Introduction to Consumer Behaviour 2024-25 SEM 1 Lecture Notes PDF

CONSUMER BEHAVIOUR UNIT 1 TOPIC : Introduction to Consumer Behavior - Consumers, Markets & Technology Unit 1 Learning Objectives The evolution of the marketing concept, the most prominent tools used to implement marketing strategies, the relationship between value and cu...

CONSUMER BEHAVIOUR UNIT 1 TOPIC : Introduction to Consumer Behavior - Consumers, Markets & Technology Unit 1 Learning Objectives The evolution of the marketing concept, the most prominent tools used to implement marketing strategies, the relationship between value and customer retention, and the objectives of socially responsible marketing. To understand how the Internet and related technologies improve marketing transactions by adding value that benefits both marketers and customers. To understand the interrelationships among customer value, satisfaction, and retention, and technology’s revolutionary role in designing effective retention measures and strategies. To understand consumer behavior as an interdisciplinary area, consumer decision-making. What is Consumer Behaviour? WHAT IS CONSUMER BEHAVIOUR? The study of activities consumers’ undertake (searching for, purchasing, using, evaluating, and disposing) in relation to offerings that they expect will satisfy their needs  What is Consumer Behaviour? Consumer Behaviour is the study of the totality of consumers’ decisions (whether, what, why, how, when, where, how much, often, long) with respect to the buying process (acquisition, use and disposition) of marketing offers (goods, services) by decision-making units (user, purchaser, decider, influencer) over time (hours, days, weeks, months, years).  Market Offering? Anything that promises to fulfill customer needs and wants  Market Offerings: Goods Properties Services Places Events Organisations Experiences Information Persons Ideas  Learning Objective 1.1 To understand the evolution of the marketing concept, the most prominent tools used to implement marketing strategies, the relationship between value and customer retention, and the objectives of socially responsible marketing. Marketing Orientation/Philosophy Philosophy/thinking guiding marketing strategies Marketing Orientation 1. Production Concept: 2. Product Concept: 3. Selling Concept: 4. Marketing Concept: 5. Societal Marketing Concept: 1. Production Concept Consumers will favor products that are widely available and highly affordable. Focus: production and distribution efficiency 1. Production Concept – Widely available and affordable. High production and distribution efficiency. 2. Product Concept Consumers will favor products that offer high quality, superior performance and innovative features. Focus: continuous product improvement 2. Product Concept – high quality, superior performance and innovative features 3. Selling Concept Consumers will not buy enough of the company’s product unless it undertakes large scale selling and promotion effort. Focus: Transactions rather than relationships 3. Selling Concept – aggressive promotion of product.  4. Marketing Concept Holds that knowing the needs and wants of target markets and delivering the desired satisfaction better than competitors do is the way to achieve organizational goals. Focus: Customer needs and suitable offerings 4. Marketing Concept– identify and satisfy the needs of customers more effectively and efficiently than competing offers. 5. Societal Marketing Concept Marketing decisions should consider consumers wants, company’s requirements, consumers’ long term interests, and society’s long run interests. Focus: sustainable practices for the collective good of all stakeholders 5. Societal Marketing – marketing in a way that preserves or enhances the consumers’ and the society’s long term interest or well being. Focus on sustainable practices for the collective good of society Marketers face the challenge of balancing the needs of customers, company profits and society’s long term interest  Society (Human Welfare) Societal Marketing Concept Consumers Company (Want satisfaction) (Profits) Selecting Customers to Serve?  Market Consider the entire collection of actual and potential buyers  Market Segmentation : Divide the market into groups of customers with similar needs and wants (homogeneous) Target Marketing : select a group(s) of customer(s) to focus resources on reaching Implement the Marketing Plan?  Marketing Mix: Using a combination of tactical tools used by a marketer to execute strategy For Services marketers also need to consider: People, Process, Physical Evidence  LEARNING OBJECTIVE 1.3 To understand how the Internet and related technologies improve marketing transactions by adding value that benefits both marketers and customers. MARKETING & TECHNOLOGY ✓ Technology has completely revolutionized the marketing mix. ✓ Technology has created a value exchange. ✓ Lower prices, more information and customized products - ✓ Consumers provide virtually unlimited information about themselves to marketers, who gather, analyze and use it to target buyers. ✓ Consumers also have access to better information, and can compare products based on attributes in side-by-side comparisons More precise targeting ✓ Interactive Communications  Explore how Technology has changed the marketing and its effect on Consumer Behavior Amazon 7-Crave Cheapoair  LEARNING OBJECTIVE 1.4 To understand the interrelationships among customer value, satisfaction, and retention, and technology’s revolutionary role in designing effective retention measures and strategies. SUCCESSFUL RELATIONSHIPS: VALUE, SATISFACTION, RETENTION Successful Relationships High level of Customer Customer customer value retention satisfaction SUCCESSFUL RELATIONSHIPS: Customer Value 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 SUCCESSFUL RELATIONSHIPS: Customer satisfaction - The individual's perception of the performance of the product or service in relation to his or her expectations. Customer groups based on satisfaction/loyalty include: 1. Loyalists 2. Apostles 3. Defectors 4. Terrorists 5. Hostages 6. Mercenaries  SUCCESSFUL RELATIONSHIPS: Customer groups based on satisfaction/loyalty include: 1. Loyalists - very satisfied and will remain loyal 2. Apostles - very satisfied to the point of spreading positive WOM 3. Defectors - merely satisfied and likely to switch 4. Terrorists - very dissatisfied and will spread negative WOM 5. Hostages - unhappy customers but have little or no option or remain for low prices 6. Mercenaries - very satisfied customers but have no real loyalty and may defect SUCCESSFUL RELATIONSHIPS: Retention: The objective of providing value is to retain highly satisfied customers. Loyal customers are key: They buy more products They are less price sensitive Servicing them is cheaper They spread positive word of mouth SUCCESSFUL RELATIONSHIPS: Measures to assess Customer Retention strategies 1.Customer Valuation 2.Retention Rates 3.Analyzing Defections Develop Retention Strategies 4.Management & Employee actions 5.Erect switching barriers 6.Cross-sell/cross-promotion/ incentives LEARNING OBJECTIVE 1.5 To understand consumer behavior as an interdisciplinary area, consumer decision-making. Interdisciplina ry Nature of Consumer Behaviour  Consumer Behavior Is Interdisciplinary Psychology – study of human mind and mental factors that affect behavior (needs, personality- traits, perceptions, attitudes) Sociology– study of the development, structure, functioning and problems of human society (social class/strata) Social Psychology - how individuals function within groups (group behaviour/influences, conformity to group norms) Anthropology - compares human societies’ cultures and development (cultural values and subcultures)  Interdisciplinary Influences Explore Consumer Experimental Psychology Neuroscience/Neuromarketing Clinical Psychology https://hbr.org/2019/01/ Developmental Psychology neuromarketing-what-you-need-to- know Human Ecology Microeconomics Social Psychology Sociology Macroeconomics Semiotics - the theory and Semiotics/Literary Criticism study of signs and symbols, Demography especially as elements of language or other systems History of communication. Cultural Anthropology CONSUMER DECISION MAKING MODEL TUTORIAL SESSION Tutors will cover the Chapter on Segmentation, Targeting & Positioning TUTORIAL QUESTIONS Students should answer Tutorial Questions on Unit 1 CONSUMER BEHAVIOUR UNIT 1 TOPIC : Segmentation, Targeting & Positioning CHAPTER 2 LEARNING OBJECTIVES 2.1 To understand the interrelationship among market segmentation, targeting, and positioning and how to select the best target markets. 2.2 To understand the bases used to segment consumers, including demographics, psychographics, product benefits sought, and product usage-related factors. 2.3 To understand behavioral targeting and its key role in today’s marketing. 2.4 To understand how to position, differentiate, and reposition products.  Learning Objective 2.1 To understand the interrelationship among market segmentation, targeting, and positioning and how to select the best target markets. Market / Segmentation/ Targeting  Why is Segmentation Necessary Consumer needs differs Differentiation helps products compete Segmentation helps identify best channels to communicate SELECTING TARGET MARKETS Targeted Segments must be: Identifiable Profitable (sizeable) Stable Reachable Congruent with company objectives and resources “Lefties” are hard to identify and measure, so few firms target this segment.  LEARNING OBJECTIVE 2.2 To understand the bases used to segment consumers, including demographics, psychographics, product benefits sought, and product usage-related factors. MARKET SEGMENTATION Demographic Segmentation - age, gender, households (FLC), social class, ethnicity, income, education/occupation Geographic Segmentation (Geo-Demographic) Psychographic Segmentation - lifestyle (activities, interests, opinions), values Behavioral Segmentation - Benefit, Usage Rate, Product Awareness status, Usage occasion MARKET SEGMENTATION QUANTITATIVE FACTORS - can be determined numerically COGNITIVE FACTORS - reside in consumers mind and cannot be determined numerically MARKET SEGMENTATION QUANTITATIVE FACTORS - can be determined numerically Consumer Intrinsic attributes - Demographics, Geographics Consumption-based factors - product volume, rate of purchasing, frequency in engaging in leisure activities MARKET SEGMENTATION COGNITIVE FACTORS - reside in consumers mind and cannot be determined numerically Consumer Intrinsic attributes - personality traits, cultural values, interest, attitudes Consumption-based factors - attitudes and preferences, benefits sought, attitude toward shopping Demographics are the core of almost all segmentation because they are easy and logical. In addition, they are a cost-effective way to reach segments and demographic shifts are easier to identify than other types of shifts. Income, education, and occupation tend to tie together and lead to segmentation based on social class. Geographic Segmentation - is a type of market segmentation that groups prospective customers based on where they live. People living in the same environment tend to have similar wants and needs, and geographic segmentation allows marketers to target audiences in a country, city or region with messaging that appeals to their specific wants and needs. GEO-DEMOGRAPHIC SEGMENTATION Geo-demographic segmentation suggests that birds of a feather flock together, such that where a person lives helps determine his/her consumption behavior. PSYCHOGRAPHIC SEGMENTATION Psychographic - Consumers’ lifestyles, which include consumers’ activities, interests, and opinions. They explain buyers purchase decisions and choices PERSONALITY TRAIT People often do not identify these traits because they are guarded or not consciously recognized. Consumer innovators (WOM/Exemplary) - Open-minded - Perceived less risks in trying new things PSYCHOGRAPHIC SEGMENTATION VALS VALS™ (an acronym for “values and lifestyles”) is the most popular segmentation system combining lifestyles and values.  VALS Innovators – (high resources, high innovation): they are, successful, seek sophisticated – upscale products, especially with innovative technology. Thinkers – (motivated by ideals, high resources). They are educated, practical – favor durability, functionality, and value in products. Achievers – (motivated by achievement, high resources): they are goal-oriented, centered on career and family, prefer premium products that demonstrate success to their peers. Experiencers – (motivated by self-  VALS Believers – (motivated by ideals, low resources): they are conservative, conventional, slow to alter their consumption habits, and choose familiar products. Strivers – (motivated by achievement, low resources): they are trendy-representing latest trends, fun-loving, emulate wealthy people. Makers – (motivated by self-expression, low resources): they are self-sufficient, not materialistic, spend leisure time with and friends, prefer value to luxury. Survivors – (low resources, low innovation): they are concerned about safety and security, focus on needs, price sensitive, brand loyal and buy MARRIOT INTERNATIONAL BEHAVIOURAL SEGMENTATION Benefits Visiting Tourists Seek in National Park Segment Description Environmentalists Interested in an unpolluted, un-spoilt natural environment and in conservation. Not interested in socializing, entertainment, or sports. Desire authenticity and less man-made structures and vehicles in the park. Want-it-all Tourists Value socializing and entertainment more than conservation. Interested in more activities and opportunities for meeting other tourists. Do not mind the “urbanization” of some park sections. Independent Looking for calm and unpolluted environment, Tourists exploring the park by themselves, and staying at a comfortable place to relax. Influenced by word of mouth in choosing travel destinations. Loyalty Status Segmentation Hard-core Split loyals Shifting loyals Switcher s USAGE BEHAVIOUR Usage rate – group of consumer are heavy, medium, light or non-users of a product Factors to Consider: Awareness Status Level of involvement Usage-Occasion Segmentation Segmenting on the basis of special occasions or situations e.g. valentines Day – orders flowers for a loved one User & Loyalty Status Segmentation  LEARNING OBJECTIVE 2.3 2.3 To understand behavioral targeting (real-time bidding) and its key role in today’s marketing.  Real-Time BEHAVIOURAL TARGETING Bidding A technique that allows advertisers to reach the right user, in the right place, at the right time, and also sets the price that advertisers pay for each “eye-ball” or “impression” (i.e for each person reached. Impression - a customer that becomes available for RTB  Real-Time BEHAVIOURAL TARGETING Bidding Profiling Impressions - the profile of each impression is determined by data broker through web crawlers (programs that capture content across the internet and transmit it to the data broker’s servers PREDICTIVE ANALYTICS Predictive Analytics - Measures designed to predict consumers’ future purchases on the bases of past buying information and other data, as well as evaluate the impact of personalized promotions stemming from these predictions. Predictive analytics often focuses on noticing significant changes in a consumer’s buying behavior, because such changes often alert marketers that consumers are going through significant life events, such as the arrival of a new baby, an upcoming marriage, divorce. See Fig 2.6 for example. RTB Operation Specialized “information exchanges” track who is interested in what through “cookies” (invisible bits of code stored on Web pages). Cookies enable websites to remember information which enable more precise targeting based on their searches. Exchanges such as eXelate or BlueKai sell the cookies to interested marketers TRACKING ONLINE NAVIGATION INCLUDES: Websites visited Engagement on sites Lifestyles and personalities Purchases, almost purchases, returns, exchanges  Instagram Advert in Instagram Home Explore and profile feed LEARNING OBJECTIVE 2.4 2.4 To understand how to position, differentiate, and reposition products. POSITIONING Positioning - The process by which a company creates a distinct image and identity for its products, services, or brands in consumers’ minds.  Positioning: Establish brand meaning in the minds of prospects Copyright © 2016 Pearson Education Ltd. UMBRELLA POSITIONING Umbrella positioning is a statement or slogan that describes the universal benefit of the company’s offering. At times, this statement does not refer to specific products. OTHER TYPES OF POSITIONING Premier positioning e.g. New York Times - “All the news that’s fit to print,” – L’oreal “Because I’m/We’re worth it” Positioning against the competition e.g. Avis – “We’re number 2. We try harder” or 7Up “the uncola” Key attribute based on the brands’ superiority on relevant attributes e.g. Bounty – “The quicker picker upper”, Un-owned positioning when a position is not associated with a product from the category i.e. finding a niche not owned by other companies. e.g. L’oreal antidandruff Shampoo for dry, oil hair. PERCEPTUAL MAP Perceptual mapping is constructing a map-like diagram representing consumers’ perceptions of competing brands along relevant product attributes. PERCEPTUAL MAP Perceptual mapping is constructing a map-like diagram representing consumers’ perceptions of competing brands along relevant product attributes. Positioning example To (target segment and need) our (brand) is a (concept) that (point- of-difference). iPad Pro Photographer Video Editor Content Creator Film Producer Positioning Statement Example To (target segment and need) our (brand) is a (concept) that (point-of- difference). “To creative professionals who need a dependable creative tool, iPad Pro is the most technologically advanced device that facilitates the highest quality creative output.” REPOSITIONING Repositioning is the process by which a company strategically changes the distinct image and identity that its product or brand occupies in consumers’ minds.  RECAP – IMPLEMENTING STP (SEGMENTATION, TARGETING, POSITIONING) NEXT…Consumer Research