Marketing

Chapter 5

Consumer Behavior

Dhruv Grewal Michael Levy

McGraw-Hill/Irwin Copyright 2008 by the McGraw-Hill Companies, Inc. All rights reserved.

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Netflix

1.5 million subscriber households 18,000 titles 25 strategically located distribution centers Changing in store to in home selection Key partnership promotions

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

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Consumer Behavior
Use principles and theories from sociology and psychology

Understand consumer actions

Develop basic strategies to deal with those actions

Understand why people buy products or services

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

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Meet Eva
Problem: Getting access to the latest video releases and movies.

Alternative Solutions: 1. Join local movie rental (i.e. Blockbuster store) 2. Subscribe to premium cable 3. Subscribe to online movie rental (i.e. Netflix)

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

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Evas Questions
Which alternative gives me the best overall value?

Which alternative is more likely to attract friends over to watch movies?

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

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The Consumer Decision Process

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Types of Buying Decisions

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Types of Buying Decisions

Limited Problem Solving Habitual Decision Making Extended Problem Solving Impulse Buying

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Test Your Knowledge

What type of and effort? A) B) C) D) buying decision requires the least amount of time

limited problem solving habitual decision making extended problem solving impulse buying

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Need Recognition

Functional needs

Psychological needs

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Search for Information

Internal Search for Information External Search for Information

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Factors Affecting Consumers Search Process

Perceived Benefits versus Perceived Costs

Discussion question What is the difference in search time between the following: A wedding gift for a) coworker, b) your brother, c) your best friend?

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

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The Locus of Control

Internal Locus of Control Control = more search activities

External Locus of Control Fate, external factors = why bother

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

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Actual or Perceived Risk

Financial risk Performance risk Psychological risk

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Type of Product or Service

Specialty goods/services Shopping goods/services Convenience goods/services

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

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Test Your Knowledge

Consumers can spend considerable time searching for both specialty and shopping goods or services; the difference lies in _______________. A) the amount of time they have B) the amount of money they have budgeted C) the psychological risk D) the kind of search

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Evaluation of Alternatives: Attribute Sets

Universal Set
Retrieval Set
Evoked Set

Choice

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Evaluation of Alternatives: Evaluate Criteria

Evaluative Criteria

Determinant Attributes

Discussion question What are some of the features of a vacation that would be in your evaluative criteria?

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

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Evaluative Criteria

How do consumers begin to evaluate different alternatives, and what important attributes and criteria do they use?

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Case in Point:
Carnival Connections
To encourage small groups to travel together and understand the preferences of these groups.

Challenge

Answer

Establish a social networking site that allows small groups to plan and coordinate a cruise vacation as well as invite others to participate in the cruise.

Results

A soft launch in Jan, 2006 to better understand consumers use and needs from the site.
2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

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Evaluation of Alternatives: Consumer Decision Rules

Entertainment Number of Days Meals Price

Importance Weights

0.4 10 8 6

0.1 8 9 8

0.3 6 8 10

0.2 8 3 5 8.2 7.1 7.2

Carnival Holland America Celebrity

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Evaluation of Alternatives: Decision Heuristics

Price
Product Presentation

?
Brand
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Test Your Knowledge

Decision heuristics are ________ that help a consumer narrow down his or her choices. A) mental shortcuts B) breathing exercises C) logical steps D) compensatory decision rules

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Purchase and Consumption

Ritual consumption

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Understanding Rituals

How does someone plan a ritual event that they have never planned before?

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Case in Point: Grooms Guide to Weddings

Challenge
To involve the future groom in the wedding planning.

Answer

The Knot is a one stop shop for the 2.4 million couples preparing for a wedding in the U.S. The site includes information about customs, traditions and products for any wedding.

Results

3.2 million unique visitors each a month, 3,000 new members per day and growing.

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

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Postpurchase: Customer Satisfaction

Customer contact Encourage feedback Provide money back guarantee Build realistic expectations Demonstrate correct product use

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

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Postpurchase: Dissonance

Firms attempt to reduce dissonance by reinforcing the decision Thank you letters, congratulations letters, quality ratings

Discussion question What other ways do firms reinforce purchase decisions?

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

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Ethical Dilemma 5.1: Dissatisfied Customers Use ihate____.com

Customer complaint system Customer service failure leads to consumers seeking other means Effective means of raising complaints The Complaint Station - tribe.net

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

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Factors Influencing the Consumer Decision Process

Social Factors

Situational Factors

Consumer Decision Process

Marketing Mix Elements

Psychological Factors

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Psychological Factors

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Psychological Factors: Motives

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Test Your Knowledge

What psychological factor is a need or want that is strong enough to cause the person to seek satisfaction? A) learning B) perception C) motive D) attitude

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Psychological Factors: Attitude

Attitude Behavioral Cognitive Affective

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Psychological Factors: Perception

Discussion question How has societys perception of people with tattoos changed in recent years?

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

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Psychological Factors: Learning

Affects both attitudes and perceptions

Affected by social experiences

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Social Factors: Family

Decision makers Influencers

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Social Factors: Reference Groups

Family Friends Coworkers Famous people

Offer information Provide rewards for specific purchasing behaviors Enhance consumers selfimage

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Test Your Knowledge

Which of the following is a way in which reference groups might provide information to consumers? A) Leading by example B) Indirectly, through observation C) Contacting the seller D) Web research

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Social Factors: Culture

Example: Weddings Gathering Ritual Vows Celebration

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Situational Factors

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Entrepreneurial Marketing 5.1: Zipcar The Urban Rent-a-car

Discussion question What situational factors led to the creation of Zipcar?

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

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Chapter 5 Glossary

Extended problem solving: Occurs when a buyer devotes considerable time and effort to analyzing alternatives; common when the customer perceives that the purchase decision entails a lot of risk. External search for information: The buyer seeks information outside his or her personal knowledge base to help make the buying decision. Functional needs: Needs that pertain to the performance of a product or service. Habitual decision making: A purchase decision process in which consumers engage with little conscious effort. Impulse buying: A buying decision made by customers on the spot when they see the merchandise. Internal search for information: The buyer examines his or her own memory and knowledge about the product or service, gathered through past experiences. Limited problem solving: Occurs during a purchase decision that calls for, at most, a moderate amount of effort and time. Psychological needs: Needs that pertain to the personal gratification consumers associate with a product and/or service. Ritual consumption: Refers to a pattern of behaviors tied to life events that affect what and how we consume.