CHAPTER

ONE
Consumer Behavior
and Technology
 What is Marketing?

The process by which companies engage

customers, build strong customer relationships,
and create customer value in order to capture
value from customers in return Keywords
Create Customer Value
Capture Value in Return
 Consumer Behavior

• The behavior that consumers display in

searching for, purchasing, using, evaluating,
and disposing of products and services that
they expect will satisfy their needs.

• It is hard to understand consumer behavior

because it often defies logic and common
sense. Example: French Fry vs. Salad

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Five Marketing Approaches
The Marketing Concept
…satisfying consumers’ needs,
creating value, and retaining
customers, and that companies
must produce only those goods
that they have already determined
would satisfy consumer needs and
meet organizational goals.

Emerged Around 1960s

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 Development of the
Marketing Concept

Production Product Selling Marketing

Concept Concept Concept Concept

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 Production Concept

• Believes that consumers are mostly interested

in product availability at low prices.
• Companies focus on production capabilities

Production Product Selling Marketing

Concept Concept Concept Concept

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 Ford Model T

“the best way to serve the customer is the way the

customer wants to be served.” Alfred Sloan, President, GM

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 Product Concept

• Assumes that consumers will buy the product

that offers them the highest quality, the best
performance, and the most features.

• Can lead to Marketing Myopia.

– The Case of BlackBerry Phones

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 Selling Concept

• Focus on selling what is already produced.

• Assumes that consumers are unlikely to buy
the product unless they are aggressively
persuaded to do so.
• Care less about “customer satisfaction”

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 Marketing Concept

• Focus on the customer!

• Determine the needs and wants of specific
target markets
• Deliver satisfaction better than competition
• Implementation requires consumer research,
market segmentation, integration of 4 Ps,
provide superior value, and ensure customer
satisfaction and long-term retention.

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 Open Discussion

1. Which companies do you believe grasp and

use the marketing concept?

2. Why do you believe this?

Societal Marketing Concept

• Considers consumers’
long-run best interest

• Ensures societal and

environmental well-
being

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 The Marketing Concept
Implementing the Marketing Concept

• Consumer • The process and tools used to

Research study consumer behavior
• Segmentation
• Market Example-
Targeting • “What are the barriers
• Positioning consumers face when buying
green products?”

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 The Marketing Concept
Implementing the Marketing Concept
Process of dividing the market into
• Consumer subsets of consumers with common
Research needs or characteristics.
• Segmentation
• Market Demographic (age, income, gender
Targeting etc.)
• Positioning Age: Teenagers vs. Professionals vs.
Elderly
Geographic (Based on location)
Location: Urban vs Rural
Psychographic (personality,
lifestyle, values)
Tech-enthusiasts vs minimalists
 Open Discussion

1. What products that you regularly purchase

are highly segmented?
2. What are the different segments?
3. Why is segmentation useful to the marketer
for these products?

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 The Marketing Concept
Implementing the Marketing Concept
• Consumer
Research
The selection of one or more of the
• Segmentation
segments identified to pursue
• Market
Targeting
• Positioning

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 The Marketing Concept
Implementing the Marketing Concept
• Developing a distinct image for the
• Consumer
product in the mind of the consumer
Research
• Successful positioning includes:
• Segmentation
• Market – Communicating the benefits of
Targeting the product
• Positioning – Communicating a unique selling
proposition

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 The Marketing Mix

Product Price

Marketing
Mix

Place Promotion

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 Impact of Digital Technologies

Marketers Consumers
• More products and • Power
services through • Information
customization • Computers, phones, PDA,
• Instantaneous exchanges GPS, smart TV
• Collect and analyze data

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 Impact of Digital Technologies

Interactive Communication
• Instant Exchange of Info
• Online search, supermarket scanners
• Cross-screen marketing
• Collect and analyze data

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 THE VALUE EXCHANGE FACILITATED BY TECHNOLOGY

TECHNOLOGIES MARKETERS- CONSUMERS-

CREATE A ALLOW CONSUMERS GIVE THE
“VALUE TO SHOP MORE MARKETERS
EXCHANGE” EFFICIENTLY BEHAVIORAL
(INFORMATION, DATA.
CUSTOMIZATION ETC.)
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Customer Value, Satisfaction, Trust,
and Retention

Successful Relationships
High level Strong
Customer of sense of Customer
value customer customer retention
satisfaction trust

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 Successful Relationships
Value, Satisfaction,
• Defined as the ratio between
Trust, and Retention the customer’s perceived
• Customer Value benefits and the resources
• Customer used to obtain those
Satisfaction benefits
• Customer Trust • Perceived value is relative
and subjective
• Customer
Retention • Developing a value
proposition is critical

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 Successful Relationships
Value, Satisfaction,
Trust, and Retention
• The individual's perception
• Customer of the performance of the
Value product or service in
• Customer relation to his or her
Satisfaction expectations.
• Customer Trust • Customer groups based on
• Customer loyalty include loyalists,
Retention apostles, defectors,
terrorists, hostages, and
mercenaries 25
Consumer Types Based on Satisfaction and
Loyalty
1. The Loyalists:
• Highly Satisfied.
• Apostoles.
• Experiences with the company exceeded their
expectations.
• Provide very positive word-of-mouth about.
2. The Defectors:
• Feel neutral or merely satisfied with the company
• Likely to switch to another company that offers them a
lower price.
• Companies must turn them into loyalists.
3. The Terrorists:
• Customers who have had negative experiences with the
company and spread negative word-of mouth.
• Companies must take measures to get rid of terrorists. 26
 Consumer Types Based on Satisfaction
and Loyalty

4. The Hostages:
• Unhappy customers who stay with the company because
of a monopolistic environment or low prices
• Difficult and costly to deal with because of their frequent
complaints.
• Companies should fire hostages, possibly by denying
their frequent complaints.

5. The Mercenaries:
• very satisfied customers who have no real loyalty to the
company and may defect because of a lower price
elsewhere or on impulse.
• defying the satisfaction–loyalty rationale.

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 Successful Relationships
Value, Satisfaction,
Trust, and Retention • Establishing and
• Customer Value maintaining trust is
• Customer essential.
Satisfaction • Trust is the
• Customer Trust
foundation for
• Customer
Retention maintaining a long-
standing relationship
with customers.
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 Successful Relationships
Value, Satisfaction, • The objective of providing
Trust, and Retention value is to retain highly
satisfied customers.
• Customer Value
• Loyal customers are key
• Customer
Satisfaction – They buy more products
• Customer Trust – They are less price
sensitive
• Customer
Retention – Servicing them is
cheaper
– They spread positive
word of mouth
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 Why Customer Retention is Important
-Buy more products

-Represent an opportunity for cross-selling.

-Often purchase ancillary and high-margin supplemental

products.

-Less price-sensitive and pay less attention to

competitors’ advertising.

-The cost of acquisition occurs only at the beginning of

a relationship, so the longer the relationship, the lower
the amortized cost. 30
Why Customer Retention is Important
-Loyal customers spread positive word-of-mouth

-In saturated markets, it may be impossible to find new

customers

-Low customer turnover = higher profits.

-Make the employees’ jobs easier and more satisfying.

-Happy employees = higher customer satisfaction

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 Consumer Decision-
Making
-Consumer Behavior is a multidisciplinary
concept

Psychology

Anthropolo Consumer
gy Behavior
Sociology

Communicati
on

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A Model of Consumer Decision Making

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QUESTIONS
?

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