CONSUMER BEHAVIOR

Understanding Consumption
Applications of Consumer Behavior
Marketing Strategy and Consumer Behavior
Consumer Decisions
Nature of Consumer Behavior
 Lesson Outcomes

• Introduction to development, diversity and role of

consumer research

• Understanding Definition

• Consumer Behavior in the marketing concept – Introduction

 Definition of Consumer Behavior

The study of individuals,

Because of the
groups, or organizations and
Prozumer concept that
the processes they use to is driving the market.
select, secure, use, and
dispose of products, services, Growth from
experiences, or ideas to satisfy product driven market
to
needs and the impacts that
consumer driven
these processes have on the market.
consumer and society.
 Who is consumer and customer

• Consumer behavior: the Customer behavior: a

process through which broad term that covers
both individual
the ultimate buyer consumers who buy
makes purchase goods and services for
decisions their own use and
organizational buyers
who purchase business
products
Consumer Behavior Roles

User- User consumer of the

purchase

Buyer – The person who buys

Influencer- Person who intentionally

or unintentionally influences an
action

Initiator- Who determines that a needs or

want is not being satisfied and authorizes
a purchase to rectify the situation
 The Focus of Consumer Behavior
Why Consumer Behavior is
a positive step in marketing
How individual make
Because you respond to
decisions to spend wider needs
resources:
Because the product or
• time service that is offered
• money delivers what the consumer
actually wants and needs in
• effort the price, and process that
they prefer or need it at

More service orientation to

wider range of consumers
 Four Applications of Consumer Behavior

• Marketing strategy—i.e., for making better

marketing campaigns.
• Public policy – To create awareness of products and
their usage.
• Social marketing involves getting ideas across to
consumers rather than selling something.
• Customer Sensitization to products available
 The Consumers
Personal Consumer
• Those who buy goods and
services for their individual
use or for the family or even
friends
• End-users or ultimate
consumers
Organizational Consumer
• Profit and non profit
business
• Government and non
government Institutions
 Consumer Behavior Understanding

• People
– Why do different consumers purchase different
products?
– What ways do consumers go about buying products?

• Marketing
– How are products designed for and sold to consumers?
– How does advertising work to influence consumer
preferences?
 Development in Consumer Behavior
Product
Productio
Selling
n Concept
Concept

M
ar
k
e
ti
n
g
C
o
n
c
e
pt
 The Production Concept

Assumes that consumers are interested

primarily in product
availability at low prices Marketing objectives:
• Cheap, efficient production
• Intensive distribution
• Market expansion
 The Total Product Concept

• Total product: refers to the sum of benefits offered by a product, service,

outlet, etc.
– Basic core: bundle of utilitarian benefits (e.g., design, features, etc.)

– Accessory ring: added-value benefits with no apparent extra cost (e.g., store
reputation, manufacturer prestige, convenient location, etc.)

– Psychological ring: benefits resulting from the consumer’s feelings associated with
owning/using the product (e.g., belonging, youthful, powerful, sexy, etc.)

– Time: products/service “give” or “take” time; this can be “good” or “bad” (e.g., fast
food versus conventional restaurant)

– Quality improvement Addition of features Tendency toward Marketing Myopia

 The Selling Concept

• Assumes that consumers are unlikely to buy a product unless

they are aggressively persuaded to do so Marketing
objectives:

• Sell, sell, sell

• Lack of concern for customer needs and satisfaction

 The Marketing Concept

The Marketing Concept Assumes that to be successful, a

company must determine the needs and wants of specific
target markets and deliver the desired satisfactions better
than the competition

• Marketing objectives: Make what you can sell

thus - Focus on buyer’s needs
 The Changing Marketing Vision – Moving
towards Value and Retention Focus Marketing

TRADTIONAL MARKETING Value and Retention Focused Marketing

• Create Customer Trust • Create Customer Bonding

• Make only what you can sell • Co Creation through
– rather than sell what you technology enabling
make customization – the mobile
• Go beyond Product to the • Understand the needs and
need it satisfies perceived value
• Go beyond the completion • Be customer responsive –
in matching needs and Understand the percieved
services value and respond to it –
The Face book success,
Please refer Table 1.2 of Consumer Behavior Pearson
 The Changing Marketing Vision
TRADTIONAL MARKETING
• Create Customer Trust
• Make only what you can sell
– rather than sell what you
make
• Go beyond Product to the
need it satisfies
• Go beyond the completion
in matching needs and
services
Please refer Table 1.2 of Consumer Behavior Pearson
Value and Retention Focused Marketing
• Create Customer Bonding
• Co Creation through
technology enabling
customization – the mobile
• Understand the needs and
perceived value
• Be customer responsive –
Understand the percieved
value and respond to it –
The Face book success,
 Customer Value

Defined as the ratio between

the customer’s perceived
Benefits and the resources
used to obtain those benefits
Perceived value is relative
and subjective Ensuring a
Rising Customer
Developing a value
Value Index
proposition is critical Value,
Through a
Satisfaction, and Retention
Consumer Value
Proposition
 Implementing Value and Retention Focused
Marketing
Product Price Place Promotion

●
Cost of
●
Customer
Benefits accessing ●
Convenience
the product of access
●
Sales Effort
●
Brand ●
List Price ●
Distribution ●
Advertising
●
design ●
Service ●
Store ●
Promotion
●
Features benefits
●
discounts ●
PR
●
Service ●
Online
●
Payment ●
IMC
●
packaging outlets
methods
●
And more ●
And more
 The 4 Ps and Customer Behavior

Process of dividing the market into

subsets of consumers with
The process and tools used to study
common needs or characteristics
consumer behavior
Implementing the Marketing
Concept

Consumer Segmentati
Research on

Positioning Targeting

Communicating the benefits of the

product The selection of one or more of the
Communicating a unique selling segments to pursue Implementing
proposition Implementing the the Marketing Concept
Marketing Concept
Segmentation, Targeting, and Positioning

Market Segmentation

1. Identify segmentation variables and segment the

market
2. Develop profiles of resulting segments
Market Targeting
3. Evaluate the attractiveness of each
segment
4. Select the target segment(s)
Product/Service Positioning

5. Identify possible positioning concepts for each target

segment
6. Select, develop, and communicate the chosen positioning
concept
 Segmentation

• Segmentation is a
concept that recognizes
the diversity in the
marketplace. The
process of segmenting
the market produces
clusters of people who
enjoy similar product
features.
 Segmentation
Segmentation
• Goal: Identify segments that seek different benefits and,
therefore, will be responsive to different positionings of the
product/offerings.
• Means: Link benefits sought to characteristics that make
customers readily identifiable and accessible. For example:
– User status, Demographics, Media exposure patterns, …

• Caution: Avoid over-segmenting; make sure that each

segment is substantial enough to justify a unique
positioning effort.
 Market Segmentation
Bases for Segmentation

Usage
Non-users vs. Category users
Competitor users vs. Own brand users

Geographic
Area Analysis
Regional Analysis
Demographic
Age
Gender
Income
Others

Benefit Sought
Psychographic Analysis
 Market Segmentation
Bases for Segmentation

Usage
Non-users vs. Category users
Competitor users vs. Own brand users

Geographic
Area Analysis
Regional Analysis
Demographic
Age
Gender
Income
Others

Benefit Sought
Psychographic Analysis
 Positioning

• Positioning requires designing a company and

product image and developing a marketing
mix to promote the image to the target
segment(s).
Building Customer Relationships in a
competitive market

Customer Customer
Value Satisfaction

Customer Retention
Building Customer Relationships in a
Positioning
competitive market

Customer
Value
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 is critical Value,
Satisfaction, and Retention
 Building Customer Relationships in a
Positioning
competitive market

Customer
Satisfaction
The individual's perception of the performance of
the product or service in relation to his or her
expectations. Customers identified based on
loyalty include loyalists, apostles, defectors,
terrorists, hostages, and mercenaries Value,
Satisfaction, and Retention
Building Customer Relationships in a
Positioning
competitive market

The objective of providing value is to retain highly satisfied

customers. Loyal customers are key They buy more products They
are less price sensitive They pay less attention to competitors’
advertising Servicing them is cheaper They spread positive word of
mouth Value, Satisfaction, and Retention

Customer
Retention
 Positioning Marketing
Customer Profitability-Focused

Tracks costs and revenues Platinum

of individual consumers

Categorizes them into tiers Gold

based on consumption
behavior

A customer pyramid groups Lead

customers into four tiers

 
 Impact of Digital Technologies

• Consumers have more power and access to

information

• Marketers can gather more information

about consumers
Brand
• The exchange between marketer and
customers is interactive and instantaneous
and goes beyond the PC. Democracy
• Marketers must offer more products and
services
 Societal Marketing Concept

• Marketers adhere to principles

of social responsibility in the
marketing of their goods and
services; that is, they must
endeavor to satisfy the needs
and wants of their target
markets in ways that preserve
and enhance the well-being of
consumers and society as a
whole.
Consumer Behavior Is Interdisciplinary

Psychology

Anthropology

Sociology

Economics
A Basic Model of Consumer
Decision Making Process