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Introduction to &
Diversity ofConsumer Behavior
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One Definition
Consumer behavior: Thebehaviour that consumersdisplay in searching for,purchasing, using, evaluatingand disposing of products andservices that they expect willsatisfy their needs ..
2 kinds of consuming entities :Personal Consumer
Organizational consumer(NGOs,institutions ,govt agencies etc )
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Personal Consumer
The individual who buys goods and services for
his or her own use, for household use, for the
use of a family member, or for a friend.
Organizational Consumer
A
business, government agency, or otherinstitution (profit or nonprofit) that buys the
goods, services, and/or equipment necessary
for the organization to function.
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Why study consumer behavior? 1) Shorter product life cycles--- Consumers today are
more demanding & look for change .
E.g. changing needs & preferences has resulted in shorter life of mobile
phones, cameras, electronic item
2) Evolving Consumer preferences--- E.g. Colgate herbaltoothpaste that appeals to consumer aspiration of health
3) Environmental concerns---- Environment friendly pdcts e.g.HUL launched washing powder that uses less water to clean clothes .
4) Changing lifestyles--- Pepsi & Coca-cola launched sugar freedrinks to target health conscious & diabetic population
5) Faster technology adoption----
Advent of internet led toinformation boom .E.g. on-line purchase of air tickets 4
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Applications of Consumer
Behavior
Marketing Strategy To satisfy target consumer
needs
Regulatory Policy To protect consumers
Social Marketing
- To help consumers
Informed Individuals To better understand how
societies function 5
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Example 1
During periods when consumers are not shopping
much (e.g., bad economy), store managers often
play slow music within stores
During busy periods (e.g., holiday season), fast
music is played
Why?
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Example 2.
In the US, the Marlboro cowboy is usually shown
alone
Ad.
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Example 2.
In Japan, the Marlboro cowboy is usually shown
as part of a group
Ad.
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WHY??
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Solution.
Culture has an influence on consumer behavior
US culture = importance of individual; not true in
Asia
Japanese consumers think a single cowboy lookslonely and poor Just an ordinary worker on a farm
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In general, important to
understand consumer
psychology to design successfulmarketing tactics
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1 - 14
Development of the Marketing
ConceptProduction
Concept
Selling Concept
Product Concept
Marketing
Concept
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1 - 15
The Production Concept
Assumes that consumers are
interested primarily in product
availability at low prices
Marketing objectives:
Cheap, efficient production
Intensive distribution
Market expansion
Eg Manufacture of sugar , China pdcts
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1 - 16
The Product Concept
Assumes that consumers will buy the
product that offers them the highest
quality, the best performance, and the
most features
Marketing objectives:
Quality improvement
Addition of features
Tendency toward Marketing Myopia
E.g. digital & non digital cameras
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The Selling Concept
Assumes that consumers are unlikely
to buy a product unless they are
aggressively persuaded to do so
Marketing objectives:
Sell, sell, sell
Lack of concern for customer needs
and satisfaction
Eg Insurance policies
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1 - 18
The Marketing Concept
Assumes that to be successful, a
company must determine the needs
and wants of specific target markets
and deliver the desired satisfactions
better than the competition
Marketing objectives:
Make what you can sell
Focus on buyers needs
Eg Head & Shoulders shampoo
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The Marketing Concept
ConsumerResearch
Segmentation
Targeting
Positioning
The process andtools used to study
consumer behavior
Two perspectives:
Positivist approach
Interpretivist
approach
Implementing the
Marketing Concept
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The Marketing Concept
ConsumerResearch
Segmentation
Targeting
Positioning
Process of dividingthe market into
subsets of
consumers with
common needs orcharacteristics
Implementing the
Marketing Concept
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Zen Estello Young trendy
peopleOmni---Need to transport
goods
Wagon R Smarter people (executive Alto- small car small family
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The Marketing Concept
ConsumerResearch
Segmentation
Targeting
Positioning
The selection of oneor more of the
segments to pursue
Implementing the
Marketing Concept
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The Marketing Concept
ConsumerResearch
Segmentation
Targeting
Positioning
Developing a distinct imagefor the product in the mind
of the consumer
Successful positioning
includes:
Communicating the
benefits of the product
Communicating a unique
selling proposition
Implementing the
Marketing Concept
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This product is
positioned as
a solution to
facial redness.
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The Marketing Mix
Product
Price
Place Promotion
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Successful Relationships
CustomerValue
CustomerSatisfaction
CustomerRetention
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Successful Relationships
CustomerValue
Customer
Satisfaction
CustomerRetention
Defined as the ratio between
the customers perceivedbenefits and the resources
used to obtain those
benefits
Perceived value is relativeand subjective
Developing a value
proposition is critical
Value, Satisfaction,
and Retention
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Discussion Question
How does McDonalds create value for
the consumer?
How do they communicate this value?
Think Globally Act Locally
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Successful Relationships
CustomerValue
Customer
Satisfaction
CustomerRetention
The individual's perception of
the performance of the product
or service in relation to his or
her expectations.
Customers identified based on
loyalty include loyalists,apostles, defectors, terrorists,
hostages, and mercenaries
Value, Satisfaction,
and Retention
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Different types of Customers
1) Loyalists--- Satisfied customers who keep purchasing
2) Apostles --- Experiences exceed their expectation & they providepositive word-of-mouth
3)Defectors --- Feel neutral or merely satisfied & are likely to stopdoing business with the company
4) Terrorists--- Have had negative experiences with the company &spread negative word of mouth
5) Hostages ---- Are unhappy customers who stay with the companybecause of a monopolistic environment or low prices & who are difficult
& costly to deal with because of frequent complaints .
6) Mercenaries ---While being really satisfied customers they do not
have any loyalty to the company & may defect for a lower priceelsewhere. 30
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R
esearchers propose:
Companies should strive to create Apostles
Raise Satisfaction of the Defectors & turn them
into Loyalists
Avoid having terrorists orhostages
Reduce the number ofMercenaries
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Successful Relationships
CustomerValue
CustomerSatisfaction
CustomerRetention
The objective of providing value
is to retain highly satisfiedcustomers.
Loyal customers are key
They buy more products
They are less price sensitive
They pay less attention tocompetitors advertising
Servicing them is cheaper
They spread positive word of
mouth
Value, Satisfaction,
and Retention
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Disciplines involved in the Study of
Consumer Behavior
Cultural
Anthropology
Economics History and
geography
Psychology
Sociology
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Cultural Anthropology ( study of
human beings in society )
The study of people
within and across
cultures
Emphasis on cross-cultural differences
Development of core
beliefs, values &customs that individuals
inherit from parents &
grandparents .34
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Economics (how consumers spendfunds )
How consumers ---Spend their funds
----How they evaluate
alternatives
---How they make decisions
to get maximum satisfaction
from purchases
Behavioral economics
e.g.,mental accounting
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History and Geography
Studies how an individualbehaves in a group( Consumer respects opinion of peers,
reference groups, families, opinion
leaders etc)
Impact of geography on
individuals
Isolation
Language development
Climate
Geographic determinism
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Psychology( study of individual )
Study of human thinking
and behavior
Some issues
Personality
Personal development
Cognition (thinking),
perception Motivation & Attitudes
Learninge.g., acquired
tastes
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Sociology( Study of groups )
Cultural and
interpersonal
influences on
consumptione.g.,
Fads, fashions
Diffusion of
innovation
Popular culture
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Consumer BehaviorApplications in
Marketing
Analyzing Market OpportunityCBB helps in identifying needs & wants of consumers
( e.g. trend towards dual income & emphasis on convenience &
leisure lead to needs for household gadgets like Washing
Machines, mixer grinder ,Vaccum Cleaner)
Selecting Target MarketCBB helps in identifying distinct consumer segments with
distinct needs
( studies proved that consumers do not prefer shampoo priced at
Rs 60 but prefer sachets , hence sachets introduced )
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Consumer BehaviorApplications in
Marketing ( cont)
M
arketing-
mix decisions(Product / Price/ Distribution / Promotion)
Product--- designed to satisfy needs e.g. Maggie noodles first inmasala & capsicum flavors & now in garlic & sambar flavors
Price--- decision will improve flow of revenue to the companyFor eg should the marketer charge same price or higher or low
Distribution--- CBB helps in deciding the distribution channel
e.g. Eureka Forbes vacuum cleaner
Promotion--- Which promotion methods to be used advertising,Personal selling ,Publicity , direct marketing etc
Use in Social & Non-profit Marketing UNICEF , CRY use CBB to sell pdcts & services to motivate
people to support these institutions 40
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A Simplified Model of Consumer Decision Making
Influences
consumers
recognition of a
pdct need
Influences how
consumer
makes
decisions
Post decision
activities