Understanding Consumer Behavior

Consumer Behavior

• Studies the processes individuals or groups use to select, purchase, use, or dispose of products, services, ideas, or experiences
• The goal is to satisfy needs and desires

Examples of Consumer Behavior

• Preference for name-brand pain relievers over store brands
• Buying gas on a specific day
• Choosing farmers' markets over grocery stores
• Recycling

Marketing and Consumer Behavior

• Marketing aims to satisfy consumer needs, create value, and retain customers.

Consumer

• A person who identifies a need or desire, makes a purchase, and then disposes of a product.

Marketing Myopia

• Occurs when companies focus too much on product development with excessive features
• Companies discover, as a result, that consumers don't value or are unwilling to pay for them

Production Concept

• Businesses focused on production prioritize increasing manufacturing skills to expand production
• This strategy was especially common when demand exceeded supply

Business Assumption for the Production Concept

• Consumers are primarily interested in product availability at low prices.

Selling Concept

• Primary focus is to sell more of what the manufacturing department can produce

Kevin's Business Example

• Kevin's factory maximizes sales relative to its production capacity, reflecting the selling concept

Marketing Concept Key Assumption

• A company determines the needs/wants of specific target markets, satisfying them better than competitors.

Selling Concept vs Marketing Concept

• Focuses on the needs of the seller, while the marketing concept focuses on the needs of the buyer

Consumer Research

• Characterized as the process and tools used to study consumer behavior

Market Research

• Links the consumer, customer, and public to the marketer through information
• Allows for identifying marketing opportunities and problems
• Helps evaluate marketing actions and strategies' performance

Positioning

• Refers to the development of a distinct image for the product in the mind of the consumer

Market Segmentation

• Involves dividing a target audience into groups with shared needs different from other groups
• Tanya and her marketing team uses this

Successful Positioning

• Communicates the distinct benefits that a product provides

Four Ps of the Marketing Mix

• Product/service, Price, Place, Promotion

Matt's Mobile Services

• Designed a cellular plan especially for tech-savvy teens who live in households earning over $150,000 per year
• Tailoring the plan for a specific group showcases target marketing

Market Segmentation

• Process of dividing a market into subsets of consumers with common needs or characteristics

"Me too" Products

• Lack a unique image or benefit in the eyes of consumers

Matt's Mobile Services Advertising Example

• Matt's Mobile's messaging to teens focused on its expansive network and subscribers' access to news
• Example of communicating the product benefits

Packaging and Warranties

• Elements of the ‘Product’ marketing mix

Four Ps - Promotion

• Public relations is an element of promotion

Four Ps - Place

• Includes distribution centers

Four Ps - Price

• Payment methods

Socially Responsible Marketing

• Marketers fulfill the needs of a target audience, improving society as a whole while meeting organizational objectives

San Francisco vs Monster Beverage Corp.

• The city attorney sued Monster Beverage because it markets caffeinated energy drinks to children, despite health risks.

Societal Marketing Concept

• Fast food places offer less fat and more nutrients
• Food marketers advertise to young people in ways that do not encourage overeating
• Marketers do not hire professional athletes in liquor or tobacco advertisements
• Marketers avoid featuring unreasonably slim female models

Socially Responsible Activities

• Can result in improved corporate image and increased sales

Online Companies

• Create a "value exchange," enabling consumers to gain information, customize products, and enjoy entertainment content

Technology Adoption

• Digital tech has increased marketers' potential output of products and services

Emerging Digital Technologies

• Allow more consumer power through finding the best prices for products or services

Shift in Marketing Dollars

• Marketers are moving budgets from traditional display advertising to sites like Facebook to target large audiences as consumers spend more time online and have more tools to avoid TV ads

Technology Enables Marketers to

• Customize offerings and promotional messages
• Offer more effective pricing
• Utilize shorter distribution channels
• Build long-term relationships with customers

Cookies

• Used to track consumer interests online
• Track data sold on exchanges like eXelate and BlueKai to companies who target consumers based on interests

Site Comparisons

• When consumers compare products online, companies gain information about product attributes consumers value

Samsung's Use of Twitter Comments

• Took advantage of consumer-generated content

Cross-Screen Marketing

• Using software to track a person across devices (mobile phone, tablet, computer) to target them

Customization Success Criteria

• Consumers understand their preferences
• Can express their preferences
• Must be involved

Internet Effects on Prices and Distribution

• Consumers use smartphones to compare prices, leading to price matching from retailers.
• Apple distributes iBooks via its digital bookstore that reduces prices
• Amazon installed Amazon Lockers in grocery and drugstores to accept packages

Customer Value

• Defined as the ratio between the customer's perceived benefits and the resources used to obtain those benefits

Customer Expectations

• Customers have different expectations when buying a Lexus versus a Hyundai; these expectations affect customer satisfaction

Customer Satisfaction

• Individual's perception of a product/service performance in relation to expectations

Customer Retention

• Turns transactions into long-term relationships

What is NOT a Benefit of Loyal Customers?

• Loyal customers aren't particularly price-sensitive.

Customer Acquisition and Retention

• It makes sense for Antoine to allocate more of his budget to customer retention because lower customer turnover is linked to higher profits.

Customer Engagement Forms

• Emotional bonds and transaction-based relationships

Social Media Impact

• Social media transformed market research, allowing companies to easily collect input and customers' preferences

Customer Satisfaction with Online Shopping

• Adaptation is a key determinant.
• Matching purchase recommendations to the customer's needs and enabling customized products
• Trust refers to completing the purchase transaction and reliable honesty from the merchant.
• Engagement is an attractive site design and an enjoyable, comfortable site.

Amazon's Customers

• Delighted customers have high emotional bonds and modest purchase levels

Customer Satisfaction Benefits

• High satisfaction that does not include switching to competitors for lower prices

Mercenary Customers

• Gary is best described as this; he buys ice cream based on which brand is on sale

Apostle

• Megan, uses and recommends Bed Head
• Someone is best described as something when they enthusiastically makes recommendation

Hostage Example

• Norman is best described as one due to health insurance
• Someone may best be described as something even though they dislike the health insurance plan provided

Objective of Providing Value

• The primary objective is to create and retain highly satisfied customers

Customer Profitability-Focused Marketing

• Tracks the costs and revenues of individual customers
• Categorizes these consumers into tiers based on consumption behaviors that are specific to the company’s offerings

Frequent Fliers

• John is a frequent flier that is classified as a diamond member

Customer Retention Measurement

• Retention rate is the percentage of customers from the beginning of the year that remain by year-end.

Internal Marketing

• Disney has employees value their employees like customers; internal marketing

Consumer Decision-Making Process

• The interlocking steps are input, process, and output

Market Segmentation at Ryan's Store

• Ryan divides the athletic market, as an example, which the decision is known as market segmentation

Ryan Runs a Store

• The specific choice to focus on the segment of the market interested in running is known as market targeting.

Transatlantic Airlines

• Identifies the most profitable customers and offers specific incentives, which is customer profitability-focused marketing

Disciplines that Shape Understanding

• Psychology impacts consumer behavior by studying the human mind and behavior factors

Sociology

• Studies human society's development, structure, functioning, and problems

Ford

• Business strategy focused on minimizing production costs

Car Mini Case

• Ford's business approach exhibited the production concept

Central Element to Ford's Business Model

• Price

General Motors

• Differentiated themselves from Ford by allowing customers to choose

Ryan's Runners Mini Case

• Dividing the athletic market into subsets, the dividing of the market is market segmentation

Ryan's Mini Case Cont.

• Ryan decided to the specific targeted portion of the market interested in running; this is market targeting

Ryan's Mini Case Example

• By portraying the store as a one-stop-shop he has a distinctive approach known as positioning

Transatlantic Approach

• Upgrades the seat assignment of especially loyal customers, in an attempt to increase customer satisfaction

Transatlantic Cont.

• Tracks flight searches and developing services to better meet customer’s unfulfilled needs; this adheres to the marketing concept

Companies

• Focus on increased customer understanding
• Able to grow and remain leaders in their industries in spite of increased competition and changing business environments

Substitutes

• Most products do have substitutes or similar products in the marketplace, so having a distinct benefit is usually important for marketers.

Benefits such as Warranties

• Benefits are not part of the place element of the marketing mix.

Healthcare ads

• The Physicians Committee for Responsible Medicine targeted health commercials that blame it for heart disease.

Marketing Concept

• Includes consumer satisfaction, market segmentation, value as well as long term customer satisfaction.