Marketing Management Class 3 - Consumer Behavior (PDF)

Marketing Management MKTG 1030 Class 3: Consumer Behaviour (with a little bit of B2B) Steve Pulver 1 Agenda Mid Term Exam Introduction to Consumer Behavior Why Do Consumers Buy? What influences their buying behavior?...

Marketing Management MKTG 1030 Class 3: Consumer Behaviour (with a little bit of B2B) Steve Pulver 1 Agenda Mid Term Exam Introduction to Consumer Behavior Why Do Consumers Buy? What influences their buying behavior? How do they make purchase decisions? Introduction to B to B Marketing This Week’s Labs 2 Mid Term Exam The Logistics Will be held during your Tutorial (Lab) time Rooms TBD Multiple versions 20 Multiple choice questions 30 minutes to complete it No computers or phones allowed Bring 3 HB # 2 Pencils to class in case 2 fail Accommodation Letters 3 Mid Term Exam How to Prepare Do the reading before the lecture Come to the lecture and pay attention Take notes in the lecture There will be 3 questions on the exam based on material discussed in the lecture. This material will not be covered in the textbook or lecture notes. Come to the labs, do the lab prep and participate ! 4  What is it? Course Review & Targeting, The Marketing Positioning, Plan Segmentation Personal Understanding Branding The Consumer MARKETING Promotion MANAGEME Marketing NT Research MKTG 1030 Distribution Branding Pricing & Sales Midterm Exam New Products 5 Consumer Behavior CONSIDERS THE MANY REASONS PERSONAL, SITUATIONAL, PSYCHOLOGICAL, AND SOCIAL WHY PEOPLE SHOP FOR PRODUCTS, BUY AND USE THEM, SOMETIMES BECOMING LOYAL CUSTOMERS, AND THEN DISPOSE OF THEM. 6 Why Do Consumers Buy? Why do you buy the things you buy? How did you decide on what you bought? Where and when do you like to shop? 7 Getting the Answers Companies spend billions studying consumer behaviors Data is collected in many ways Web visits Blogs Social networks Psych. profiles Surveys 8 Situational Factors Store Location Physical Factors Crowding Social situation Time Reasons for Mood purchase 9 Physical Factors Some physical factors can be controlled by design, others must be accommodated Atmospherics: The physical aspects of the selling environment retailers try to control store layout music played Lighting Temperature Smell Uncontrolled: weather 10 Social Situation Circumstances in which consumers may find themselves Factors such as an obligation, expected bahavior, or a need to impress may compel purchases 11 Time THE RIGHT PRODUCT IN THE AT THE RIGHT RIGHT PLACE TIME 12 Reasons for the Purchase Is it an emergency purchase? Is it a gift or for a special occasion? Is it going to help complete a task? Is it needed quickly? 13 Mood People’s moods temporarily affect their spending patterns Some people enjoy shopping. Other’s less so A sour mood can spoil a consumer’s desire to shop 14 Economic Situation People’s economic situation affects what and how much they buy People reduce spending during economic downturns Stores with lower prices (like Walmart) fare better during economic downturns than high-end stores 15  Changes in Demand During the Pandemic Increased demand (+) Decreased demand (-) Drive- Indoor dining throughts Videogames Amusement parks Peleton bikes/home Public gyms gyms Home delivery/curb-side In-store shopping pickup Home office equipment and Commercial office equipment and spaces space Online gambling In-person gambling Take-out liquor Bars Teleconferencing In-person conferences Recreational vehicles Vacation and resort rentals Live-streamed concerts Public concerts 16 Personality It describes a person’s disposition It helps show why people are different It encompasses a person’s unique traits 17 “Big Five” Personality Traits How open you are to new Openness experiences Conscientiousne How diligent you are ss Extraversion How outgoing or shy you are How easy you are to get along Agreeableness with How prone you are to negative Neuroticism states The link between personalities and buying behavior is unclear Copyright Flatworld 2023 18 Self-Concept Marketers have had better luck linking people’s self-concepts to their buying behavior Your self-concept is how you see yourself—be it positive or negative For example, the U.S. Army “Be All That You Can Be” slogan 19 Self-Concept Your ideal self is how you would like to see yourself Your self-concept is how you see Fitter More popular More eco-conscious People buy products to enhance how they feel about themselves 20 Gender Women Men Tend to try on See what they everything want and buy it Shop ‘til they Prefer sites with drop pictures of products Copyright Flatworld 2023 21 Gender When shopping online, men prefer sites that save them time and money and have lots of products Women prefer to browse more diverse sites and see products in a lifestyle context (e.g., a lamp in living room) Women are also twice as likely as men to use viewing tools such as the zoom and rotate buttons and links that allow them to change the colors of products Copyright Flatworld 2023 22 Gender Gender-based shopping differences appear to be changing Younger, well-educated men are more likely to shop for groceries than in the past. Men today are also more likely to buy diapers as well as change them Copyright Flatworld 2023 23  Age A consumer’s age influences their purchase decisions Chronological age A person’s age in years Cognitive age The age a buyer perceives himself or herself to be Copyright Flatworld 2023 24 Lifestyle Companies research on consumers’ lifestyles by asking them Where do they live? What products do they like? What are their How they spend their priorities? time? Where do they go other than work? Who do they talk to? What do they talk about? Copyright Flatworld 2023 25 Lifestyle Psychographics combines: Lifestyle traits of consumers and their personality styles Their attitudes, activities, and values Copyright Flatworld 2023 26 Motivation It is the inward drive people have to get what they need In the mid- 1900s, Abraham Maslow developed the hierarchy of needs Copyright Flatworld 2023 27 Maslow’s Hierarchy of Needs Self-Actualization Needs Realizing your full potential Evaluation Being respected by others as a result of your accomplishments Social Needs Being loved, befriended, and accepted by others Safety Needs Feeling safe and sheltered from harm Physiological Needs Needing food, water and sleep Copyright Flatworld 2023 28 Maslow’s Hierarchy of Needs Physiological Needs Sleep, water, food Copyright Flatworld 2023 29 Maslow’s Hierarchy of Needs Safety Needs Feeling Safe and Sheltered From Harm Copyright Flatworld 2023 30 Maslow’s Hierarchy of Needs Social Needs Being Loved, Befriended, Accepted Copyright Flatworld 2023 31 Maslow’s Hierarchy of Needs Evaluation Being Respected by Others as a Result of Your Accomplishments Copyright Flatworld 2023 32 Maslow’s Hierarchy of Needs Self Actualization Needs Realizing Your Full Potential Copyright Flatworld 2023 33 Perception This is how people interpret the world around them It involves five external senses Sight Touch Taste Hearing Smell Copyright Flatworld 2023 34 Perception and Retention factors Selectiv Selectiv e Filtering out irrelevant information Attentio Attentio n Selectiv Selectiv e Forgetting information that Retentio Retentio contradicts your beliefs n Copyright Flatworld 2023 35 Perception and Retention factors Shock advertising: surprising stimuli that can increase retention For example, the Centers for Disease Control used shock advertising to try to convince Americans of the terrible toll smoking has on people’s health Research on shock advertising is mixed Copyright Flatworld 2023 36 Perception and Retention factors Subliminal advertising: stealthily embedded messages in media Movies, ads Banned by the Federal Communications Commission (FTC) Opposite of shock advertising Copyright Flatworld 2023 37 Learning It is the process by which consumers change their behavior after they gain information or experience Operant A type of behavior that’s (instrumental) repeated when it’s conditioning rewarded Prizes and toys in Cracker Jack boxes and McDonald’s Happy Meals Free sandwich after a certain number of purchases Free car washes when you fill up your car with a tank of gas Copyright Flatworld 2023 38 Learning Strategy of building a game component into a product to Gamification encourage consumers to buy a product or use it more Peloton’s exercise bike Copyright Flatworld 2023 39 Attitudes Attitudes are: Mental positions or emotional feelings Favorable or unfavorable evaluations Action tendencies people have about products, services, companies, ideas, issues, or institutions They tend to be enduring and hard to change because they are based on people’s values and beliefs Copyright Flatworld 2023 40 Societal Factors Culture Social Class Family Subculture Reference groups and opinion leaders Copyright Flatworld 2023 41 Consumer Cultures Culture a group of people with shared beliefs, customs, behaviors, and attitudes. Copyright Flatworld 2023 42 Consumer Cultures Subculture A group of people within a culture who are different from the dominant culture but have something In common with one another such as: Common interests Vocations or jobs Religions Ethnic backgrounds Geographic locations Copyright Flatworld 2023 43 Social Class It is a group of people who have the same social, economic, or educational status in society While income helps define social class, the primary variable determining social class is occupation Copyright Flatworld 2023 44 Example of Social Classes and Buying Patterns Class Type of Car Definition of Class Upper-Upper Class Rolls-Royce People with inherited wealth and aristocratic names (the Rockefellers, Kennedys, Vanderbilts, etc.) Lower-Upper Class Mercedes Professionals such as CEOs, doctors, and lawyers Upper-Middle Class Lexus College graduates and managers Middle Class Toyota Both white-collar and blue-collar workers Working Class Chevrolet Blue-collar workers Lower but Not the Used vehicle People who are working but not Lowest on welfare Lowest Class No vehicle* People on welfare Copyright Flatworld 2023 45 Reference Groups and Opinion Leaders Reference Opinion Leaders Influencers Groups Groups a People with People who consumer expertise in have a identifies with certain areas significant and may want Trusted publicly amount of to join known figures influence over E.g., Movie idols what people and professional purchase athletes Not necessarily celebrities or athletes Often post online Copyright Flatworld 2023 46 Family One of the most important determinants in buying behavior Children Follow their parents’ behavior Influence household purchases Nag their parents for certain Risk inproducts advertising to children May alienate parents Copyright Flatworld 2023 47 Key Takeaways – Why Consumers Buy Situational influences are temporary conditions that affect how buyers behave Market researchers believe people buy products to enhance how they feel about themselves Gender, Age, Lifestage and Lifestyle are strong influencers over how people shop Maslow’s Hierarchy of Needs is a fundamental principle of the human condition Basic needs come before wants Copyright Flatworld 2023 48 Key Takeaways – Why Consumers Buy Learning is the process by which consumers change their behavior after they gain information about or experience with a product Consumers’ attitudes are the “mental positions” people take based on their values and beliefs. Attitudes tend to be enduring and are often difficult for companies to change Copyright Flatworld 2023 49 Key Takeaways – Why Consumers Buy Culture prescribes the way in which you should live and affects the things you purchase A subculture is a group of people within a culture who are different from the dominant culture but have something in common with one another— common interests, vocations or jobs, religions, ethnic backgrounds, sexual orientations, and so forth To some degree, consumers in the same social class exhibit similar purchasing behavior. Most market researchers consider a person’s family to be one of the biggest determinants of buying behavior Copyright Flatworld 2023 50 Key Takeaways – Why Consumers Buy Reference groups are groups that a consumer identifies with and wants to join. Companies often hire celebrities to endorse their products to appeal to people’s reference groups Opinion leaders are people with expertise in certain areas. Consumers respect these people and often ask their opinions before they buy goods and services Influencers are people who aren’t necessarily celebrities or experts but who have a significant amount of influence over what people purchase, often because of what they post online about products Copyright Flatworld 2023 51 Consumer Decision-Making Routine response Automatic purchase decisions based on limited information or behavior information consumers have gathered in the past Purchases that occur with no Impulse buying planning or forethought Low-involvement Used for products that carry a low decisions risk of failure or have a low price tag Copyright Flatworld 2023 52 Consumer Decision-Making High-involvement Used for products that carry a high decisions price tag or high level of risk Consumers already have some Limited problem information but search for a little solving more before making buying decisions Consumers gathers a significant Extended problem amount of information before solving making a buying decision Copyright Flatworld 2023 53 Involvement in Buying Decisions Low involvement High involvement Routine purchase High risk, high price Extended problem Inexpensive solving Postpurchase Low risk dissonance Copyright Flatworld 2023 54 Stages in the Consumer’s Purchasing Process Need Recognition 1 You realize you need a better backpack to travel across the country after you graduate Search for Product Information You begin looking at different backpacks on the Web, 2 talking to friends about them, and visiting stores to look at them Product Evaluation You decide on the price you want to pay and certain that 3 you “must have” in a backpack. You then examine each product based on those criteria Copyright Flatworld 2023 55 Stages in the Consumer’s Purchasing Process Product Choices and Purchase You decide what the best backpack for you is, 4 based on your evaluative criteria, and decide when, where, and how to purchase it Postpurchase Use and Evaluation of Product 5 You decide if the backpack is everything you thought it would be and meets your needs– or not Disposal of the Product You realize you like the backpack so much you buy 6 another one or an upgraded version of it. Or you throw it away, give it to friend, or sell it on eBay Copyright Flatworld 2023 56 Stages in the Consumer’s Purchasing Process The consumer realizes they have a need or Awarene problem ss The consumer Considerati Searches for on solutions and The customer evaluates options decides on a Intent product or service The Purchase consumer The makes the customer purchase evaluated Post-purchase the quality and value of Copyright Flatworld 2023 the 57 purchase Post-Purchase Dissonance Situations that occur when experiences do not match expectations and consumers rethink their decisions after purchasing products and wonder if they made the best decision Copyright Flatworld 2023 58 The Customer’s Journey Marketers have begun to rethink a buyer’s purchase decision as a journey Why do some customers “travel” with a company for the long haul? Companies are developing customer journey “maps” to walk a mile in their customers’ shoes A company also wants to get an idea of the emotions customers experience at each stage when they do business with it Are they delighted? Disappointed? Or somewhere in between? Copyright Flatworld 2023 59 Key Takeaways – Consumer Decision Making Consumer behavior looks at the many reasons why people buy things and later dispose of them. Consumers go through distinct buying phases when they purchase products Realizing the need or wanting something Searching for information about the item Evaluating different products Choosing a product and purchasing it Using and evaluating the product after the purchase Copyright Flatworld 2023 60 Key Takeaways – Consumer Decision Making A consumer’s level of involvement is how interested he or she is in buying and consuming a product Low-involvement products are usually inexpensive and pose a low risk to the buyer if he or she makes a mistake by purchasing them High-involvement products carry a high risk to the buyer if they fail, are complex, or have high price tags Limited-involvement products fall somewhere in between Copyright Flatworld 2023 61 Key Takeaways – Consumer Decision Making Instead of a process, marketers have begun to rethink a buyer’s purchase decision as a journey – that is, the customer’s journey More companies are going so far as to develop customer “maps” to find out where the journey gets hard or breaks down for customers The key is how to move them from merely being aware of a product to being a loyal customer Copyright Flatworld 2023 62  Business to Business Customers are Different From Consumers Copyright Flatworld 2023 63 Business Customers are Different From Consumers The number sold to business markets and size Number of each transaction is much greater than sold consumer markets The size of each transaction for business customers is also much greater Complexi Business products can be far more complex Custom building and retrofitting is common ty Because the transactions are large, personal Personal selling is justified The agility of interactive personal selling allows selling changes to be made to meet conditions Copyright Flatworld 2023 64 Demand for B2B Products Derived Derived Demand that is derived from a demand demand source other than the primary buyer of a product A small change in demand by Fluctuati Fluctuati consumers can have a big effect ng ng throughout the chain of businesses demand demand that supply all the goods and services that produce it Joint Joint Occurs when demand for one demand demand product increases the demand for another Companies try to influence their B2B sales by directly influencing consumers Copyright Flatworld 2023 65 B2C B2B Markets Markets Consumer Market Business Market Fewer customers, often geographically Many customers, concentrated, with a small geographically dispersed number accounting for most of a company’s sales Smaller total dollar amounts Larger dollar amounts due due to fewer transactions to more transactions Shorter decision cycles Longer decision cycles More reliance on mass marketing via advertising More reliance on personal on TV, radio, websites, social media and mobile selling phones More-rigid product Less-rigid product standards standards Copyright Flatworld 2023 66 B2B Buyers Business buyers can be either nonprofit or for- profit businesses Four basic categories Producer Resellers Institution Government s s s Copyright Flatworld 2023 67 Producers COMPANIES THAT PURCHASE GOODS AND SERVICES THAT THEY TRANSFORM INTO OTHER PRODUCTS These businesses have to buy certain products to produce the goods and services they create Producers generally buy in large quantities Copyright Flatworld 2023 68 Resellers COMPANIES THAT SELL GOODS AND SERVICES PRODUCED BY OTHER FIRMS WITHOUT MATERIALLY CHANGING THEM Large wholesalers, brokers, and retailers are typical resellers Large resellers wield considerable power over producers as they provide customers and influence prices Value-added resellers (VARS): companies that buy finished products from other companies, customize them in some way, and thenCopyright sell them Flatworldat 2023 69 higher prices Governments (B2G Markets) State/local governments buy huge amounts of products The U.S. government is the world’s largest buyer of goods and services Each agency will have its own procurement policies Would-be sellers are asked to submit sealed bids It’s not always the lowest bid that’s accepted Copyright Flatworld 2023 70 Governments (B2G Markets) Selling to the government is not always easy Additional regulations or specifications may be required Decision cy cl es can be very long and involve large buying centers Some businesses avoid selling to the government because the perceived hassle (“red tape”) is too great to warrant the effort Other businesses, though, realize that government purchases can become a sustainable competitive advantage Copyright Flatworld 2023 71 Institutions Institutional markets Include nonprofit Charitable organizations, organizations private colleges, civic clubs Buy products and services in large quantities Holding costs down is The lower the cost, the more especially important people they can serve Products and services bought The same as used by The quantity bought consumers is much greater Copyright Flatworld 2023 72  Purchasing Decisions in Business Markets Who makes the decision to buy? Not always clear when dealing with business customers Finding the decision maker is key Where to start in B2B sales can be a little bit like a scavenger hunt There may be several involved There are tiers of B2B and B2C customers Copyright Flatworld 2023 73 Dynamics of B2B Marketing Interpersonal factors among the people making the buying decisions have an impact on the products chosen B2B marketers are aware of these dynamics and try to influence the outcome B2B marketing is very strategic Selling firms gather information about their customers and use that information to their advantage Copyright Flatworld 2023 74 This Week’s Lab Getting deeper into Product, and why people buy what they buy will be explored further in this lab. Now that we have had our lecture on the key items below, it's time to put them into practice... To prepare, please think about Nike and have answers to the following questions 1. How looking at lifestyle information helps firms understand what consumers want to purchase 2. How culture, subcultures, social classes, families, and reference groups affect consumers’ buying behavior 3. How Maslow’s hierarchy of needs works, and how that can influence buyer behavior 4. What marketing professionals can do to influence the behavior of consumers 75 Next Week’s Lecture Nothing is so powerful as an insight into human nature… what compulsions drive a man (or woman), what instincts dominate his (or her) action… if you know these things about a man (or woman) you can touch (him or her) at the core of his (or her) being.” ——Bill Bernbach (a key figure in the development of advertising as a discipline in marketing, Born 1911, Died 1982) 76 Next Week’s Lecture Here we take a break from looking at the 7 Ps of Marketing and get into the essential topic of Marketing Research. Business, and marketing for that matter, is a lot about gathering facts and drawing conclusions that help differentiate your offering from that of your competitors. In class 4 we dive into this key area and learn some of the key do's and don’ts in how to conduct valid and Read:reliable marketing Read: Textbook: research Textbook: Principles Principles of of Marketing Marketingby byJeff Jeff Tanner Tanner and and Mary Mary Raymond Raymond VV 5.0, 5.0,Chapter Chapter10 10 77