MKTG 3150 Chapter 1: Consumer Behavior and Marketing Strategy ● The field of 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 Applications of Consumer Behavior ● Marketing decisions based on consumer behavior theory and research are much more successful than decisions based on hunches or assumptions. ● Social marketing is the application of marketing strategies and tactics to alter or create behaviors that have a positive effect on the target individuals or society as a whole. ○ Requires decent knowledge of consumer behavior ● Marketers spend billions to influence consumer decisions and individuals need to understand consumer behavior so they can set limits for themselves Marketing Strategy and Consumer Behavior ● The application of consumer behavior involves the development, regulation, and effects of marketing strategy ● Marketing strategy begins with an analysis of the market: ○ Organizations identify groups of individuals, households, or firms with similar needs (demographics, geographics, etc.) ○ Then they choose a target market, based on the economy, technological conditions, etc. ○ Then the marketing strategy is formulated ● Customer value is the difference between all the benefits derived from a total product and all the costs of acquiring those benefits. A firm must consider value from a customer’s perspective. ● Marketing strategy: ○ Seeks to provide the customer with more value than the competition while still producing a profit for the firm. ○ Involves determining the product features, price, communications, distribution, and services that will provide customers with superior value. ■ All of these characteristics are known as the total product Market Analysis Components ● Market analysis requires an understanding of the consumption process of the: ○ Consumers ■ Must have a complete understanding of consumer behavior to anticipate their wants and needs. ○ Company ■ Must understand its ability to meet customer needs and evaluate its: financial condition, managerial skills, production, research and development, technological, reputation, and marketing skills. ■ Failure to understand the strengths and weaknesses can cause many problems. ○ Competitors ■ Must have an understanding of the competition’s capabilities and strategies. ○ Conditions (economic, physical, and technological environment) ■ A firm cannot develop a sound marketing strategy without anticipating the conditions under which the strategy will be implemented. Marketing Segmentation ● A market segment is a portion of a larger market whose needs differ somewhat from the larger market. ● A segment must be large enough to be profitable. ● Behavioral targeting in which consumers’ online activity is tracked and specific banner ads are delivered based on what activity. ● Market segmentation involves four steps: ○ Identifying product-related needs set ■ Need set is used to reflect the fact that most products in developed economies satisfy more than just one need (like some buy watches as a status symbol, to tell time, etc.) ■ Finding need sets take research like focus groups and depth interviews. Also depend on demographics (income, age, gender, etc.) ○ Grouping customers with similar needs sets ■ Involves consumer research, like focus group interviews, surveys, and product concept tests ○ Describing each group ■ Once the groups have been identified, they should be described by their demographics ○ Selecting an attracitve segment(s) to serve ■ Must select a target market, the segment(s) of the larger market on which we will focus our marketing effort ● Based on the ability to provide customer value at a profit ■ The size of the segment, the intensity of competition, the cost of providing value, etc. are important considerations ● Finding profitable segments means identifying a maximal fit between customer needs and the firm's offering. ● Each element of the marketing mix should be examined to determine if changes are required from one segment to another Marketing Strategy ● Marketing strategies answer the question of: how will we provide superior customer value to our target market? The answer requires the marketing mix ● A product is anything a customer acquires or might acquire to meet a perceived need ○ Or physical products and primary or core services ○ To be successful a product must meet the needs of the target market better than the competitor ● Marketing communications include advertising, the sales force, public relations, packaging, and any other signal that the firm provides about itself and its products. An effective communications strategy answers these questions: ○ With whom, exactly do we want to communicate? ○ What effect do we want our communications to have on the target audience? ○ What message will achieve the desired effect on our audience? ○ What means and media should we use to reach the target audience? ○ What should we communicate with the target audience? ● Price is the amount of money one must pay to obtain the right to use the right product. ○ Consumer cost is everything the consumer must surrender in order to receive the benefits of owning/using the product ○ One of the ways firms seek to provide customer value is to reduce the nonprice costs of owning or operation a product ● Distribution, having the product available where target customers can buy it, ○ Good channel decisions require a sound knowledge of where the targeted customer shop and cross-channel options ○ Retailer characteristics need to be understood and delivered upon. ● Service refers to auxiliary or peripheral activities that are performed to enhance the primary product or primary service. ○ Auxiliary services cost money to provide and must provide value to the target customers Consumer Decisions ● The most basic outcome of a firm’s marketing strategy is product position, an image of the product or brand in the consumer’s mind relative to competing products and brands ○ It is determined by communications about the brand from the firm. Most specify the product position they want to have. Because a brand that's position matches its target market is likely to be purchased. ● It is more profitable to maintain its existing customers, rather than always finding new ones. So customer satisfaction is very important. ● Markets must deliver more value than the customer expected. ● Individual Outcomes ○ The most obvious outcome of the consumption process for an individual is some level of satisfaction of the need that initiated the consumption process. ● Injurious Consumption ○ Injurious consumption occurs when individuals or groups make consumption decisions that have negative consequences for their long-run well-being ■ Consuming alcohol or drugs ■ Engaging in activities such as gambling ● Economic Outcomes ○ The total impact of consumers’ purchase decisions, including the decision to not purchase at times ● Physical Environment Outcomes ○ Consumers make decisions that have a major impact on the physical environments of both their own and other societies ● Social Welfare ○ Consumer decisions affect the general social welfare of a society. Decisions concerning how much to spend on private goods rather than public goods are generally made by consumers’ elected representatives The Nature of Consumer Behavior ● The general structure and process of consumer behavior is known as the conceptual model ○ It reflects our beliefs about the general nature of consumer behavior ○ Self Concepts - their view of themselves ○ Subsequent Lifestyles how they live ○ Internal Influences mainly psychological and physical ○ External Influences - mainly sociological and demographic ● External Influences ○ Culture is the most widespread influence on consumer behavior. ● Internal Influences ○ Internal influences begin with perception ○ The three most prevalent internal influences are: motivation, personality, and emotion ○ An attitude is an enduring organization of motivational, emotional, perceptual, and cognitive processes with respect to some aspect of the environment
