CHAPTER

ONE

Technology-Driven
Consumer Behavior
 Learning Objectives
1. To understand the importance and scope of consumer
behavior and different kinds of consuming entities.
2. To understand the evolution of the marketing concept
and the components of strategic marketing.
3. To understand the interrelationships among customer
value, satisfaction, and retention, and how technology
has enhanced customer loyalty and retention.
4. To understand marketers’ social and ethical
responsibilities.
5. To understand consumer behavior as an
interdisciplinary area and understand the makeup and
composition of a consumer decision-making model.
 Introduction
“Sales determine profit, and consumers’
actions determine sales.”

Customer is The King.

Customer is Always Right.
Why should you consider the customer as the king?

 A customer is the most important visitor on our premises.

 A customer is not dependent on us, we are dependent on
him/her.
 He/she is not an interruption on our work, he/she is the
purpose of it.
 He/she is not an outsider in our business, he/she is a part
of it.
 We are not doing a favor by serving them, they are doing
us a favor by giving us the opportunities to do so.
Stages of the Buying Process
The difficulties surrounding the consumer’s
willingness and ability lie at the heart of the
buying behavior process.

The complex Nature of Consumer Buying

Process

The buying processes consumers go through to

purchase most products and services are
considerably more complex than they may
appear.
 Stages of the Buying Process

1.Pre-Purchase Stage:

 What the consumer does before

making a purchase.
( activity
takes place intensity of need, time
frame, first time or repeat purchase)
 Stages of the Buying Process

1.Pre-Purchase Stage
What the consumer does before making a purchase.
( activity takes place intensity of need, time frame, first
time or repeat purchase)

The pre-purchase stage consists of three separate steps:

A.awareness (need to be satisfied) and availability

(product/services)

B. obtain information (friends, relatives, or various

promotional efforts) and

C. analyze the information collected.

 Stages of the Buying Process

2. Purchase Stage: Should the consumer

make a purchase or hold his/her
money?
3. Post-purchase Stage:
Product performance and expectation

Q- Which is the most influential factor in the

case of buying behavior?
Definition of Consumer Behavior
Consumer behavior is the study of
consumers’ choices during searching,
evaluating, purchasing, and using products
and services that they believe would satisfy
their needs.

Consumer behavior focuses on how

individuals make decisions to spend their
available resources (time,money,effort) on
consumption related items.
Scope of Consumer Behaviour Field

 What are the products people buy?

 Why they buy them?
 How they buy them?
 When they buy them?
 Where they buy them?
 How often they buy them?
 How is the decision process of the consumer?

The behavior varies among individuals, products,

regions.
 Few Consumer Terminology
 Consumer Vs. Buyer
“Buyers are not always deciders.”

 Customer Vs. Consumer:

- Customer is the buyer of the offering.
- Consumer is the end-user who consumes the
offering.
Two Different Kinds of Consuming Entities

 Personal Consumer
The individual who buys goods and
services for his or her own use, for the
household use or as a gift for a friend.

 Organizational Consumer
A business, government agency or other
institutions (profit or nonprofit) that buys
the goods, services, and equipment in
order to run their organizations.
Development of Marketing Concept

Production
Concept

Product Concept

Selling Concept

Marketing Concept
 The Production Concept
(From the 1850s-late 1920s)

 The production concept assumes that

consumers are mostly interested in product
availability at low prices.
 Implicit Objectives
-Cheap
-Efficient production
-Intensive distribution
 Main Objective
-Expand the market.
 The Product Concept

 The product concept assumes that

consumers will buy the product that offers
them the highest quality, the best
performance, and the most features.
 Objectives
-Quality improvement
-Addition of features
Marketing Myopia
 The Product Concept
Product orientation often leads to “marketing
myopia” that is, focus on the product rather than
on the consumer needs it presume to satisfy.

Marketing myopia may cause a company to ignore

crucial changes in the marketplace because it
causes marketers to look in the mirror rather than
through window.
 The Selling Orientation
(From the 1930s to the mid 1950s)
Sergio Zyman

Under the selling concept, a company makes a

product and then uses various selling methods to
persuade customers to buy the product. In effect,
the company is bending consumer demand to fit
the company’s supply.

Objectives:
– Sell, sell, sell

Supply exceeded customer demand

 The Selling Concept

 Lack of concern for customer needs and

satisfaction
 Selling concept (Hunting): product-
centered, “make-and-sell”
philosophy.

Inside-out Perspective
 The Marketing Concept
(Emerged in the mid-1950s).

 The company finds out what the customer

wants and then tries to develop a product
that will satisfy that want and still yield a
profit. Now the company is bending its
supply to the will of consumer demand. The
job is not to find the right customers for
your product, but the right products for your
customers.
 Objectives:
– Profits through customer satisfaction
 The Marketing Concept

 Marketing concept (Gardening): customer-

centered," sense-and-respond” philosophy.

 Example-“Love the customer, not the product.”

Outside-in Perspective

Deliver satisfaction better than competition.

 Contrast Between Selling &Marketing Concept
Selling Marketing
1.Emphasis is on the product. 1. Emphasis is on customers’
wants.
2.Company first makes the 2.Company first determines
product and then figures out how customers’ wants and then figures
to sell it. out how to make and deliver a
product to satisfy those wants.
3.Management is oriented to sales 3.Management is oriented to the
volume. long-term.
4.Planning is oriented to short- 4.Planning is oriented to the long
term results, in terms of today’s run, in terms of new products,
products and markets. tomorrow’s markets, and future
growth.
5.The selling concept focuses on 5.The marketing concept focuses
profits through sales volume. on profits through customer
satisfaction.
 Business Leaders Who Understood Consumer Behavior
Long Before the Development of the Marketing Concept

1.In 1923, Alfred P. Sloan of General Motors

2.In the 1930s,Colonel Sanders of KFC

3.In the 1950s, Ray Kroc of McDonald

Implementing the Marketing Concept

 The strategic tools that are used to

implement the marketing concept include:
-Segmentation
-Targeting
-Positioning and
-Marketing Mix (4 Ps)
 Segmentation, Targeting, & Positioning
 Segmentation is the process of dividing a market
into subsets of consumers with common needs or
characteristics.

 Targeting is selecting one or more of the

segments identified for the company to pursue.

 Positioning is developing a distinct image for the

product or service in the mind of the consumer.
 Successful Positioning

Two Key Principles

 Communicating  Communicating a
the benefits of the Unique Selling
product, rather Proposition for the
than its features product
 Successful Positioning

Unique Selling Proposition(USP)-a distinct

benefit or point of difference (POD) for the
product or service.
The Marketing Mix
 Successful Relationships

Customer Customer
Value Retention

Customer
Satisfaction
The Three Drivers of Successful Relationships
between Marketers and Customers

1.Customer Value,

2.Customer Satisfaction, &

3.Customer Retention
 Customer Value
Customer Value is defined as the ratio between
the customer’s perceived benefits and the
resources used to obtain those benefits.
Customer Value=economic+functional +psychological/
monetary,time,effort,psychological

Developing a Value Proposition

 EX-Lexus claims to deliver to it buyer quality, zero defect in

manufacturing and superior and personal post purchase service.
 Customer Satisfaction

 Satisfaction- Consumer condition when experience

with a product equals or exceeds expectation.
.
 Types of Customers

 Loyalists  Defectors
 Apostles  Hostages
 Mercenaries  Terrorists
Several types of Customers based on level
of satisfaction
Loyalists (completely satisfied customers): who keep
purchase, less price sensitive and spread positive word of
mouth.

Apostles: whose experience exceed expectation and

who provide very positive word of mouth about the
company to other.

Defectors: who feel neutral or merely satisfied and

are likely to switch to another company that offers
them a lower price.
 Types of Customers
Mercenaries: who are very satisfied
customers but who have no real loyalty to
the company and may defect because of a
lower price elsewhere.
Hostages: who are unhappy but stay
because of monopolistic environment or
low prices.
Terrorists: who have had negative
experiences with the company and who
spread negative word of mouth.
 Customer Retention
The case for increasing the customer retention
rate is captured in the concept of customer
lifetime value (CLV). CLV describes the present
value of the stream of future profits expected
over the customer’s lifetime purchases.

Studies have shown that small reductions in

customer defection produce significant increase
in profits.
 Customer Retention
Loyal customers are key in business.

1. Loyal customers buy more product;

2. They are less price sensitive
3. They pay less attention to competitors’ advertising
4. Servicing them is cheaper
5. They spread positive word of mouth and refer other
customers

Furthermore, marketing effort aimed at attracting

new customer are expensive;indeed,in saturated
markets,it may be impossible to find new customers.
Customer Loyalty and Profitability

Tier 1: Platinum
Tier 2: Gold
Tier 3: Iron
Tier 4: Lead
 Customer pyramid
A “customer pyramid” where customers are
grouped into four tier:
1.The platinum tier includes heavy users who
are not price sensitive and who are willing to
try new offerings.
2.The gold tier consists of customers who are
heavy users but not as profitable because they
are more price sensitive than those in the
higher tier, ask more for discounts, and are
likely to buy from several providers.
 Customer pyramid
3.The iron tier consists of customers whose
spending volume and profitability do not
merit special treatment from the company;

4.The lead tier includes customers who actually

cost the company money because they claim
more attention than is merited by their
spending, tie up company resources, and
spread negative word of mouth.
 Marketing Ethics and Social Responsibility
Ethics is a set of rules that define right and wrong
conduct.

Business ethics is the application of general ethical

rules to business behavior.
Corporate Social Responsibility

 Corporate social responsibility, often abbreviated

"CSR," is a corporation's  initiatives to assess and
take responsibility for the company's effects on
environmental and social wellbeing.
 Corporate Social Responsibility
(CSR practices began in the United States in the early part of the 20 th century)

The concept calls upon marketers to balance

three considerations:
a) Company profits
b) Consumer want satisfaction and
c) the public interest.
 Corporate Social Responsibility

Arguments for Corporate Social Responsibility

 Balances power with responsibility
 Discourages government regulation
 Promotes long-run profits
 Improves a company’s Public image
 Responds to changing public needs and expectations
 Corrects social problems caused by business
 Applies useful business resources to difficult
problems.
 Corporate Social Responsibility
Critics View:
Social responsibility is nothing but a clever public
relations smokescreen to hide business’s true
intentions to make as much profit as possible.

Arguments against corporate social

responsibility
 Lowers economic efficiency and profits
 Imposes unequal costs among competitors
 Imposes hidden costs on society
The Impact of New Technologies
New consumer capabilities
–Can use the internet as a powerful information
and purchasing aid
–Can search, communicate, and purchase on the
move
–Can tap into social media to share opinions and
express loyalty
–Can actively interact with companies
–Can reject marketing they find inappropriate
 Consumer Behavior is
Interdisciplinary
 Psychology: Study of behavior and mental
process of individuals (i.e., needs,
personality traits, perception, learned
experiences, and attitudes).

 Sociology: Study of collective behavior of

people in group (the most prominent social
groups are family, peers, and social class).
 Consumer Behavior is
Interdisciplinary
 Anthropology: Study of people in relation to
their culture.

 Communication is the process of imparting

or exchanging information personally or
through media channels and using
persuasive strategies.
Consumer Decision Making (1 of 2)
 Inputs (two influencing factors)
– Firm marketing efforts
– Sociocultural influences
 Process (focuses on how consumers make decisions)
– Psychological factors
– Need Recognition, Decision Type, Prepurchase Search,
Evaluation of Alternatives
– Learning
 Outputs (post-decision activities)
– Purchase
– Post-purchase evaluation
Consumer Decision Making (2 of 2)

Figure 1-1:
A Model of
Consumer Decision
Making