Consumer Behavior

INTRODUCTION TO THE STUDY OF

CONSUMER BEHAVIOUR
 INTRODUCTION TO THE STUDY OF
CONSUMER BEHAVIOUR
Lecture 1: Development of the marketing concept and
the discipline of consumer behavior
Lecture 2: Customer value, satisfaction and retention
Lecture 3: The impact of digital technologies on
marketing strategies
Lecture 4: Consumer behavior and decision-making are
interdisciplinary & The consumer research process
 Learning Outcomes
On successful completion of this chapter, you will
be able to:
1. Identify and explain factors which influence consumer
behavior;
2. Demonstrate how knowledge of consumer behavior
can be applied to marketing;
3. What online or eMarketing is

4. How it differs from traditional marketing

Lecture#1: Development of the
marketing concept and the
discipline of consumer behavior
Consumer behavior is the study of consumer’s actions
during searching for purchasing, using, evaluating,
and disposing of products and services that they
expect will satisfy their needs.
 Consumer Behavior
Consumer Behavior focuses not only on what consumers buy,
but also why they buy, when they buy, where they buy and
how they evaluate their purchase, and how they ultimately
dispose of it. The second edition has been thoroughly
adapted and revised to reflect European conditions, and to
focus attention on critical concepts in consumer behavior. In
doing so the authors illuminate the ways in which marketers
apply the principles of consumer behavior to the
development and implementation of marketing strategies.
The new IT Innovation In Action feature will give practical
examples to help you student link Consumer Behavior with
how it is practiced in the workplace.
 KINDS OF CONSUMING ENTITIES
The personal consumer buys goods and services for
his or her own use, for the use of the household, or as a
gift for a friend.
The organizational consumer – includes companies
and charities, government agencies (local and
national), and institutions (e.g. schools, hospitals and
prisons), all of which must buy products, equipment
and services in order to run their organizations.
DEVELOPMENT OF THE MARKETING CONCEPT
AND THE DISCIPLINE OF CONSUMER BEHAVIOUR
The field of consumer behavior is rooted in the
marketing concept , a business orientation that
evolved in the 1950s through several alternative
approaches towards doing business referred to,
respectively, as
the production concept,
the product concept
the selling concept.
 production concept
The production concept assumes that consumers are
mostly interested in product availability at low prices;
its implicit marketing objectives are cheap, efficient
production and intensive distribution.
This orientation makes sense when consumers are more
interested in obtaining the product than they are in
specific features and will buy what is available rather
than wait for what they really want.
Today, using this orientation makes sense in developing
countries or in other situations in which the main
objective is to 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.
 A product orientation leads the company to strive constantly to
improve the quality of its product and to add new features that
are technically feasible without finding out first whether or not
consumers really want these features.
 A product orientation often leads to ‘marketing myopia’, that is, a
focus on the product rather than on the consumer needs it
presumes 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 the window.
 Marketing myopia
The mistake of paying more attention to the product
than to the benefits and experiences experienced by
the customers while using these products.
The best way to avoid marketing myopia is
to understand your customers’ needs and then match
these needs with what you offer. This requires an
understanding of customer needs that goes beyond
what a salesperson can provide, and a willingness to do
the research necessary to make sure you’re offering
what your customers want.
 Example Case “Levi’s Jeans”
Levi’s Jeans saw a decline in sales from record annual
sales of $7.1 billion in 1996 to $5.1 billion in 1999. In the
same period, profits fell from more than $1 billion to
barely nothing, despite the fact that Levi’s closed down
30 of its 51 factories and laid off 15,000 of its workers.
The reason? Levi’s no longer connected with younger
customers, and did not offer products able to satisfy
the changing needs of the market.
 The selling concept
The assumption of the selling concept is that consumers are
unlikely to buy the product unless they are aggressively
persuaded to do so – mostly through the ‘hard sell’ approach.
The problem with this approach is that it fails to consider
customer satisfaction.
When consumers are induced to buy products they do not
want or need, they will not buy them again. Also, they are likely
to communicate any dissatisfaction with the product through
negative word-of-mouth that serves to dissuade potential
consumers from making similar purchases.
Today, the selling concept is typically utilized by marketers of
unsought goods such as life insurance.
 Marketing concept
The field of consumer behavior is rooted in a marketing
strategy that evolved in the late 1950s, when some
marketers began to realize that they could sell more goods,
more easily, if they produced only those goods they had
already determined that consumers would buy. Instead of
trying to persuade customers to buy what the firm had
already produced, marketing- oriented firms found that it
was a lot easier to produce only products they had first
confirmed, through research, that consumers wanted.
Consumer needs and wants became the firm’s primary
focus. This consumer-oriented marketing philosophy came
to be known as the marketing concept .
 EXERCISES
Case studies of companies
suffering from marketing myopia
Lecture#2: Customer value,
satisfaction and retention
 Since its emergence in the 1950s, many companies have very
successfully adopted the marketing concept. And in the 1990s the
digital revolution enabled many marketers to offer even more
products and services and distribute them more widely, while
reducing the costs and barriers of entering many industries. It has
accelerated the rate at which new competitors enter markets and also
has speeded up the rate at which successful segmentation, targeting
and positioning approaches must be updated or changed, as they are
imitated or made obsolete by the offerings of new business rivals.
Three drivers of successful relationships
between marketers and customers
customer value,
customer satisfaction
customer retention.
 Customer value
 Customer value is defined as the ratio between the customer’s
perceived benefits (economic, functional and psychological) and the
resources (monetary, time, effort, psychological) used to obtain those
benefits. Perceived value is relative and subjective.
 For example, millions of customers each year visit thousands of
McDonald’s restaurants in scores of countries around the globe, where
they purchase standard, inexpensive meals from franchise owners and
employees systematically trained by the McDonald’s Corporation to
deliver the company’s four core standards: quality, service, cleanliness
and value. Customers flock to McDonald’s outlets repeatedly because
the restaurants are uniform, customers know what to expect and they
feel that they are getting value for the resources they expend.
 Customer satisfaction
Customer satisfaction is the individual’s perception of
the performance of the product or service in relation
to his or her expectations.
For example, customers will have drastically different
expectations of an expensive restaurant and a
McDonald’s, although both are part of the restaurant
industry.
 Customer retention
 Customer retention refers to a company's ability to turn customers into
repeat buyers and prevent them from switching to a competitor. It
indicates whether your product and the quality of your service please
your existing customers.
 In almost all business situations, it is more expensive to win new
customers than to keep existing ones. Studies have shown that small
reductions in customer defections produce significant increases in profits
because:
1. loyal customers buy more products;
2. loyal customers are less price sensitive and pay less attention to
competitors’ advertising;
3. servicing existing customers, who are familiar with the firm’s offerings and
processes, is cheaper; and
4. loyal customers spread positive word-of-mouth and refer other customers.
 THE TRADITIONAL VALUE- AND RETENTION-
MARKETING CONCEPT FOCUSED MARKETING
 Make only what you can sell  Use technology that enables
instead of trying to sell what customers to customize what you
you make. make.
 Do not focus on the product;  Focus on the product’s perceived
focus on the need that it value, as well as the need that it
satisfies.
satisfies.
 Utilize an understanding of
 Market products and services
customer needs to develop
that match customers’ needs offerings that customers perceive
better than competitors’ as more valuable than
offerings. competitors’ offerings.
 Research consumer needs and  Research the levels of profit
characteristics. associated with various consumer
 Understand the purchase needs and characteristics.
behavior process and the  Understand consumer behavior
influences on consumer in relation to the company’s
behavior. product.
 EXERCISES
You are the marketing manager of a bank’s online
banking division. How would you apply the concepts
of providing value and customer satisfaction and
retention to designing and marketing effective online
banking?
Lecture#3: The impact of digital
technologies on marketing strategies
 Digital technologies allow much greater customization of products, services and
promotional messages than older marketing tools. They enable marketers to adapt the
elements of the marketing mix to consumers’ needs more quickly and efficiently, and to
build and maintain relationships with customers on a much greater scale. By using new
technologies, marketers can collect and analyze increasingly complex data on consumers’
buying patterns and personal characteristics, and quickly analyze and use this
information for targeting smaller and increasingly more focused groups of consumers.
On the other hand, the same technologies enable consumers to find more information
about products and services (including prices) more easily, efficiently and, for the most
part, from the comfort of their own homes. Therefore, more than ever before, marketers
must ensure that their products and services provide the right benefits and value and are
positioned effectively to reach consumers.
Digital technologies and business environment
Online communication and emerging digital technologies have introduced
several dramatic changes into the business environment:
● Consumers have more power than ever before. They can use ‘intelligent
agents’ to locate the best prices for products or services, bid on various
marketing offerings, by pass distribution outlets and intermediaries, and
shop for goods around the globe and around the clock from the convenience
of their homes. Therefore, marketers must offer more competitively priced
products and more options.
● Consumers have access to more information than ever before. They can easily
find reviews for products they are considering buying that have been posted
by previous buyers, click a button to compare the features of different
product models at the sites of online retailers, and subscribe to ‘virtual
communities’ of people who share the same interests as they do. In turn,
marketers must be aware of the limits of their promotional messages and
assume that consumers know all of their buying options.
The impact of the Internet on the
marketing mix
Product – new products, new delivery mechanisms
Price – dynamic pricing, comparison pricing,
bartering, bidding
Place – direct distribution of digital products, supply
chain management, channel integration
Promotion – new communications media, advertising
efforts
The transformation of the marketing mix
Shift away from a selling orientation toward a customer-
focused or customer-centric orientation

The 4 Ps become the 4 Cs (Albert and Sanders 2002)

Customer focused solution
Cost (increase in value)
Convenience
Communication
Internet Properties and Marketing Implications
Internet means:
new channels for selling and marketing
new pricing and promotion options
new forms of market research and new products
improved distribution and customer service

Most important is a shift toward customer power

What is driving customer power?
More options

More information

Simpler transactions

Network model versus broadcast model (or why the

Internet is not TV)
buyer attention becomes a scarce commodity
 Challenges marketers face
Creating content that appeals to multi-level roles
within the target audience.
Accessing subject matter experts to create content.
Internal communication between teams/silos.
Creating valuable content instead of sales-oriented
content.
 Lecture#4: Consumer behavior and
decision-making are interdisciplinary &
The consumer research process
Consumer behavior was a relatively new field of study in the mid- to late 1960s.
Because it had no history or body of research of its own, marketing theorists
borrowed heavily from concepts developed in other scientific disciplines, such
as psychology (the study of the individual), sociology (the study of groups),
social psychology (the study of how an individual operates in a group),
anthropology (the influence of society on the individual) and economics, to
form the basis of this new marketing discipline. Many early theories
concerning consumer behavior were based on economic theory, on the notion
that individuals act rationally to maximize their benefits (satisfactions) in the
purchase of goods and services. Later research discovered that consumers are
just as likely to purchase impulsively and to be influenced not only by family
and friends, by advertisers and role models, but also by mood, situation and
emotion. All of these factors combine to form a comprehensive model of
consumer behavior that reflects both the cognitive and emotional aspects of
consumer decision-making .
Consumer Decision Making Process
Definition: The Consumer Decision Making Process is
the sequential interrelated steps explaining the
approach of the consumers in making buying
decisions. Also, it involves an in-depth analysis of the
consumers’ purchase behavior. We can also refer to it
as the Buyer Decision-Making Process.
5 steps of the consumer decision making
process
Problem recognition: Recognizes the need for a
service or product
Information search: Gathers information
Alternatives evaluation: Weighs choices against
comparable alternatives
Purchase decision: Makes actual purchase
Post-purchase evaluation: Reflects on the purchase
they made
The marketing concept states that, to be successful, a
company must understand the needs of specific
groups of consumers (i.e. target markets) and then
satisfy these needs more effectively than the
competition.
The satisfaction of consumer needs is delivered in the
form of the marketing mix, which consists of the so-
called ‘4 Ps’: product, price, place and promotion.
Marketers who have a thorough understanding of the
consumer decision-making process are likely to design
products, establish prices, select distribution outlets
and design promotional messages that will favorably
influence consumer purchase decisions.
 CUSTOMER RESEARCH MARKETING RESEARCH
Study purpose Data collection and, potentially, Data collection only. Respondents
strengthening the relationship are
between the not told the research sponsor’s
customers and the company. identity.
Contacted Respondents cooperate because
customers are told the identity of they are
the asked and sometimes paid.
survey’s sponsor.

Respondents’ level Increase respondents’ The respondents’ level of

of involvement by involvement is
involvement and indicating that the data collected generally low.
expectations will be
used to improve the company’s
offerings.
Respondents who tell the
researcher about
problems expect corrective
action.
 CUSTOMER RESEARCH MARKETING RESEARCH
The sample size Since the survey is an A sufficient number of
and the opportunity to build respondents are
researcher’s relationships with customers, as contacted to achieve statistical
attitude toward many as validity at a
the respondents possible are contacted. given confidence level. When
Respondents expect approached,
the researcher to know their respondents do not expect the
usage habits researcher to
concerning the company’s know anything about them.
offerings.

How the data are The data collected can be linked The data are collected
collected to anonymously and
and analyzed specific respondents and aggregated. Typically,
analyzed at the comparisons among
respondent level. sample averages are used in the
analysis.
 CUSTOMER RESEARCH MARKETING RESEARCH
End result Appropriate data are identified to Product and service problems are
fix identified.
product and service problems
and to
correct individual participant’s
problems.

Follow-up surveys Follow-up is encouraged. Linking data collected to specific

Customers who respondents and using the data in
report problems expect some follow-up
feedback. contacts is considered unethical.
The follow-up may be linked to
information
collected previously from the
same
respondent.
 Consumer research
Consumer research describes the process and tools used to study
consumer behavior. Broadly speaking, there are two theoretical
perspectives that guide the development of consumer research
methodology:
 The positivist approach tend to be objective and empirical, to seek
causes for behavior, and to conduct research studies that can be
generalized to larger populations. Consumer research designed to
provide data to be used for strategic managerial decisions falls into
this category.
 The interpretive approach tends to be qualitative and based on
small samples. Although they tend to view each consumption
situation as unique and unpredictable, researcher seek to find
common patterns of operative values, meanings and behavior across
consumption situations.
The consumer research process
The major steps in the consumer research process
include:
1. defining the objectives of the research,
2. collecting and evaluating secondary data,
3. designing a primary research study,
4. collecting primary data,
5. analyzing the data, and
6. preparing a report on the findings.
 References
Consumer Behavior: Applications in Marketing, Third
Edition by Robert East, Jaywant Singh, Malcolm Wright,
Marc Vanhuele. Sage London 2017.
Consumer Behavior, 11th Edition by Leon G. Schiffman,
Joseph L. Wisenblit. Pearson London 2016
Marketing Theory: Foundations, Controversy, Strategy,
Resource-Advantage Theory, Shelby D. Hunt. ME Sharp
2010.
Schiffman, Leon G., Leslie Lazar Kanuk og Håvard
Hansen (2012 or newer). Consumer Behavior: A European
Outlook, 2. Edition, London, UK.: Prentice-Hall