Consumer behavior: is the study of individuals, groups, or organizations and the

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Part I: Introduction

Chapter 1: Consumer Behavior and Marketing Strategy

LO1: Define consumer behavior

Consumer behavior: is the study of individuals, groups, or organizations and the processes they use to select, secure, use, and dispose of products, services, experiences, or ideas to satisfy needs and the impacts that these processes have on the consumer and society.Consumer behavior is a complex, multidimensional process.oConsumer decisions involve numerous steps and are influenced by a host of factors including demographics, lifestyle, and cultural values.oConsumer decisions are complicated when the needs and wants of multiple individuals or groups are considered. (Where to go on vacation with family?) Successful marketing decisions by firms, nonprofit organizations, and regulatory agencies require an understanding of the processes underlying consumer behavior.Successful marketing decisions require organizations to collect information about the specific consumers involved in the marketing decision at hand. Consumer decisions are heavily influenced by situation and product category.Marketing practices designed to influence consumer behavior involve ethical issues that affect the firm, the individual, and society.

LO2: Summarize the applications of consumer behavior

Consumer behavior can be applied in four areas

1.Marketing strategy: Involves setting levels of the marketing mix based

on an understanding of the market and segments involved to create desirable outcomes.

2.Regulatory policy: involves developing policies, guidelines, and laws to

protect and aid consumers. (Food and Drug Administration)

3.Social marketing: the application of marketing strategies and tactics to

alter or create behaviors that have a positive effect on the targeted individuals or society as a whole. For example reduce smoking & recycling.

4.Informed individuals: Creating more informed individuals involves

educating consumers about their own consumption behaviors as well as marketers’ efforts to influence it in such a way as to create a more sound citizenship, effective purchasing behavior, and reasoned business ethics.

LO3: Explain how consumer behavior can be used to develop marketing strategy

The interplay between consumer behavior and marketing strategy involves five stages: Company, comMpeatriktoertsa, cnoanldyistisons, consumers Market segmentation Identify product-related need sets, group customers with similar need sets, describe each group, select attractive segment to target Marketing strategy Product, price, distribuation, promotion, service Consumer decision process Problem recognition, information search, alternative evaluation, purchase, use, evaluation Outcomes Individuals/firms/society 2 / 4

Customer value: the difference between all the benefits derived from a total

product and all costs of acquiring those benefits. It is critical that a firm consider value from the customer’s perspective.Total product: the entire set of characteristics: product features, price, communications, distribution and services (marketing mix).Market analysis components Requires a thorough understanding of the consumption process of potential customers, the organization’s own capabilities, the capabilities of competitors, and the economic, physical, and technological environment in which these elements will interact.

1.The Consumers: It is not possible to anticipate and react to customer’s

needs and desires without a complete understanding of consumer behavior. Discovering customers’ needs is a complex process, but it can often be accomplished by marketing research

2.The Company: A firm must fully understand its own ability to meet

customer needs. This involves evaluating all aspect of the firm.Marketing skills would include new- product development capabilities, channel strength, advertising abilities, service capabilities, marketing research abilities, market and consumer knowledge, etc.

3.The Competitors: understanding customer needs must be at the

same level of knowledge of a firm’s key competitors.

4.The Conditions: the state of economy, physical environment, government

regulations, and technological developments affects consumer needs and expectations as well as company and competitor capabilities. A firm cannot develop a sound marketing strategy without anticipating the conditions under which that strategy will be implemented.Market segmentation Most important marketing decision a firm makes is the selection of one or ore

market segments on which to focus. Market segment: a portion of a larger market

whose needs differ somewhat from the larger market. Behavioral targeting:

consumers’ online activity is tracked and specific banner ads are delivered based

on that activity. Marketing segmentation involves four steps:

Identifying product-related need sets: organizations approach with a set

of current and potential capabilities such as reputation, an existing product, a technology, or some other skill set. Need set is used to reflect the fact that most products in developed economies satisfy more than one need.oA firm might start by identifying various ethnic groups and then attempt to discover similarities and differences in consumption related needs across these groups.oBetter-defined segments will generally be discovered by focusing first on needs and then on consumer characteristics associated with those needs, both approaches can be used for segmentation.

Grouping customers with similar need sets: for example those who

are basic shoppers are all similar in that their most critical need set is mall essentials.

Describing each group: then they should be described in terms of their

demographics, lifestyles, and media usage.

Selecting an attractive segment: Once you understand each segment

select the target market: the segment(s) of the larger market on which

we will focus our marking effort. Provide customer value at a profit; segment size, growth rate, competitor strength, cost of providing the superior value etc. Each segment has its own marketing strategy; each element of the marketing mix should be examined to determine if changes are required from one segment to another.Marketing strategy No selection of a target market without formulating marketing strategy.

Marketing strategy: how will we provide superior customer value to our target

market? Marketing mix: the product, price, communications, distribution, and

services provided to the target market. The combination of these elements that meets customer needs and provides customer value.

The product: anything a consumer acquires or might acquire to meet a

perceived need. Consumers are generally buying need satisfaction, not 3 / 4

physical attributes. The

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