CHAPTER ONE

CONSUMER BEHAVIOR:
INTRODUCTION & STRATEGIC
APPLICATION
 LEARNING OBJECTIVES

1. Define consumer behavior (CB) and explain

its elements.
2. Identify the 4 domains of consumer behavior.
3. Discuss the benefits of studying consumer
behavior.
4. Explain how companies apply consumer
behavior concepts when making marketing
decisions.
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Chapter One Slide

WHAT IS CONSUMER BEHAVIOR?

• The behavior that consumers display in

– Searching for
– Purchasing
– Using
– Evaluating, and
– Disposing of products(consuming ideas;
e.g. Green consumption) and services that
they expect will satisfy their needs.
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Chapter One Slide

CONSUMER BEHAVIOR INVOLVES
ATTITUDES TOWARDS

• PRODUCTS
• SERVICES
• ACTIVITIES
• PEOPLE
• IDEAS

Chapter One Slide

 5

Chapter One Slide

 TWO CONSUMER ENTITIES

Organizational
Personal Consumer
Consumer
• A business,
government agency,
• End user = individual or other institution
who buys goods and (profit or nonprofit)
services for his or her organizations that
own use, for buys the goods,
household use, for the services, and/or
use of a family equipment necessary
member, or for a for the organization to
friend. function.
• Need to run 6

organizations
Chapter One Slide
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e Chapter One i 7
Slide
 CUSTOMER VALUE,
SATISFACTION, TRUST, AND
RETENTION
Successful Relationships

Building a
High level of
Strong sense of structure that
Customer value customer
customer trust ensures customer
satisfaction
retention

• Good marketers today realize that in order to

outperform competitors they must achieve the full
potential from each and every customer.

• Employees should view any exchange with a as

part of a customer relationship and not a
transaction.
8
Chapter One Slide
 SUCCESSFUL RELATIONSHIPS
Value, Satisfaction,
Trust, and Retention • Defined as the ratio between the
customer’s perceived benefits
• CUSTOMER VALUE (economic, functional,
• CUSTOMER psychological) and the resources
SATISFACTION (monetary, time, effort used to
obtain those benefits,
• CUSTOMER TRUST
psychological)
• CUSTOMER
• Perceived value is relative and
RETENTION
subjective
• Developing a value proposition
is critical (a unique selling
proposition) 9
Chapter One Slide
 SUCCESSFUL RELATIONSHIPS
Value, Satisfaction,
Trust, and Retention • The individual's perception of the
performance of the product or
service in relation to his or her
• CUSTOMER VALUE
expectations. (Function of customer
• CUSTOMER expectation)
SATISFACTION EXPECTATIONS=EXPERIENCE  SATISFIED
EXPECTATIONS>EXPERIENCE 
• CUSTOMER DELIGHTED
TRUST EXPECTATIONS<EXPERIENCE 
DISSATISFIED
• CUSTOMER
RETENTION
• Customer groups based on loyalty
include loyalists, apostles, defectors,
terrorists, hostages, andChapter
mercenaries 10
One Slide
• LOYALIST: keep purchasing
• APOSTLES: experiences exceed expectations, provide positive word of
mouth
• DEFECTORS: feel neutral or merely satisfied
• TERRORISTS: had bad experience, spread negative word of mouth
• HOSTAGES: unhappy customers, stay with the company only because
of monopolistic environment/frequent complains
• MERCENARIES: being satisfied but do not have any real loyalty

Companies should strive to create apostles, raise the

satisfaction of defectors  loyalists and avoid having
terrorists/hostages and reduce the number of 11

mercenaries
 SUCCESSFUL RELATIONSHIPS
Value, Satisfaction,
Trust, and Retention • Establishing and maintaining trust
is essential to online and off-line
retailers

• Trust is the foundation for

maintaining a long-standing
• CUSTOMER TRUST
relationship with customers;
• CUSTOMER
increases the chance of customer
loyalty (Trust)

12
Chapter One Slide
 SUCCESSFUL RELATIONSHIPS
Value, Satisfaction, • THE OBJECTIVE OF PROVIDING
Trust, and Retention VALUE IS TO RETAIN HIGHLY
SATISFIED CUSTOMERS.
• LOYAL CUSTOMERS ARE KEY

• THEY BUY MORE PRODUCTS

• THEY ARE LESS PRICE SENSITIVE;
PAY LESS ATTENTION TO
COMPETITOR’S ADS
• SERVICING THEM IS CHEAPER
• CUSTOMER • THEY SPREAD POSITIVE WORD OF
RETENTION MOUTH

• MARKETING AIMED TO ATTRACT

NEW CUSTOMERS IS EXPENSIVE
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Chapter One Slide
 NATURE OF CONSUMER
BEHAVIOR
1. Influenced by various factors:
a. Marketing factors such as product design, price, promotion,
packaging, positioning and distribution.
b. Personal factors such as age, gender, education and income level.
c. Psychological factors such as buying motives, perception of the
product and attitudes towards the product.
d. Situational factors such as physical surroundings at the time of
purchase, social surroundings and time factor.
e. Social factors such as social status, reference groups and family.
f. Cultural factors, such as religion, social class—caste and sub-
castes.
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Chapter One Slide

 NATURE OF CONSUMER
BEHAVIOR
2. Undergoes a constant change: Consumer behavior is
not static. It undergoes a change over a period of time
depending on the nature of products.
3. Varies from consumer to consumer, region to region
and country to country: nature of the consumers,
lifestyle and culture, urban & rural consumers, income level
4. Information on consumer behavior is important to
the marketers: Enables them to take appropriate
marketing decisions in respect of the following factors: a.
Product design/model b. Pricing of the product c. Promotion
of the product d. Packaging e. Positioning f. Place of 15

distribution
Chapter One Slide
 NATURE OF CONSUMER
BEHAVIOR
5. Leads to purchase decision: A positive consumer behavior
leads to a purchase decision. The purchase decision leads to
higher demand, and the sales of the marketers increase.
Therefore, marketers need to influence consumer behavior to
increase their purchases.

6. Varies from product to product: Consumer behavior is

different for different products. There are some consumers who
may buy more quantity of certain items and very low or no
quantity of other items.

7. Reflects status: The consumer behavior is not only influenced

by the status of a consumer, but it also reflects it. The 16

consumers who own luxury cars, watches and other items are
considered belonging to a higher status. Chapter One Slide
MARKETING IMPLICATIONS OF
CONSUMER BEHAVIOR

Developing/implementing customer-
orientation
Segmenting the market?
Profitability of each segment?
Characteristics of each segment?
Customer satisfaction of each segment?
Selecting the target market

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Chapter One Slide

MARKETING IMPLICATIONS OF
CONSUMER BEHAVIOR

Product positioning decisions

Positioning of competition?
How should our offerings be
positioned?
Should we reposition offerings?

18

Chapter One Slide

 MARKETING IMPLICATIONS OF
CONSUMER BEHAVIOR

IMC Decisions
Advertising objectives? Sales promotion objectives?
Words and visuals of ads? When should sales promotions
Where should ads be placed? occur?
When should ads be placed?Have sales promotions been
Have ads been effective? effective?
How large a sales force?
How can salespeople best
serve customers?
19

Chapter One Slide

 MARKETING IMPLICATIONS OF
CONSUMER BEHAVIOR

Pricing decisions
What should the price be?
Distribution
How sensitive are consumers decisions
to price and price changes? Where does target market
When should pricing tactics be shop?
used? How should stores be
Distribution decisions designed?
Where does target market
shop?
How should stores be 20

designed?
Chapter One Slide
MARKETING IMPLICATIONS OF
CONSUMER BEHAVIOR

Other decisions
Creation and Retention of
Consumers
Predicting Market Trend
Useful for Dealers and Salesmen
Developing New Products

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Chapter One Slide