Intro to Consumer Behavior

1. Consumer Behavior (8428)
Lecture 1
(Consumer Behavior and Consumer Research )
Teacher:
ISMATULLAH BUTT
Associate Professor

2. Consumer Behavior and Consumer Research
Lecture Contents:
1.1 Development of Marketing Concepts
1.1.1 Marketing Concept
1.1.2 Implementing Marketing Concept
1.1.3 Segmentation, Targeting and Positioning
1.1.4 Marketing Mix
1.1.5 Customer Value, Satisfaction and Retention
1.1.6 Impact of Digital Technologies on Marketing Strategies
1.1.7 Consumer Behavior and Decision Making are Interdisciplinary
1.2 Consumer Research
1.2.1 Quantitative Research
1.2.2 Qualitative Research
1.2.3 Combining Qualitative and Quantitative Research Findings
1.3 Consumer Research Process
1.4 Ethics in Consumer Research
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3. Consumer
Behavior
studies
Consumer behavior is an Interdisciplinary Field
Psychology
Social
Psychology Economics
Other Fields
Anthropology

4. Company Orientations to the Marketplace
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 What philosophy should guide a company marketing and selling efforts?
 What relative weights should be given to the interests of the organization, the customers,
and society?
 These interests often clash. However, an organization’s marketing and selling activities
should be carried out under a well-thought-out philosophy of efficiency, effectiveness,
and social responsibility.
 Five orientations (philosophical concepts to the marketplace have guided and continue to
guide organizational activities):
1. The Production Concept
2. The Product Concept
3. The Selling Concept
4. The Marketing Concept
5. The Societal Marketing Concept

5. Company Orientations to the Marketplace
1. The Production Concept.
 This concept is the oldest of the concepts in business.
 It holds that consumers will prefer products that are widely
available and inexpensive.
 Managers focusing on this concept concentrate on achieving high
production efficiency, low costs, and mass distribution.
 They assume that consumers are primarily interested in product
availability and low prices.
 This orientation makes sense in developing countries, where
consumers are more interested in obtaining the product than in its
features. 5

6. Company Orientations to the Marketplace
2. The Product Concept.
 This orientation holds that consumers will favor those products
that offer the most quality, performance, or innovative features.
 Managers focusing on this concept concentrate on making superior
products and improving them over time.
 They assume that buyers admire well-made products and can
appraise quality and performance.
 However, these managers are sometimes caught up in a love affair
with their product and do not realize what the market needs.
 Management might commit the “better-mousetrap” fallacy,
believing that a better mousetrap will lead people to beat a path
to its door.
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7. Company Orientations to the Marketplace
3. The Selling Concept.
 This concept holds that consumers and businesses, if left alone, will ordinarily not
buy enough of the selling company’s products.
 The organization must, therefore, undertake an aggressive selling and promotion
effort.
 This concept assumes that consumers typically show buying inertia or resistance and
must be coaxed into buying.
 It also assumes that the company has a whole battery of effective selling and
promotional tools to stimulate more buying.
 Most firms practice the selling concept when they have overcapacity.
 Their aim is to sell what they make rather than make what the market wants.
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8. Company Orientations to the Marketplace
4. The Marketing Concept.
 This is a business philosophy that challenges the above three business
orientations.
 Its central tenets crystallized in the 1950s.
 It holds that the key to achieving its organizational goals (goals of the
selling company) consists of the company being more effective than
competitors in creating, delivering, and communicating customer
value to its selected target customers.
 The marketing concept rests on four pillars: target market, customer
needs, integrated marketing and profitability.
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9. Company Orientations to the Marketplace
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5. The Societal Marketing Concept.
 This concept holds that the organization’s task is to determine the needs, wants,
and interests of target markets and to deliver the desired satisfactions more
effectively and efficiently than competitors (this is the original Marketing
Concept).
 Additionally, it holds that this all must be done in a way that preserves or
enhances the consumer’s and the society’s well-being.
 This orientation arose as some questioned whether the Marketing Concept is an
appropriate philosophy in an age of environmental deterioration, resource
shortages, explosive growth of population, world hunger and poverty, and
neglected social services?
 Are there companies that do an excellent job of satisfying consumer wants
necessarily acting in the best long-run interests of consumers and society?

10. Marketing Concept
How does Consumer behavior study help business?
 A recipe of good marketing strategy lies in sound understanding of
its market.
 All good market communication strategies( brand , IMC) are
developed from deeper insight in the market.
 Sound Product Distribution, Price , Customer services ( CRM )
strategy etc. originates from understanding of behavior of a market.
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11. Marketing Concept
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Consumer Buying process:
 Impulsive buying : Consumer buy due to stimuli.
 Compulsive buying : Consumer feels the product or service is
best suited for her need.
 Addictive buying : Consumer feels the product or service is only
option available to meet her aspiration & life style.

12. Implementing Marketing Concept
Market Segmentation, Targeting and Positioning:
1) Identify bases for segmenting the market
2) Develop segment profiles
3) Target Marketing
4) Develop measure of segment attractiveness
5) Select target segments
6) Market Positioning
7) Develop positioning for target segments
8) Develop a marketing mix for each segment
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13. Focus on Health and Beauty
The Information Superhighway
Trends influencing consumer behavior in
contemporary society
Shifting Roles of Sexes
Telecommuting
Personalized Economy
Emphasis on Leisure
Concern about Safety
Diversity
Focus on Ethics
Ecological Consciousness
A Global Village
Changing Perception of Religion

14. Market Segmentation, Targeting and Positioning
MARKET SEGMENTATION: Dividing a market into smaller groups of buyers on the
basis of needs, characteristics or behavior who might require separate products or
marketing mixes.
SEGMENTING CONSUMER MARKETS: Major segmentation variables are:
1. Geographic segmentation: Dividing a market into different geographical units e.g.
Country, City, Density (Urban, suburban, rural),Climate (Northern, Southern).
2. Behavioral segmentation: Dividing the market into groups based on consumer
knowledge, attitude, use or response to a product, Occasions, Benefits, User status,
Usage rate, Loyalty status.
3. Demographic segmentation: Dividing the market into groups based on demographic
variables e.g. Age, Gender, Family lifecycle, Income, Occupation, Religion.
4. Psychographic segmentation: Dividing the market into groups based on social class,
lifestyle and personality.
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15. SEGMENTING BUSINESS MARKETS
Major segmentation variables:
 Demographics
 Industry
 Company size
 Locations
 Operating variables
 Technology
 User-nonuser status
 Customer capabilities
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16. Purchasing approaches Personal characteristics
 Purchasing function organization
 Power structure
 Nature of existing relationships
 General purchase policies
 Purchasing criteria
 Situational factors
 Urgency
 Specific applications
 Size of order
 Personal characteristics
 Buyer-seller similarity
 Attitudes toward risks
 Loyalty
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17. SEGMENTING INTERNATIONAL MARKET
Major segmentation variables:
 Geographic location
 Economic factors
 Political and legal factors
 Cultural factors
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18. TARGET MARKETING
Target Marketing: The process of evaluating each market segment’s
attractiveness and selecting one or more segments to enter.
Evaluating Market Segments:
 Segment size and growth
 Major structural factors affecting segment attractiveness
 Competitors
 Substitute products
 Power of buyers
 Powerful sellers
 Company objectives and resources
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19. SELECTING MARKET SEGMENTS
Target marketing strategies / Market coverage strategies /
Levels of market segments :
 Undifferentiated (Mass) marketing
 Differentiated (Segmented) marketing
 Concentrated (Niche) marketing
 Micro-Marketing
 Targeting broadly
 Targeting narrowly
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20. SELECTING MARKET SEGMENTS
 Undifferentiated (mass) marketing: A market coverage strategy in which a firm
decides to ignore market segment differences and go after the whole market with
one offer.
 Company Marketing Mix
 Market
 Differentiated (segmented) marketing: A market coverage strategy in which a
firm decides to target several market segments and design separate offers for each.
 Company Marketing Mix 1
 Segment 1
 Company Marketing Mix 2
 Segment 2
 Company Marketing Mix 3
 Segment 3
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21. SELECTING MARKET SEGMENTS
Benefits of segment marketing over mass marketing: –
 The company can market more efficiently toward the consumers that
it can serve best and most profitably.
 The company can market effectively by fine-tuning its marketing
mixes to the needs of carefully defined segments.
 The company may face fewer competitors.
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22. SELECTING MARKET SEGMENTS
 Concentrated (niche) marketing: A market coverage strategy in which a firm goes after
a large share of one or a few submarkets with distinctive traits that may seek a special
combination of benefits.
Company Marketing Mix
 Segment 1
 Segment 2
 Segment 3
 Benefits of niche marketing over mass/segment marketing:
 Niches are Smaller and normally attract only one or a few competitors.
 Marketers understand their consumers’ needs so well that their customers willingly pay
a price premium.
 It offers smaller companies an opportunity to compete by focusing their limited
resources on serving niches that may be unimportant to or overlooked by larger
competitors.
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23. SELECTING MARKET SEGMENTS
 Micromarketing: A market coverage strategy in which a firm
tailors its products and marketing programs to suit the tastes of
specific individuals and locations.
Micromarketing includes –
 Local marketing - Cities, neighborhoods and specific stores
 Individual marketing – Mass customization
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24. SELECTING MARKET SEGMENTS
Choosing a market-coverage strategy is based on:
 Company resources
 Product variability
 Product’s life-cycle stage
 Market variability
 Competitor’s marketing strategies
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25. POSITIONING FOR COMPETITIVE ADVANTAGE
 POSITIONING FOR COMPETITIVE ADVANTAGE:
 Market positioning is the process of arranging for a product to
occupy a clear, distinctive and desirable place relative to competing
products in the minds of target consumers.
 A product’s position is the way the product is defined by consumers
on important attributes – the place the product occupies in
consumers’ minds relative to competing products.
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26. CHOOSING A POSITIONING STRATEGY (3 steps)
1. Identifying possible competitive advantages :Competitive advantage is an
advantage over competitors gained by offering consumers greater value, either through
lower prices or by providing more benefits that justify higher prices.
Positioning on specific product features:
The most common basis for constructing a product positioning strategy are: –
 Positioning on specific product features
 Positioning on specific benefits, needs or solution
 Positioning on specific use categories
 Positioning on specific usage occasions
 Positioning on a reason to choose an offering over the competition
 Positioning against another product
 Positioning by cultural symbols
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27. CHOOSING A POSITIONING STRATEGY (3 steps)
2. Choosing the right competitive advantages :
 How many differences to promote?
 Which differences to promote?
The differences must have the following criteria: -
 Important
 Distinctive
 Superior
 Communicable
 Preemptive
 Affordable
 Profitable
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28. CHOOSING A POSITIONING STRATEGY (3 steps)
3. Selecting an overall positioning strategy :
 Price (More, The same, Less)
 More for more, More for the same, More for less
 Benefits: The same, The same for less, Less for much less.
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29. 4 Ps of Marketing Mix
1. Product: There are many things to consider when choosing a product to sell:
 What do people want?
 What services should be included with the sale of a product?
2. Price : The price is what the customer must give up to receive the product.
It often is necessary to try different prices periodically to see which prices
provide the best financial returns.
3. Place :It is important to make sure that there is enough of a product on hand
to sell.
For instance, if there is a sale, then enough of a product should be available so
that customers can be satisfied.
4. Promotion :Promotion involves all that goes into making consumers aware of
your product and its desirable features, including: Advertising, Personal selling,
Sales promotion etc.
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30. Customer Value, Satisfaction and Retention
 It is no longer enough to satisfy customers. You must delight them. (P. Kotler)
 Customer Perceived Value: Is the difference between the prospective customer’s evaluation of
all benefits and all the costs of an offering and the perceived alternatives.
 Determinants of Customer Delivered Value:
 Total Customer Satisfaction: is a person’s feelings of pleasure or disappointment resulting from
comparing a product’s perceived performance (outcome) in relation to his or her expectations.
 Customer Expectations: Customers form their expectations from past buying experience, friends
and associates’ advice and marketers’ and competitors’ information and promises. (High VS Low
expectation).
 Total Customer Satisfaction:
 Delivering High Customer Value :Delivering a competitively superior value proposition aimed at
a specific market segment, backed by a superior value-delivery system.
 Value proposition: whole benefits a company promises to deliver.
 Value-delivery system: all experiences the customer will have on the way to obtaining and using
the offering.
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31. Attracting and Retaining Customers
 Five levels of investment in customer relationship building:
1. Basic marketing: simply sell
2. Reactive marketing: sell & encourage to call
3. Accountable marketing: phone and ask for feedback.
4. Proactive marketing: contact from time to time.
5. Partnership marketing: work continuously to improve the company
performance.
 Forming Strong Customer Bonds: Cross-departmental participation,
Integrate the Voice of the Customer into all business decisions, Create
superior offering for the target market.
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32. Impact of Digital Technologies on Marketing Strategies
Positive Implications
 Marketers can be in touch with anyone, anywhere and at any time
 Availability of information increases consumers’ knowledge and
power in the marketplace.
Negative Implications
 Increased information about consumers raises serious privacy
issues
 Creation of a digital divide that further stratifies society based on
wealth, education and age
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