Learning Objectives

1. To understand the importance and scope of consumer

behavior and different kinds of consuming entities.
2. To understand the evolution of the marketing concept
and the components of strategic marketing.
3. To understand the interrelationships among customer
value, satisfaction, and retention, and how technology
has enhanced customer loyalty and retention.
4. To understand marketers’ social and ethical
responsibilities.
5. To understand consumer behavior as an
interdisciplinary area and to understand consumer
decision-making as the foundation of this book.
6. To explain how the knowledge of consumer behavior
advances seeking employment after graduation.
 Introduction
“Sales determine profit, and consumers’
actions determine sales.”

Customer is The King.

Customer is Always Right.
Why should you consider the customer as the king?

 A customer is the most important visitor on our premises.

 A customer is not dependent on us, we are dependent on
him/her.
 Customers do not impede our work; they are the reason
for it.
 A customer is not an outsider in our business, he/she is a
part of it.
 We are not doing a favor by serving them, they are doing
us a favor by giving us the opportunities to do so.
Stages of the Buying Process
The complex Nature of Consumer Buying
Process

The difficulties surrounding the consumer’s

willingness and ability lie at the heart of the
buying behavior process.
 Stages of the Buying Process

1.Pre-Purchase Stage
What the consumer does before making a purchase.
( activity takes place intensity of need, time frame, first
time or repeat purchase)

The pre-purchase stage consists of three separate steps:

A.awareness (need to be satisfied) and availability

(product/services)

B. obtain information (friends, relatives, or various

promotional efforts) and

C. analyze the information collected.

 Stages of the Buying Process

2. Purchase Stage: Should the consumer

make a purchase or hold his/her
money?
3. Post-purchase Stage:
Product performance and expectation

Q- Which is the most influential factor in the

case of buying behavior?
 Definition of Consumer Behavior
Consumer behavior
- The study of consumers’ actions during searching
for, purchasing, using, evaluating, and disposing
of products and services that they expect will
satisfy their needs.

 Consumer behavior
– The study of how individuals, groups, and
organizations select, buy, use, and dispose of
goods, services, ideas, or experiences to satisfy
their needs and wants.
Scope of Consumer Behaviour Field
 What are the products people buy?
 Why they buy them?
 How they buy them?
 When they buy them?
 Where they buy them?
 How often they buy them?
 How is the decision process of the consumer?

The behavior varies among individuals, products,

regions.
 Customer Vs. Consumer

 Customer Vs. Consumer:

- Customer is the buyer of the offering.

“Buyers are not always deciders.”

- Consumer is the end-user who consumes the

offering.
Two Different Kinds of Consuming Entities

 Personal Consumer
The individual who buys goods and
services for his or her own use, for the
household use or as a gift for a friend.

 Organizational Consumer
A business, government agency or other
institutions (profit or nonprofit) that buys
the goods, services, and equipment in
order to run their organizations.
Development of Marketing Concept

Production
Concept

Product Concept

Selling Concept

Marketing Concept
 Marketing Myopia
Nokia lost its market share to android & IOS.
However, recently they revive.
 The Selling Orientation
(From the 1930s to the mid 1950s)
Sergio Zyman

Under the selling concept, a company makes a

product and then uses various selling methods to
persuade customers to buy the product. In effect,
the company is bending consumer demand to fit
the company’s supply.

Objective:
– Sell, sell, sell

Supply exceeded customer demand

 The Marketing Concept
(Emerged in the mid-1950s).

 The company finds out what the customer

wants and then tries to develop a product
that will satisfy that want and still yield a
profit. Now the company is bending its
supply to the will of consumer demand. The
job is not to find the right customers for
your product, but the right products for your
customers.
 Objective:
– Profits through customer satisfaction
 Business Leaders Who Understood Consumer Behavior
Long Before the Development of the Marketing Concept

1.In 1923, Alfred P. Sloan of General Motors

2.In the 1930s,Colonel Sanders of KFC

3.In the 1950s, Ray Kroc of McDonald

Implementing the Marketing Concept

 The strategic tools that are used to

implement the marketing concept include:
-Segmentation
-Targeting
-Positioning and
-Marketing Mix (4 Ps)
 Segmentation, Targeting, & Positioning
 Segmentation is the process of dividing a market
into subsets of consumers with common needs or
characteristics.

 Targeting is selecting one or more of the

segments identified for the company to pursue.

 Positioning is developing a distinct image for the

product or service in the mind of the consumer.
 Successful Positioning

Two Key Principles

 Communicating  Communicating a
the benefits of the Unique Selling
product, rather Proposition for the
than its features product
 Successful Positioning

Unique Selling Proposition(USP)-a distinct

benefit or point of difference (POD) for the
product or service.
Features vs. Benefits: What’s the
Difference?
Product/Service, Features and Benefits

 Washing machine-High load capacity-

Wash a large number of items at once.

 Grocery store-Free home delivery-Save

time by not having to visit the store.
The Marketing Mix
 Successful Relationships

Customer Customer
Value Retention

Customer
Satisfaction
The Three Drivers of Successful Relationships
between Marketers and Customers

1.Customer Value,

2.Customer Satisfaction, &

3.Customer Retention
 Customer Value
Customer Value is defined as the ratio between the
customer’s perceived benefits and the resources used
to obtain those benefits.
Customer Value=economic+functional +psychological/
monetary,time,effort,psychological
 Customer Satisfaction

 Satisfaction - Consumer condition when experience

with a product equals or exceeds expectation.
.
Customer Loyalty and Satisfaction

 Loyalists  Defectors
 Apostles  Hostages
 Mercenaries  Terrorists
Several types of Customers based on level
of satisfaction
Loyalists (completely satisfied customers): who keep
purchase, less price sensitive and spread positive word of
mouth.

Apostles: whose experience exceed expectation and

who provide very positive word of mouth about the
company to others.

Defectors* feel neutral or merely satisfied with the

company and are likely to switch to another company
that offers them a lower price.
 Types of Customers
Mercenaries*: who are very satisfied customers but who have
no real loyalty to the company and may defect because of a
lower price elsewhere.

Hostages*: who are unhappy but stay because of monopolistic

environment or low prices.

Terrorists*: who have had negative experiences with the

company and who spread negative word of mouth.

Company strategy?
 Customer Retention
The case for increasing the customer retention
rate is captured in the concept of customer
lifetime value (CLV). CLV describes the present
value of the stream of future profits expected
over the customer’s lifetime purchases.

Studies have shown that small reductions in

customer defection produce significant increase
in profits.
 Customer Retention
Loyal customers are key in business.

1. Loyal customers buy more product;

2. They are less price sensitive
3. They pay less attention to competitors’ advertising
4. Servicing existing customers is cheaper.
5. They spread positive word of mouth and refer other
customers

Furthermore, marketing effort aimed at attracting

new customer are expensive; indeed, in saturated
markets,it may be impossible to find new customers.
 Marketing Ethics and Social Responsibility
Ethics is a set of rules that define right and wrong
conduct.

Business ethics is the application of general ethical

rules to business behavior.

Corporate Social Responsibility (CSR)

 Corporate social responsibility, often abbreviated
"CSR," is a corporation's initiatives to assess and
take responsibility for the company's effects on
environmental and social wellbeing.
 Corporate Social Responsibility
(CSR practices began in the United States in the early part of the 20 th century)

The concept calls upon marketers to

balance three considerations:
a) Company profits
b) Consumer satisfaction and
c) the public interest.
 Corporate Social Responsibility

Arguments for Corporate Social Responsibility

 Balances power with responsibility
 Promotes long-run profits
 Improves a company’s public image
 Responds to changing public needs and expectations
 Corrects social problems caused by business
 Applies useful business resources to difficult problems.
 Corporate Social Responsibility
Critics View:
Social responsibility is nothing but a clever public
relations smokescreen to hide business’s true
intentions to make as much profit as possible.
Arguments against corporate social
responsibility
 Imposes unequal costs among competitors
 Imposes hidden costs on society
 Give too much power to business
The Impact of New Technologies
New consumer capabilities
–Can use the internet as a powerful information
and purchasing aid
–Can search, communicate, and purchase on the
move
–Can tap into social media to share opinions and
express loyalty
–Can actively interact with companies
–Can reject marketing they find inappropriate
 Consumer Behavior Is
Interdisciplinary
 Consumer behavior stems from four
disciplines.
 Psychology
 Sociology
 Anthropology
 Communication
 Consumer Behavior Is
Interdisciplinary
 Anthropology is the study of people in relation to
their culture.
 Psychology is the scientific study of the mind and
behavior.
 Sociology is the study of human social relationships
and institutions.
 Communication is the process of exchanging
information personally or through media channels
and using persuasive strategies.
 Consumer Behavior

 Social psychology is the study of how individual

or group behavior is influenced by the presence
and behavior of others.

 Economics is a science that studies

human behavior as a relationship between ends and
scarce means which have alternative uses.
Consumer Decision Making (1 of 2)
 Inputs (two influencing factors)
– Firm marketing efforts
– Sociocultural influences
 Process (focuses on how consumers make decisions)
– Psychological factors
– Need Recognition, Decision Type,
Prepurchase Search, Evaluation of
Alternatives
– Learning
 Outputs (post-decision activities)
– Purchase
– Post-purchase evaluation
Consumer Decision Making (2 of 2)

Figure 1-1:
A Model of
Consumer Decision
Making
 Employment Opportunities
Students with expertise in consumer behavior should pursue
employment in three areas:
.

Brand management
Advertising and
Consumer research
Discussion Questions

• How does McDonald’s create value for the consumer?

• How do they communicate this value?

 Assignment

Find an example (advertisement) illustrating

practice consistent with the societal marketing
concept and another example of business practice
that contradicts or ignores this concept. Explain
your choices.