ch02: Consumer Behaviour

COPYRIGHT 2006 Thomson South-Western, a part of The Thomson Corporation.
. Thomson, the Star logo, and South-Western are trademarks used herein under license.
Consumer Behavior
Roger D. Blackwell Paul W. Miniard James F. Engel
Requests for permission to make copies of any part of the work should be mailed to the following address: Permissions Department, Thomson Business and Economics
5109 Natorp Boulevard Mason, OH 45040 8004230563

COPYRIGHT 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.
CHAPTER 2
Creating Marketing Strategies for CustomerCentric Organizations
Consumer Analysis
The process of understanding consumer trends, global consumer markets, models to predict purchase and consumption patterns, and communication methods to reach target markets most effectively
Strategy
A decisive allocation of resources (capital, technology, and people) in a particular direction
Customer-Centric Organizations
A strategic commitment to focus every resource of the firm on serving and delighting profitable customers
Characteristics of CustomerCentric Organizations

Shared Vision and Values
Cross-Functional Integration
System-Wide Simultaneous Training Customer Based Metrics
Characteristics of CustomerCentric Organizations

Shared Vision and Values
Cross-Functional Integration
System-Wide Simultaneous Training Customer Based Metrics
The goal of a customer-centric organization is to provide a consumer with more value than its competitors
Value
The difference between what consumers give up (pay with time, money, or other resources) for a product and the benefits they receive
Marketing Strategy
Involves the allocation of resources to develop and sell products or services that consumers will perceive to provide more value than competitive products or services
Where Does Consumer Behavior Fit In?
Marketing Strategy
Involves the allocation of resources to develop and sell products or services that consumers will perceive to provide more value than competitive products or services
The process includes market analysis, market segmentation, brand strategy, and implementation with the consumer at the core
Market Analysis Consumer Company Environmental Political/Legal Implementation in Marketplace Segmentation Demographic Situational Psychographic Marketing Mix Product, Brand, Price, Place Promotion, and 7Rs
Market Analysis
The process of analyzing changing consumer trends, current and potential competitors, company strengths and resources, and the technological, legal, and economic environments
Market Analysis
The process of analyzing changing consumer trends, current and potential competitors, company strengths and resources, and the technological, legal, and economic environments One goal is to minimize the number of failed products introduced to the market by better understanding the wants and needs of the market
Market Analysis: Consumer Insight and Product Development

Consumer Insight: an understanding of consumers expressed and unspoken needs and realities that affect how they make life, brand, and product choices. Combines fact (from research) and intuition to yield an insight that can lead to a new product, existing product innovation, brand extension, or revised communication plan
Market Analysis: Consumer Environment

Includes demographic trends, personal and group influences, knowledge, attitudes, motivation, purchase and consumption patterns, changing consumer needs, wants, and lifestyles
Market Analysis: Consumer Environment

Includes demographic trends, personal and group influences, knowledge, attitudes, motivation, purchase and consumption patterns, changing consumer needs, wants, and lifestyles Changes in the consumer environment can lead to new product ideas, product adaptations, new packaging or new services to help consumers meet their changing needs -iPod Accessories
Market Analysis: Corporate Strengths and Resources

Resources:
- Financial - Technological - Personnel / managerial - Production - Development and design - Research - Marketing / advertising
Market Analysis: Corporate Strengths and Resources

Resources:
- Financial - Technological - Personnel / managerial - Production - Development and design - Research - Marketing / advertising
-Proctor and Gamble once developed everything internally. Currently 35% of its innovations are based on licensing and strategic acquisitions
Market Analysis: Current and Potential Competitors

- Who are current competitors and which firms are likely to become competitors? - What are advantages/disadvantages of competitors and competitive products? -What do alternative scenarios show of how competitors react to new products or innovations?
Market Analysis: Market Environment

State of Economy
Government Stability and Regulations
Market Environment
Physical Conditions
Technology
Market Segmentation
Process of identifying groups of people who behave in similar ways to each other, but somewhat differently than other groups
Inferring Other Behaviors From Product Usage
Inferring Other Behaviors From Product Usage
Market Segmentation
Process of identifying groups of people who behave in similar ways to each other, but somewhat differently than other groups Results in market segment: a group of consumers with similar behaviors and needs that differ from those of the entire mass market Goal: minimize variance within groups and maximize variance between groups Opposite of market aggregation
Market Segmentation
Market aggregation: when organizations choose to market and sell the same product or service to all customers (also known as mass marketing)
Market Segmentation
Identifying Segments
Market Segmentation
Increasing diversity in consumer needs and wants leads to mass customization: customizing goods for individual customers in high volumes and at relatively low costs
Market Segmentation
Key is understanding which customized features customers value the most
Market Segmentation
Key is understanding which customized features customers value the most

Ability to reach segment of one
Market Segmentation
Segmentation can increase customer satisfaction and profitability
- decreases marketing expenses - increases value (and therefore price) to consumers
Criteria for Choosing Segments

Measurability: ability to obtain information about the size, nature, and behavior of a market segment Accessibility: degree to which segments can be reached, either through targeted advertising and communication programs or multiple retail channels
Criteria for Choosing Segments

Substantiality: size of the marketis it large enough to be profitable? Congruity: how similar members within the segment exhibit behaviors or characteristics that correlate with consumption behavior
Bayesian Analysis
Statistical technique based on a theorem that expresses uncertainty in probability terms Allows consumer analysts to make educated guesses on how the human mind affects behavior or why people buy Analyzes data collected from point-ofsale (POS) scanners to identify patterns of behavior that define market segments
Market Mix Strategies: Product

Product: the total bundle of utilities (or benefits) obtained by consumers in the exchange process

Product: the total bundle of utilities (or benefits) obtained by consumers in the exchange process Internal considerations External considerations

Internal considerations include:
- What are the costs of developing, producing, distributing, and selling the product?
External considerations include:

- What form of product best serves consumption patterns for the target segment - What packaging will most likely attract consumers and fulfill transportation, usage, and disposal of the product? - How will consumers compare this product to competitive or substitute products?
Market Mix Strategies: Place

Place: physical distribution and location of sale
- Where will consumers expect and want to buy this product? - What are the most effective outlets through which to sell the product and how best to get it there?
Market Mix Strategies: Price

Price: total bundle of disutilities (costs) given up by consumers in exchange for the product
Market Mix Strategies: Price

Pricing considerations include:
- What is the best pricing policy for the product or for the store? - How will consumers react to Everyday Low Prices or promotional prices? - Is it more important to have the lowest price or prices in the range consumers expect to pay? - What effect does price reduction or price ending have on perceived quality of product? - What does pricing policy need to be to maintain a healthy profit margin?
Market Mix Strategies: Promotion

Promotion: activities involved in selling a product, including advertising, public relations, sales promotions, and personal sales
- What message should be sent to consumers? - Which forms of communication will best reach specific segments? - What type of communication should occur at various stages of purchase and consumption - How should different product attributes be positioned through different forms of media?
Market Mix Strategies: Brand

Brand: A product or product line, store, or service with an identifiable set of benefits, wrapped in a recognizable personality Functional elements Emotional elements Brand Promise

Functional elements - Performance, quality, price, reliability, logistics
Does the brand solve a problem as expected and do what it is supposed to do?
Emotional elements - Image, personality, style, evoked feelings

Does the brand create an emotional connections between the customer and the product or firm?
Brand Promise
What can consumer expect in exchange for their money?

Brand: A product or product line, store or service with an identifiable set of benefits, wrapped in a recognizable personality Brand Equity Brand Personality Brand Protection

Brand Equity
Difference in value created by the brand minus the cost of creating the brand
Brand Personality
Reflection consumers see of themselves or think will develop by using a brand
Brand Protection
By promising a certain outcome, brands reduce the risk to consumers that the product may not deliver as expected
Transforming Customers into Friends and Fans
Strategy Implementation
Even the best strategies are worthless if not implemented well in the marketplace
Strategy Implementation
Even the best strategies are worthless if not implemented well in the marketplace 7Rs for formulation and implementation
Customer Loyalty and Customer Relationship Management
Customer Loyalty
It is less costly and easier to keep a customer than it is to create a new one
Customer Loyalty
It is less costly and easier to keep a customer than it is to create a new one Loyal customers generate superior margins and recruit additional customers
Customer Loyalty
It is less costly and easier to keep a customer than it is to create a new one Loyal customers generate superior margins and recruit additional customers With increased choices, consumers are becoming more fickle and less loyal
Customer Loyalty
It is less costly and easier to keep a customer than it is to create a new one Loyal customers generate superior margins and recruit additional customers With increased choices, consumers are becoming more fickle and less loyal Consumer feel entitled to try new brands and switching behavior increases
Customer Loyalty
It is less costly and easier to keep a customer than it is to create a new one Loyal customers generate superior margins and recruit additional customers With increased choices, consumers are becoming more fickle and less loyal Consumer feel entitled to try new brands and switching behavior increases
To retain current customers, firms must focus on customer expectations of future benefits
Customer Relationship Management

Process of managing all the elements of the relationship a firm has with its customers and potential customers with CRM solutions and enterprise systems

Implementing CRM

Implementing CRM
- Identify all customers and the nature of contacts with them - Identify which types of customers are most profitable - Identify and understand behaviors of the most profitable customers - Manage contact with most profitable customers - Manage firm activities including strategies and tactics to please the most profitable customers

Provides the ability to calculate the Customer Lifetime Value
- The value to the company of a customer over the whole time the customer relates to the company
Global Marketing Strategy

Thinking Globally: involves ability to understand markets beyond ones own country of origin with respect to:
Sources of demand Sources of supply Management & marketing methods

Organizations must understand markets on a global basis in terms of people Consumers have a myriad array of foreign-made and globally branded products Cultural, ethnic, and motivation variables also affect consumer decisions

Can marketing be standardized?

Can marketing be standardized?
- Can a firm use the same marketing program in all target countries, or must it create a different program for each? - Which are greaterthe similarities among or differences between consumers in different countries? - How do advantages of economies of scale and unified brand image compare to advantages of culture-specific messages?

Cross-Cultural analysis: the comparison
of similarities and differences in behavioral and
physical aspects of cultures

Cultural empathy: the ability to

understand the inner logic and coherence of other ways of life and refrain from judging other value systems

Cultural empathy: the ability to

understand the inner logic and coherence of other ways of life and refrain from judging other value systems
Ethnography: describing and

understanding consumer behavior by interviewing and observing consumers in realworld situations

Intermarket segmentation: the
identification of groups of customers who transcend traditional market or geographic boundaries (similar segments around the world)
Intermarket segmentation plays a key role in understanding the similarities and differences between consumers and countries that become the foundation of market standardization
Global Advertising Effectiveness

Global advertising sends the same message to consumers around the world
Localized campaigns adapt messages to the norms of the different cultures


When is global advertising most effective? - Message is based on similar lifestyle - Ad appeals to basic human needs and emotions - Product satisfies universal needs and desires


When is global advertising most effective? Language problems may occur, but backtranslation, visual language, and local experts (advice) helps overcome them

Before choosing a brand name, marketers should consider the following:

Before choosing a brand name, marketers should consider the following:
- Does the name of the product have another meaning in one or more of the countries where it might be marketed?
- Can the name be pronounced everywhere? - Is the name close to that of a foreign brand, or does it duplicate another product sold in other markets? - If the product is distinctly American, will national pride and prejudice work against the acceptance of the product?

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COPYRIGHT 2006 Thomson South-Western, a part of The Thomson Corporation.

5109 Natorp Boulevard Mason, OH 45040 8004230563

Creating Marketing Strategies for CustomerCentric Organizations

Characteristics of CustomerCentric Organizations

Characteristics of CustomerCentric Organizations

Where Does Consumer Behavior Fit In?

Market Analysis: Consumer Insight and Product Development

Market Analysis: Consumer Environment

Market Analysis: Consumer Environment

Market Analysis: Corporate Strengths and Resources

Market Analysis: Corporate Strengths and Resources

Market Analysis: Current and Potential Competitors

Market Analysis: Market Environment

Inferring Other Behaviors From Product Usage

Inferring Other Behaviors From Product Usage

Key is understanding which customized features customers value the most

Key is understanding which customized features customers value the most

Criteria for Choosing Segments

Criteria for Choosing Segments

Market Mix Strategies: Product

Market Mix Strategies: Product

Market Mix Strategies: Product

External considerations include:

Market Mix Strategies: Place

Market Mix Strategies: Price

Market Mix Strategies: Price

Market Mix Strategies: Promotion

Market Mix Strategies: Brand

Market Mix Strategies: Brand

Emotional elements - Image, personality, style, evoked feelings

Market Mix Strategies: Brand

Market Mix Strategies: Brand

Transforming Customers into Friends and Fans

Customer Loyalty and Customer Relationship Management

Customer Relationship Management

Customer Relationship Management

Customer Relationship Management

Customer Relationship Management

Global Marketing Strategy

Global Marketing Strategy

Sources of demand Sources of supply Management & marketing methods

Global Marketing Strategy

Global Marketing Strategy

Global Marketing Strategy

Global Marketing Strategy

physical aspects of cultures

Global Marketing Strategy

physical aspects of cultures

Cultural empathy: the ability to

Global Marketing Strategy

physical aspects of cultures

Cultural empathy: the ability to

Ethnography: describing and

Global Marketing Strategy

Global Advertising Effectiveness

Localized campaigns adapt messages to the norms of the different cultures

Global Advertising Effectiveness

Localized campaigns adapt messages to the norms of the different cultures

Global Advertising Effectiveness

Localized campaigns adapt messages to the norms of the different cultures

Global Advertising Effectiveness

Global Advertising Effectiveness

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