he company promises that it
will be a primary avenue for customer contact and involvement. .hoosing new flavors of
Bifesaver;s candy is only the first step in this direction. Eisit the Bifesaver;s Aeb site at
www.candystand.com and review the opening page. Cbserve the activities available for
the viewer. Fe1t% note the shopping opportunities and lin"s to other Aeb sites.
a. Ahat can you tell about the probable mar"et segment that visits this Aeb siteD
b. 9ow is the company using the mar"eting concept to interact with its customers
via this Aeb siteD
c. Ahat other advertisers 6lin"s2 would you suggest for this Aeb siteD AhyD
Instructor;s Discussion
,his Aeb site is a great one to visit in class. It is bright% colorful% full of interactive
games% and usually has some form of contest. 5ic"ing the Bifesaver color is a good
e1ample. ?tudents should certainly be able to identify the mar"et segment. 9ow would
this segment "now to visit this siteD At one time% word+of+mouth was about the only way
a young customer would have "nown. ,oday% Bifesaver;s features the address in many of
its commercials. Cnce the mar"et segment is identified 6is it male or female/how could
you tellD2% students should be able to list various synergies with other companies 6lin"s2.
.-T-/-0- 1roject #$
Aho has the best cell phone service nationwide according to customer satisfaction
ratingsD If you guessed <.an you hear me nowD= Eeri4on Aireless% you were right.
Eeri4on is not only committed to providing e1cellent service to its customers but it has
also made a significant commitment to community service and corporate sponsorship
6see www.veri4on.com and then lin"s to Eeri4on in the .ommunity and Eeri4on
?ponsorships2. After e1amining the section in the chapter on 3ar"eting 8thics and ?ocial
#2
>esponsibility% review the definition of the societal mar"eting concept and answer the
following 7uestions about Eeri4on.
a. Ahat evidence do you find on the Eeri4on Aeb site that it is following the societal
mar"eting conceptD
b. 9ow would an adherence to this concept aid Eeri4on in its competitive
environmentD
c. Ahat evidence do you find that Eeri4on is providing customer value and
satisfaction to its mar"etD 9ow would this affect consumer behaviorD
Instructor;s Discussion
,he students will find a clear discussion of Eeri4on;s social efforts by following the lin"s
suggested. ,he students should then match this data to the definition provided in the
chapter. .learly% Eeri4on is ma"ing strides toward the societal mar"eting concept. As"
students how they thin" Eeri4on chooses its sponsorships. 9ow would the societal
mar"eting concept affect these choicesD If Eeri4on is attempting to connect with
consumers% community involvement is a worthy endeavor. Depending on when you
chec" the Aeb site% the company usually provides updated data on customer value and
satisfaction. In the highly competitive world of wireless communication% value and
satisfaction are to be treasured. At this point in time% Eeri4on seems to have a good model
for connecting with consumers.
CASES
Case One: (igiti+ation ECuals Customi+ation
Luestion 1/Answer:
,he customi4ation strategies discussed in the case are refinements of the mar"eting
concept% which calls for companies to identify and focus on consumer needs in
developing% promoting% and selling their products and services. ,he new digital
technologies enable mar"eters to maintain ongoing% individual dialogues with their
customers% in which they learn about and respond to a customer;s personal preferences.
Instead of targeting a group of customers identified through mar"et segmentation as
sharing a common need or preference% these strategies focus on one+to+one mar"eting%
producing and mar"eting a product precisely suited to satisfy one individual;s needs.
Luestion 2/Answer:
3ar"et segmentation and product customi4ation can be viewed as different points on a
continuum of fulfilling customers; needs. ,he instructor may use the sites listed in the
7uestion to illustrate that point. 0or e1ample% discuss the differences between selling
#3
scores of Fi"e models at a store where athletic shoes are organi4ed according to distinct
needs and activities such as running% playing different sports etc.% 6i.e.% mar"et
segmentation2 and offering individually+customi4ed versions of several shoe models
online 6i.e.% Fi"e;s present version of one+to+one mar"eting@product customi4ation2.
81amples of products that do not lend themselves to customi4ation and where effective
mar"et segmentation is still the "ey to success include many nondurable% mass+distributed
consumer goods where several producers compete for relatively stable mar"et segments
6e.g.% canned soft drin"s% personal care products% and household care items2.
Case T:o: <hole ,oods &ar.et vs9 ,resh(irect9com
Luestion 1/Answer:
Ahole 0oods and 0reshDirect.com are each successfully catering to a very specific target
mar"et. ,hey are practicing a consumer+oriented mar"eting concept. 3eeting consumer
needs and wants is their primary mission. Ahole 0oods has found a niche of people who
want higher 7uality foods and are willing to pay the e1tra price. 0reshDirect.com literally
delivers foods% ordered by customers online% via user+friendly shopping list software.
Luestion 2/Answer:
Digital technologies are allowing 0reshDirect.com to give consumers more power and
more access to information. 0reshDirect can 7uic"ly adapt the elements of the mar"eting
mi1 to consumers needs more 7uic"ly and efficiently and build and maintain
relationships with customers on a much greater scale.
Ahole 0oods growth has been fueled by the upsurge in American;s desire for healthy
living and their interest in gourmet coo"ing. ,he company spent a great deal of time
educating consumers about foods% providing recipes and arranging trips where customers
meet with local fisherman. >iding on successes% Ahole 0oods is planning to double the
number of its stores by 2)1#.
Feither companies will survive or thrive in a competitive environment without
consistently satisfying consumers by meeting their needs better than competition.
9owever% 0reshDirect needs to be cogni4ant about complaints regarding the 7uality of
some products and ma"e necessary corrections.
Luestion 3/Answer:
81pansion will be a challenge to both organi4ations. As stated in answer 2% 0reshDirect
cannot afford to disappoint consumers. .onsumer e1pectations about 7uality of product
must be met consistently. ,he organi4ation must also deliver <on time%= <every time.= If
this doesn;t happen% consumers will go elsewhere. ,he case also mentions limited
selections of products. 0reshDirect must constantly monitor whether they have the right
mi1 of products and if consumers continue to be satisfied by the limited offerings.
#!
Ahole 0oods needs to continue to offer a premium product if they wish to continue
charging a premium price. ,hey will also have to monitor their mar"et for shifts in
interest for healthy foods and gourmet coo"ing. Aill they continue to thrive while
depending on media e1posure and newspaper and maga4ine featuresD Aill part of their
promotional dollar need to be shiftedD ,hese and similar 7uestions will need to be
addressed as the company plans to grow.
##