Chapter 5 Consumer Behavior - PowerPoint

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					OAD31863 Marketing

Dr Jenne Meyer
Week 3
Chapter 5
Consumer Behavior

 Process through which buyers make purchase
 Marketers borrow extensively from psychology and
  sociology to better understand consumer behavior
 Consumer behavior is understood as a function of
  interpersonal influences and personal factors
Interpersonal Determinants Of
Consumer Behavior
 Cultural influences
   —Culture - Values, beliefs, preferences, and tastes
    handed down from one generation to the next
       The broadest environmental determinant of behavior
Core Values in U.S. Culture

 Work ethic
 Desire to accumulate wealth
 Importance of education, individualism, freedom,
  youth, health, volunteerism, and efficiency
 Consumers are adopting new values
   —Communicating with anyone, anytime, anywhere in
    the world using new technologies
International Perspective on
Cultural Influences
 Successful strategies in one country may not extend
  to other international markets
   —Example: McDonald’s allows local managers to run
    their own advertising campaigns tailored to the
    preferences of their customers

 Groups with their own distinct modes of behavior
 Can differ by ethnicity, nationality, age, rural versus
  urban location, religion, and geographic distribution
 Population mix in U.S. is changing as the Hispanic,
  African American, and Asian populations grow
Note: Percentages do not total to 100 percent due to overlap of some racial and ethnic categories.

Source: Data from the U.SX. Census Bureau, “Projected Population of the United States, by Race and Hispanic Origin: 2000 to 2050,”, accessed February 25, 2010, “An Older and More Diverse Nation by Midcentury,” U.S. Census Bureau News,, accessed February 25, 2010.
Hispanic-American Consumers

 Not a homogenous group
 The Hispanic population now accounts for more than
  25 percent of all births in the United States
 Marketers must be aware of subtle cultural
  differences, preferences in goods and services, and
African American Consumers

 The African American population stands at more
  than 40 million people
 Spend about $39 billion a year on computers, cell
  phones, and other electronics
 Spend more time online (about 18 hours a week)
  than watching television (about 15 hours)
Asian American Consumers

 Spread among culturally diverse groups, retaining
  their own languages
   —Prefer either in-language or bilingual advertisements
   —Nearly 90 percent spend time online
   —Shop frequently at department stores—one to three
    times a week
Social Influences

 Everyone belongs to multiple social groups: family,
  neighborhood, clubs, and sports teams
 Group membership influences an individual
  consumer’s purchase decisions and behavior in both
  overt and subtle ways
 Differences in group status and roles influence
  buying behavior
The Asch Phenomenon

 Theory of psychologist S. E. Asch that individuals
  conform to majority rule, even if that majority rule
  goes against their beliefs
Reference Groups

 People or institutions whose opinions are valued and
  to whom a person looks for guidance in his or her
  own behavior, values, and conduct, such as family,
  friends, or celebrities
Reference Groups

 Influence of reference group depends on two
  —The purchased product must be one that others can
   see and identify
  —The purchased item must:
       Be conspicuous
       Stand out as something unusual
       Be a brand or product that not everyone owns
Social Classes

 Six classes: upper-upper, lower-upper, upper-middle,
  lower-middle, working class, and lower class
 Income is not always a primary factor
 Individuals’ buying habits reflect the class to which
  they aspire
 Occupations and incomes of one or both parents, are
  the primary influences on social class
Opinion Leaders

 Trendsetters who purchase new products before
  others in a group and then influence others in their
 Individuals tend to act as opinion leaders based on
  their knowledge of and interest in products
 Information about goods and services sometimes
  flows from mass media to opinion leaders to
  consumers; sometimes flows directly to consumers
Family Influences

 Family structure has changed over the last century
 Many couples are separated or divorced, so single
  heads of households are more common
 Role of each spouse in a household:
   —Autonomic role
   —Husband-dominant role
   —Wife-dominant role
   —Syncratic role
Children and Teenagers in Family Purchases

 Children and teenagers represent a huge market and
  they influence what their parents buy
 Most teens make their own purchases online
  —Girls tend to make more online purchases than boys
  —Both genders download music, play games, and
   participate in interactive marketing online
Personal Determinants of Consumer Behavior

 Need - Imbalance between a consumer’s actual and
  desired states
 Motive - Inner state that directs a person toward the
  goal of satisfying a need

 Meaning that a person attributes to incoming stimuli
  gathered through the five senses
 Results from the interaction of two types of factors:
   —Stimulus factors
   —Individual factors
Perceptual Screens

 The mental filtering processes through which all
  inputs must pass
 Techniques that marketers use to elicit a positive
  response from consumers:
   —Doubling the size of an ad
   —Using certain colors or graphics
   —Developing unique packaging
Subliminal Perception

 Subconscious receipt of incoming information
 Aimed at the subconscious level of awareness to
  circumvent the audience’s perceptual screens
 Unlikely to induce purchasing except by people
  already inclined to buy

 Person’s enduring favorable or unfavorable
  evaluations, emotions, or action tendencies toward
  some object or idea
 Attitude components
Changing Consumer Attitudes

 Marketers have two choices for appealing to
  consumer attitudes:
   —Attempt to produce consumer attitudes that will lead
    to the purchase of an existing product
   —Evaluate existing consumer attitudes and create or
    modify products to appeal to these attitudes
Modifying the Components of Attitude

 Providing evidence of product benefits and
  correcting misconceptions
 Engaging buyers in new behavior
 New technologies can also encourage consumers to
  change their attitudes

 Knowledge or skill that is acquired as a result of
  experience, which changes consumer behavior
 Components of learning process:
Applying Learning Theory to Marketing
 Marketers use shaping
  —Applying a series of rewards and reinforcements, to
   permit more complex behavior to evolve
The Shaping Process

 Offer a free-sample package that includes a
  substantial discount for first purchase
 Entice the consumer to buy the item with little
  financial risk
 Motivate the person to buy the item again at a
  moderate cost
 Customer decides whether to buy the item at its true
  price without the discount coupon
Self-Concept Theory

 Person’s multifaceted picture of himself or herself
 Four components that influence purchasing
   —Real self
   —Looking-glass self
   —Ideal self
Source: Roger Blackwell, Paul W. Miniard, and James F. Engel, Consumer Behavior, 10th ed.
(Mason, OH: South-Western, 2006).
The Consumer Decision Process

 High-involvement purchase decisions
  —Purchases with high levels of potential social or
   economic consequences
 Low-involvement purchase decisions
  —Routine purchases that pose little risk to the
The Consumer Decision Process

   Problem or opportunity recognition
     — Consumer becomes aware of a gap between the existing situation and a
        desired situation
   Search
     — Consumer gathers information about the attainment of a desired state of
     — Evoked set - Number of alternatives that a consumer actually considers in
        making a purchase decision
   Evaluation of alternatives
     — Consumer evaluates the evoked set of options and as the search progresses,
        the consumer accepts, distorts, or rejects
     — Evaluative criteria - Features that a consumer considers in choosing among
   Purchase decision and purchase act
     — After evaluating each alternative in the evoked set, the consumer decides
        where or from whom to make the purchase
The Consumer Decision Process

 Post-purchase evaluation
   — Buyer feels either satisfaction at the removal of the discrepancy
      between the existing and desired states or dissatisfaction with the
   — Cognitive dissonance - Imbalance among knowledge, beliefs, and
      attitudes that occurs after an action or decision, such as a purchase
   — Dissonance is likely to increase:
         As the dollar value of a purchase increases
         When the rejected alternatives have desirable features that the
           chosen alternatives do not provide
         When the purchase decision has a major effect on the buyer
 Marketers can reduce cognitive dissonance by providing information that
  supports the chosen item
Classifying Consumer Problem-Solving
 Routinized response behavior
   —Consumer makes many purchases routinely by choosing a
     preferred brand or one of a limited group of acceptable
 Limited problem solving
   —Consumer has previously set evaluative criteria for a
     particular kind of purchase but then encounters a new,
     unknown brand
 Extended problem solving
   —Results when brands are difficult to categorize or evaluate
   —Typical of high-involvement purchases

 Watch Consumer Behavior at Scholfield Honda

 Name the top influence(s) impacting a consumer’s
  decision to buy a car from Scholfield Honda.
 Go to and view the different
  Hondas to select the car you would be most likely to
  purchase. Carefully consider all the determinants
  discussed in the chapter and their impact on your
Chapter 6
Business (B2B)
B2B Marketing

 Business-to-business (B2B) marketing –
  Organizational sales and purchases of goods and
  services to support production of other products, to
  facilitate daily company operations, or for resale
Components of the Business Market

 Commercial market - Individuals and firms that
  acquire products to support, directly or indirectly,
  production of other goods and services
 Trade industries - Retailers or wholesalers that
  purchase products for resale to others
 Government
 Public and private institutions
Segmenting B2B Markets

 Segmentation helps marketers develop the most appropriate
 Segmentation by demographic characteristics
   — Grouping by size, based on sales revenues or number of employees
 Segmentation by customer type
   — Customer-based segmentation - Dividing a business-to-business
     market into homogeneous groups based on buyers’ product
   — North American Industry Classification System (NAICS) - Classification
     used by NAFTA countries to categorize the business marketplace into
     detailed market segments
 Segmentation by end-use application
   — Segmenting a business-to-business market based on how industrial
     purchasers will use the product
Segmenting B2B Markets

 Segmentation by end-use application
  — Segmenting a business-to-business market based on how industrial
    purchasers will use the product
 Segmentation by purchase categories
  — Segmenting according to organizational buyer characteristics
  — Consider whether the customer has made previous purchases or this
    is the customer’s first order
  — CRM systems can help segment customers in terms of the relationship
    between the business and the consumer
The Purchase Decision Process

 Suppliers who serve B2B markets must work with
  multiple buyers
 The purchasing process is more formal and
  professional than the consumer market
 Purchasers require a longer time frame
  —B2B involves more complex decisions
Buyer-Seller Relationships

 More complex than consumer relationships
 Require superior communication among the
  organizations’ personnel
 Greater reliance on relationship marketing
 Relationship with not-for-profit organizations is
Derived Demand

 The linkage between demand for a company’s output
  and its purchases of resources
   —Example: Demand for computer microprocessor chips
    is derived from demand for personal computers
 Organizational buyers purchase two types of items:
   —Capital items
   —Expense items
The Rise of Offshoring and Outsourcing

 Offshoring - Movement of high-wage jobs from one country to
  lower-cost overseas locations
 Nearshoring - Moving jobs to vendors in countries close to the
  business’s home country
   —Canada and Mexico are attractive nearshoring locations
 Outsourcing - Using outside vendors to provide goods and
  services formerly produced in-house
   —Reasons for outsourcing:
        Cost reduction
        Quality and speed of software maintenance and development
        Greater value
Problems with Offshoring and Outsourcing

 Cost savings are less than expected
 Can raise security concerns over proprietary
  technology or customer data
 Can reduce company’s ability to respond quickly to
 Can create conflicts between nonunion outside
  workers and in-house union employees
 Can negatively affect employee morale and loyalty
Developing Effective
Business-to-Business Marketing Strategies
 Marketers must develop a strategy based on a particular
  organization’s buying behavior and on the buying situation
 Challenges of government markets
   —Purchases typically involve dozens of interested parties
   —Purchases are influenced by social goals
   —Contractual guidelines are an important influence in selling
     to government markets
 The government buys products under two basic types of
   —Fixed-price contracts
   —Cost-reimbursement contracts

 Watch Business-to-Business Marketing at Flight 001

 How does marketing Flight 001’s products to give as
  gifts to companies such as Orbitz affect sales at Flight
  001’s retail stores?
 What potential conflicts might arise between Flight
  001’s wholesale business to Jet Blue and Northwest
  and Flight 001 retail business? Do you think their
  wholesale/retail strategy is sound? Why or why not?
Chapter 9
Targeting, and
The Role of Market Segmentation

 Marketing strategies must be adjusted to meet the
  needs of different consumer groups
 Market segmentation - Division of the total market
  into smaller, relatively homogenous groups
Criteria for Effective Segmentation

 The market segment must present measurable
  purchasing power and size
 Marketers must find a way to effectively promote
  and serve the market segment
 Segment must be sufficiently large to offer good
  profit potential
 Firm must aim for segments that match its marketing
Segmenting Consumer Markets

—Geographic segmentation
—Demographic segmentation
—Psychographic segmentation
—Product-related segmentation
The Cohort Effect

 Tendency of members of a generation to be
  influenced and bound together by significant events
  in their formative year, ages 17 to 22
 The current cohort (born during the late 1970s to the
  early 1990s) may be the most cohesive to date
   —Generation Y, the Millennial Generation, Generation
    Next, Echo Boomers, and the 9–11 Generation
   —The Video Game Generation
Hispanics and African Americans

 The largest ethnic/minority groups in the United
 The Hispanic population is growing much faster than
  the African American population
 Many companies find it a challenge to reach Hispanic
  consumers and turn them into customers
Asian Americans

 Second-fastest growing segment of the U.S.
 An attractive target for marketers because they also
  have the fastest-growing income
 Population is concentrated in fewer geographic areas
  than other ethnic markets
 Very diverse group
Native Americans

 Current population 5 million, 1.6 percent of the total
  U.S. population
 Native American businesses are growing
People of Mixed Race

 The ability to select more than one racial category on
  census forms has been recently introduced
 About 7 million U.S. residents classify themselves this
 Makes statistics more accurate but comparing the
  new statistics with past data can be difficult
Segmenting by Family Life Cycle Stages

 Family lifecycle - Process of family formation and
 Life stage, not age, is primary concern of marketer
 Empty nesters may have higher disposable incomes
  and spend more on premium items
 Latest trend:
   —Increase in "boomerangs"—grown children who have
    returned home to live with their parents
Segmenting by Household Type

 Average household size in U.S. has decreased from
  5.8 in 1790 to less than 3 today
 Households vary by lifestage and the presence or
  absence of children
 Growing number of same-sex couples who share
Segmenting by
Income and Expenditure Patterns
 Engel’s laws
   —As household income increases:
       A smaller percentage of expenditures goes for food
       The percentage spent on housing, household
        operations, and clothing remains constant
       The percentage spent on recreational and educational
        items increases
What is Psychographic Segmentation?

 Division of a population into groups that have similar
  attitudes, values, and lifestyles
 AIO statements - Items on lifestyle surveys that
  describe various activities, interests, and
  respondents’ opinions
Psychographic Segmentation of Global
 Roper ASW identified six psychographic consumer
  segments that exist in 35 countries studied:
  — Strivers - Value professional and material goals more than
    the other groups
  — Devouts - Value duty and tradition
  — Altruists - Emphasize social issues and societal well-being
  — Intimates - Value family and personal relationships
  — Fun seekers - Focus on personal enjoyment and
    pleasurable experiences
  — Creatives - Seek education, technology, and knowledge
Strategies for Reaching Target Markets

 Undifferentiated marketing
  —Strategy that focuses on producing a single product
   and marketing it to all customers; also called mass
 Differentiated marketing
  —Strategy that focuses on producing several products
   and pricing, promoting, and distributing them with
   different marketing mixes designed to satisfy smaller

 Placing a product at a certain point or location within
  a market in the minds of prospective buyers
 Possible approaches
   —Product user/class

 Distinguishes firm’s offerings from its competitors’
 Marketers may develop a positioning map and
  reposition a product as necessary
Differentiation and Positioning

 A product’s position is:
   —The way the product is defined by consumers on
    important attributes—the place the product occupies
    in consumers’ minds relative to competing products.
   —Perceptual positioning maps can help define a brand’s
    position relative to competitors.
Differentiation and Positioning

 Choosing a differentiation and positioning strategy
   —Identifying a set of possible value differences and
    competitive advantages on which to build a position.
   —Choosing the right competitive advantages.
   —Selecting an overall positioning strategy.
Differentiation and Positioning

 Identifying possible value differences and
  competitive advantages:
   —Key to winning target customers is to understand their
    needs better than competitors do and to deliver more
 Competitive advantage:
   —Extent to which a company can position itself as
    providing superior value.
       Achieved via differentiation.
Differentiation and Positioning

 Differentiation
   —Actually differentiating the marketing offering to
    create superior customer value.
 Types of differentiation:
   —Product differentiation
   —Services differentiation
   —Channels differentiation
   —People differentiation
   —Image differentiation
Differentiation and Positioning

 Choosing the right competitive advantage requires
  selecting how many and which differences to
 Differences that could be promoted are:
Differentiation and Positioning

 Overall or full positioning of the brand is called the
  brand’s value proposition.
 Potential value propositions include:
   —More for more: More benefits for higher price.
   —More for same: More benefits for the same price.
   —More for less: More benefits for a lower price.
   —Same for less: Same benefits for a lower price.
   —Less for much less: Fewer benefits for much lower price.
Differentiation and Positioning

 Developing a positioning statement:
   —Format: “To (target segment and need)
    our (brand) is (a concept) that (point of difference).”
   —Example: “To busy mobile professionals who need to
    always be in the loop, BlackBerry is a wireless
    connectivity solution that gives you an easier, more
    reliable way to stay connected to data, people, and
    resources while on the go.”

     Watch Targeting and Positioning at Numi Tea

 Which of the four basic targeting strategies does
  Numi Tea employ when reaching its markets?
 Would you classify Numi Tea’s marketing strategy as
  “concentrated”? If so, what are the plusses and
  minuses of using such a strategy in today’s market?

 Key learnings?
 Next weeks assignments.

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