consumer behavior in tourism

Consumer Behavior and
Consumer Research
LECTURE 1 :
CHAPTER 1

What Is Consumer Behavior?
Activities people undertake when
obtaining, consuming, and
disposing of products and
services

Obtaining Consuming Disposing
Consumer
Influences
Organizational
Influences
Consumer Behavior

Consumer
Influences
Organizational
Influences
Culture
Ethnicity
Personality
Family
Life-stage
Values
Income
Available Resources
Attitudes
Opinions
Feelings
Motivations
Past Experiences
Peer Groups
Knowledge
Brand
Product Features
Advertising
Word of Mouth
Promotions
Retail Displays
Price
Quality
Service
Store Ambiance
Convenience
Loyalty Programs
Packaging
Product Availability

Obtaining Consuming Disposing
How you decide
you want to buy
Other products
you consider
buying
Where you buy
How you pay for
product
How you
transport
product home
How you use the
product
How you store the
product in your
home
Who uses the
product
How much you
consume
How product
compares with
expectations
How you get rid of
remaining product
How much you
throw away after
use
If you resell items
yourself or
through a
consignment
store
How you recycle
some products

OBTAINING
How you decide you
want to buy
Other products you
consider buying
Where you buy
How you pay for
product
How you transport
product home
CONSUMING
How you use the product
How you store the
product in your home
Who uses the product
How much you consume
How product compares
with expectations
DISPOSING
How you get rid of
remaining product
How much you throw
away after use
If you resell items
yourself or through a
consignment store
How you recycle some
products
CONSUMER INFLUENCES
Culture Ethnicity
Personality Family
Life-stage Values
Income Available Resources
Attitudes Opinions
Motivations Past Experiences
Feelings Peer Groups
Knowledge
ORGANIZATIONAL INFLUENCES
Brand Product Features
Advertising Word of Mouth
Promotions Retail Displays
Price Quality
Service Store Ambiance
Convenience Loyalty Programs
Packaging Product Availability
Consumer Behavior

What Is Consumer Behavior?
Activities people undertake when
obtaining, consuming, and
disposing of products and
services
A field of study that focuses on
consumer activities
Scope goes beyond just why and
how people buy to include
consumption analysis

Consumption Analysis
Why and how people use products
in addition to why and how they
buy
How do the kids eat Oreo cookies ?
Marketers educate them in the ad:
It is fun during the consumption
What is your most favorite drink:
water, cola, coffee….

The Marketing Concept
The process of planning and
executing the conception, pricing,
promotion, and distribution of
ideas, goods, and services to create
exchanges that satisfy individual
and organizational objectives
Satisfaction with an exchange
depends on satisfaction with
consumption of product and the
exchange of money

Why Study Consumer Behavior?
Consumer Behavior Determines the
Economic Health of a Nation
Success of Marketing Programs

Marketing can be used to
influence brand choice and
purchase, while Demarketing
can influence people to stop
harmful consumption
“The Customer is King”
Organization influenced by
consumer needs and wants

Organizations that are Customer-
centric use a total marketing approach
to focus their resources on satisfying
customers
Marketing
Process of transforming or changing
an organization to have what people
will buy

Economic Health of Everyone

The individual’s decisions as a
consumer determine their economic
health by making more effective
consumption decisions while avoiding
deceptive practices harmful to them

Public policy leaders and social
commentators study consumer
behavior to alleviate overconsumption
and underconsumption by educating
consumers about problems and
providing assistance

Understanding consumers’ issues or
problems and developing methods to
reach and educate consumers
Educating Consumers About Health

Consumer Behavior Helps
Formulate Public Policy

Understanding
consumers’
needs to
formulate
public policy
and predicting
behavioral
changes that
follow
Helps Formulate Public Policy
Government Protection
and Education
Protection from
Competitive Markets

Consumer Behavior Affects
Personal Policy
Personal policy includes how you
behave towards others and in buying
situations, your values and beliefs,
and how you live your life
A person’s economic quality of life is
determined by personal policy
Spent all income on material goods/
donate to charity/ save ?

Evolution of ConsumerBehavior
Supply Chain:
all the organizations involved in taking a
product from inception to final
consumption
- Manufacturers
- Wholesalers
- Retailers
- Facilitating Organizations
Consumers’Increased Influence on
Business

Demand Chain:
Develop a customer-centric supply-
chain-the demand chain.
Creating chains based on
customers’ needs, wants, problems
and AIOs

Wholesaler Manufacturer Retailer Consumer
Manufacturing
Orientation
Consumer
Orientation
Selling
Orientation
Marketing
Orientation
Consumers’ Increasing Influence
U.S. 1750-1850 1850-WWII 1970-2000 2000+
Europe 1750-1850 1760-WWII 1970-2000 2000+

-Shifting from supply to demand
Manufacturing Orientation
Selling Orientation
Marketing Orientation
Consumer Orientation

• How to make the best product ?
make the best mouse-trap
• In 1900s, Henry Ford ( Model T ) :
producers dictated what was to be
sold
• “ You can get it in any color as
long as it is black “

Selling Orientation
• In 40s, how to sell the product ?
• Ted Bates devised the phrase USP
(Unique Selling Proposition ) :
select the most important benefit
for a brand and repetitive
advertising-
• Consumer associate benefit with
the brand

McDonald
• Successfully marketed in various
countries by identifying the UPS as
fast, consistent service in clean
facilities and convenient locations,
consumer can enjoy moment with
friends, families
• Another USP is Fun : “ I’m lovin’
it “

Market Orientation
• Wal- Mart : “ We are not in the
business of selling things to
consumers, we are in the business
of buying what consumers need to
consume , whether it is clothing,
food or gasoline. “

ConsumerOrientation
Beyond a marketing focus
How all organizations in a demand chain
adapt to changing consumer lifestyles
and behaviors bringing product design,
logistics, manufacturing, and retailing
together
Role of consumers in shaping many
aspects of life—society, government,
social programs, health cares, and other
areas

Consumer Orientation:
Motivational Research
• Sigmund Freud : Uncover hidden and
unrecognized motivations through
guided interviews
• Women baked cakes out of the
unconscious desire to give birth
• Pillsbury created the Doughboy icon
with the appeal of a cuddly baby on
advertising / merchandise

Starting
Point
Focus Means Ends
Factory Existing
Product
Selling &
promotion
Profit through
Sales Volume
INSIDE-OUT APPROACH

Customer Orientation
Starting
Point
Focus Means Ends
Target
Market
Customer
Need/ want
Integrated
Marketing
Profit through
Customer Satisfaction
OUTSIDE-IN APPROACH

Revlon: we make cosmetics
market-oriented business definition: we
sell life-style and self-expression,
memories, hopes and dreams.
Xerox: We make copying, fax and
other office machines
market-oriented business definition: We
help businesses more productive by
helping them scan, store, retrieve,
revise, distribute, print and distribute
documents

Peter Drucker :
To Create a customer
• Businesses should focus all their
efforts on developing the ability to
profitably satisfy an ever more
discriminating customer. We have
entered an era where the customer
reigns supreme.
• If one firm does not provide a product
that satisfies consumers' ever-changing
needs and desires, then it is certain that
a competitor will. To be profitable a firm
must understand and anticipate the
wishes of the consuming public.

Question time :
Statement 1: Make what we can sell
Statement 2: Sell what we can make
Which statement is applying the
manufacturing-oriented concept while
another the customer- oriented concept ?
illustrate your answer with an example.

Consumer Research:
Methods of Studying Consumer
Behavior

Consumer Research Methods
Observation
In-home observation: examining how and
when consumers use and consume products in
their households
Shadowing: following and observing
consumers in the shopping and consumption
processes. Researchers may ask questions
about reasons for behaviors
Physiological methods: Techniques
borrowed from medicine, psychology and other
sciences including cameras to measure eye
movement, galvanic skin response.

Interviews and Surveys
Surveys: efficient method for gathering
information from a large sample of consumers
by asking questions and recording responses
(telephone and Internet surveys, mall
intercepts, and mail questionnaires)
Focus Groups: a group discussion led by a
moderator skilled in persuading consumers to
thoroughly discuss a topic of interest
Longitudinal Studies: repeated measures of
activities over time to determine changes in
opinions, buying, and consumption behaviors

Experimentation
Attempts to understand cause-and-effect
relationships by carefully manipulating
independent variables to determine how
these changes affect dependent variables
- Laboratory experiment
- Field experiment
Independent variables might include number
of advertisements and package design
Dependent variables might include purchase
intent or behavior

Consumption Research
Builds on the three primary research
methods to examine how people use
products and services rather than how
they buy them
May use different tools to under-stand
how values and culture influence usage
of products and other behaviors

Consumption Research
Builds on the three primary research
methods to examine how people use
products and services rather than how
they buy them
May identify new uses for existing
products or new product to satisfy
unmet or changing consumer needs
Soda powder : different usage and
consumption patterns

The Underlying Principles of
ConsumerBehavior
The Consumer Is Sovereign
The Consumer Is Global
Consumers Are Different;
Consumers Are Alike
The Consumer Has Rights

The Right to be informed:
ethical concerns
• 七海健絡廣告「想關節七日止痛？」
To stop the pain in the joint within 7 days
with the SevenSeas JointCare product ?
The headline of the ad is just a question!
This is not a promise of the product t!
• Carlsberg is probably the best beer in the world
!
• Bottled Water: environmental concern
Refer to You-tube video
• Over-packaging of products

Challenges for the Future
Gathering and interpreting
information that organizations need
to meet changing needs of
consumers
Developing effective consumer
research methods to capture
changes in trends and lifestyles
Understanding consumer behavior
from a broader perspective as an
important part of life

CHAPTER 2
Creating Marketing
Strategies for Customer-
Centric Organizations

Century of the Consumer
• Globalization and the shrinking of
the commercial world have led to
increased competition
• This increased competition requires
consumer analysts to develop new
skills focusing on and requiring a
thorough knowledge of the consumer

Consumer Analysis
The process of understanding
consumer trends, global consumer
markets, models to predict
purchase and consumption
patterns, and communication
methods to reach target markets
most effectively

Strategy
A decisive allocation of resources
(capital, technology, and people) in
a particular direction

Customer-Centric Organizations
A strategic commitment to focus
every resource of the firm on
serving and delighting profitable
customers

Characteristics of Customer-
Centric Organizations
Shared Vision and Values
Cross-Functional Integration
System-Wide Simultaneous Training
Customer Based Metrics
The goal of a customer-centric organization
is to provide a consumer with more value
than its competitors

Value
The difference between what
consumers give up (pay with time,
money, or other resources) for a
product and the benefits they
receive
Benefit / cost (disutility)

Marketing Strategy
Involves the allocation of resources
to develop and sell products or
services that consumers will
perceive to provide more value
than competitive products or
services
The process includes market analysis,
market segmentation, brand strategy, and
implementation with the consumer at the
core

McDonald
• 24 Hour service in selected outlets
• Delivery service
• CRM programs
• High-valued and healthier food items.
Lobster/ Sirloin steak test-market in
USA
• McCafe
• McDonald wedding at $ 9,999

Implementation
in Marketplace
Marketing Mix
Product, Brand,
Price, Place
Promotion, and
7Rs
Market Analysis
Consumer
Company
Environmental
Political/Legal
Segmentation
Demographic
Situational
Psychographic

Market Analysis
The process of analyzing changing
consumer trends, current and
potential competitors, company
strengths and resources, and the
technological, legal, and economic
environments
One goal is to minimize the number
of failed products introduced to the
market by better understanding the
wants and needs of the market

Market Analysis: Consumer
Insight and Product Development
Consumer Insight: an understanding of
consumers’ expressed and unspoken
needs and realities that affect how they
make life, brand, and product choices.
Combines fact (from research) and
intuition to yield an insight that can lead
to a new product, existing product
innovation, brand extension, or revised
communication plan

Market Analysis: Consumer
Environment
Includes demographic trends, personal
and group influences, knowledge,
attitudes, motivation, purchase and
consumption patterns, changing
consumer needs, wants, and lifestyles
Changes in the consumer environment
can lead to new product ideas, product
adaptations, new packaging or new
services to help consumers meet their
changing needs : iPod / iPhone
Accessories are big business !

Coffee Consumption
in the PRC market
• Chinese people in the PRC consumed
50,000 tons of coffee in 2009, growing at 30 %
annually in recent years
• Starbucks will expand from 400 to 1,000 shops
in the coming year, becoming the second largest
market behind US
• Ever since its introduction by Nestle in the
1980s, it had changed from the image as a high-
class gift-items to a daily beverage
• Target segment is well-off middle class
and the younger Y-generations

Consumption Behavior
• Localization Strategy of Starbucks: Green
Tea Frappuccino, Iced Tea, Moon Cake
• Freshly brewed coffee is mainly consumed by
Chinese drinkers outside their homes, as
they do not know how to brew coffee or to
invest in the coffee machine
• Opportunity for the Coffee machines in the
future ?

Market Analysis: Corporate
Strengths and Resources
Resources:
- Financial : equity / debt
- Technological
- Personnel / managerial
- Production
- Development and design: patent ?
- Research
- Marketing / advertising

Market Analysis: Corporate
Strengths and Resources
Resources:
- Financial
- Technological
- Personnel / managerial
- Production
- Development and design
- Research
- Marketing / advertising
-Proctor and Gamble
once developed
everything internally.
Currently 35% of its
innovations are based
on licensing and
strategic acquisitions

Market Analysis: Current and
Potential Competitors
- Who are current competitors and which firms
are likely to become competitors?
- What are advantages/disadvantages of
competitors and competitive products?
-What do alternative scenarios show of how
competitors react to new products or
innovations?
-They belong to a group company? Resources
available/ bargaining power concerns

寶潔 (P&G) 護髮用品潘婷 (Pantene), 沙宣 (VS Sassoon), 飄柔 (Rejoice), 海倫仙度
絲 (Head & Shoulders), 草本精華 (Clairol), 威娜 (Wella)
嬰兒護理幫寶適(Pampers)
女性健康護理護舒寶 (Whisper)
健康衛生用品吉列 (Gillette), 百靈 (Braun), 佳潔士 (Crest), Oral B
家居用品金霸王 (Duracell), 快潔
食品 Pringles
護膚 Olay, SKII
歐萊雅 (Loreal) 護膚品 / 化妝品 Loreal Paris, Biotherm, Garnier, Lancome, Maybelline NY,
Shu Uemura, Vichy, SkinCeuticals, Kiehl’s, Helena
Rubinstein, La Roche-Posay, Bodyshop
時裝 Giorgio Aramani, Ralph Lauren, Diesel, Cacharel, Viktor &
Rolf
美心 (Maxim) -
怡和集團旗下
中菜美心皇宮, 美心閣, 美心大酒樓, 美心金閣, 粵翠軒, 翠園, 映月樓,
翠玉軒, 怡翠軒, 海逸軒, 粵江春, 八月花, 八月居, 八喜, 潮江春,
潮庭, 聚豪閣, 北京樓, 洞庭樓, 紫玉蘭, 又一棧, 喜百合, 映山紅,
北京人家
非中菜山頂明珠, Lawry’s the Prime Rib, MEZZ, CAFÉ LANDMARK,
EXP, 香港地, City Hall Maxim’s Café, Deli & Wine, Café Muse,
Encore, 海旁吧, Simplylife Bakery Café, 賀菊, Miso, LIAN,
Rice Paper, Thai Basil, 心。泰
快餐美心MX, Can.teen, 美心Food2, 千燒百味, Maxim’s Express,
Simplylife FOODPLACE, Deli-O,
中西餅美心西餅, 美心月餅, 美心賀年榚點, 美心粽, 美心嫁喜禮餅
特許品牌星巴克 (Starbuck), 元氣壽司, 千両, 東海堂

Market Analysis: Market
Environment
Physical
Conditions
Government
Stability and
Regulations
Market
Environment
Technology
State of
Economy

Market Segmentation
Process of identifying groups of people
who behave in similar ways to each
other, but somewhat differently than
other groups

Suggesting new product usage
can help expand the total
market
• Campbell Soup
• Coke
• Ribenna
• Yakult

Market Segmentation
Process of identifying groups of people
who behave in similar ways to each
other, but somewhat differently than
other groups
Results in market segment: a group of
consumers with similar behaviors and
needs that differ from those of the
entire mass market
Goal: minimize variance within groups
and maximize variance between groups
Opposite of market aggregation

Market Segmentation
Market aggregation: when organizations
choose to market and sell the same
product or service to all customers
(also known as mass marketing)

Market Segmentation
Identifying Segments

Market Segmentation
Increasing diversity in consumer needs
and wants leads to mass customization:
customizing goods for individual
customers in high volumes and at
relatively low costs: scale of economy
Key is understanding which customized
features customers value the most
Ability to reach “segment of one”

Market Segmentation
Segmentation can increase customer
satisfaction and profitability
- decreases marketing expenses
- increases value (and therefore price) to
consumers
Local Payment-by-phone Service (PPS) : who is
the major target market segment ?

Criteria for Choosing Segments
Measurability: ability to obtain information
about the size, nature, and behavior of a
market segment
Accessibility: degree to which segments
can be reached, either through targeted
advertising and communication programs
or multiple retail channels

Criteria for Choosing Segments
Substantiality: size of the market—is it
large enough to be profitable?
Congruity: how similar members within the
segment exhibit behaviors or
characteristics that correlate with
consumption behavior

Bayesian Analysis
Statistical technique based on a theorem
that expresses uncertainty in probability
terms
Allows consumer analysts to make
“educated guesses” on how the human
mind affects behavior or “why people
buy”
Analyzes data collected from point-of-
sale (POS) scanners to identify patterns
of behavior that define market segments
eg. supermarkets

Market Mix Strategies: Product
Product: the total bundle of utilities (or
benefits) obtained by consumers in the
exchange process
Internal considerations
External considerations

Market Mix Strategies: Product
Internal considerations include:
- What are the costs of developing, producing,
distributing, and selling the product?
External considerations include:
- What form of product best serves consumption
patterns for the target segment
- What packaging will most likely attract
consumers and fulfill transportation, usage,
and disposal of the product?
- How will consumers compare this product to
competitive or substitute products?

Market Mix Strategies: Place
Place: physical distribution and location
of sale
- Where will consumers expect and want to buy
this product?
- What are the most effective outlets through
which to sell the product and how best to get it
there?

Market Mix Strategies: Price
Price: total bundle of disutilities (costs)
given up by consumers in exchange for
the product
a. cash $
b. time or inconvenience.
c. psychological risk.

Market Mix Strategies: Price
Pricing considerations include:
- What is the best pricing policy for the product
or for the store?
- How will consumers react to Everyday Low
Prices or promotional prices?
- Is it more important to have the “lowest price”
or prices in the range consumers expect to
pay?
- What effect does price reduction or price
ending have on perceived quality of product?
- What does pricing policy need to be to
maintain a healthy profit margin?

Market Mix Strategies: Promotion
Promotion: activities involved in selling a
product, including advertising, public
relations, sales promotions, and personal
sales
- What message should be sent to consumers?
- Which forms of communication will best reach
specific segments?
- What type of communication should occur at
various stages of purchase and consumption
- How should different product attributes be
positioned through different forms of media?

Market Mix Strategies: Brand
Brand: A product or product line, store,
or service with an identifiable set of
benefits, wrapped in a recognizable
personality
Functional elements
Emotional elements
Brand Promise

Functional elements
- Performance, quality, price, reliability, logistics
Does the brand solve a problem as expected
and do what it is supposed to do?
Emotional elements
- Image, personality, style, evoked feelings
Does the brand create an emotional connections
between the customer and the product or firm?
Brand Promise
What can consumer expect in exchange for their
money?

Brand: A product or product line, store or
service with an identifiable set of
benefits, wrapped in a recognizable
personality
Brand Equity
Brand Personality
Brand Protection

Brand Equity
Difference in value created by the brand minus
the cost of creating the brand
Brand Personality
Reflection consumers see of themselves or
think will develop by using a brand
Brand Protection
By promising a certain outcome, brands reduce
the risk to consumers that the product may not
deliver as expected

Copy Cat Brands in the PRC
• KFG,MFC,MCK
• OMC McDonald’s
• Pizza Huh
• Bucksstar Coffee
• BlockBerry
• Bossoni

One successful example of brand personality
establishment :
Welcome to the Marlboro Country
• The image of Marlboro cowboy had
been used for years to communicate
the image that when you take a
Marlboro cigarette, your are
venturous and explorative : like
exploring the wide west !
• Association of 2 unrelated ideas

• A very user-friendly and interesting
Chinese translation was used for the
food additive -Xylitol. The camel
somehow became the brand idol /
spokesperson
• Association of Extra, Xylitol and
prevention of tooth-decay function
Brand Personality :
Extra’s Xylitol (木糖醇 or 曬駱駝 )

Transforming Customers into
Friends and Fans

Strategy Implementation
Even the best strategies are worthless if
not implemented well in the marketplace
7Rs for formulation and implementation

Customer Loyalty and Customer
Relationship Management

It is less costly and easier to keep a
customer than it is to create a new one
Loyal customers generate superior
margins and recruit additional customers
With increased choices, consumers are
becoming more fickle and less loyal
Consumer feel entitled to try new brands
and switching behavior increases
To retain current customers, firms must
focus on customer expectations of future
benefits
Customer Loyalty

Loyalty / Anniversary Celebration
Many companies are making use of the
anniversary celebration to offer discounts, project
positive images and enhance customer loyalty for
the companies.
McDonald 35 th Anniversary
Wellcome : 65th Anniversary
Vitasoy : 70th Anniversary

Customer Relationship Management
Process of managing all the elements of
the relationship a firm has with its
customers and potential customers with
CRM solutions and enterprise systems

Implementing CRM
- Identify all customers and the nature of
contacts with them
- Identify which types of customers are most
Profitable : Iceberg Theory
- Identify and understand behaviors of the most
profitable customers
- Manage contact with most profitable customers
- Manage firm activities including strategies and
tactics to please the most profitable customers

Provides the ability to calculate the
Customer Lifetime Value
- The value to the company of a customer over
the whole time the customer relates to the
company

Global Marketing Strategy
Thinking Globally: involves ability
to understand markets beyond
one’s own country of origin with
respect to:
Sources of demand
Sources of supply
Management & marketing
methods

Organizations must understand
markets on a global basis in terms
of people - Oreo made any
adaptation in the PRC market?
Consumers have a myriad array of
foreign-made and globally branded
products
Cultural, ethnic, and motivation
variables also affect consumer
decisions

Can marketing be standardized?
- Can a firm use the same marketing
program in all target countries, or must
it create a different program for each?
- Which are greater—the similarities
among or differences between
consumers in different countries?
- How do advantages of economies of
scale and unified brand image compare
to advantages of culture-specific
messages?

Cross-Cultural analysis: the comparison
of similarities and differences in behavioral and
physical aspects of cultures
Cultural empathy: the ability to
understand the inner logic and coherence of
other ways of life and refrain from judging other
value systems
Ethnography: describing and
understanding consumer behavior by
interviewing and observing consumers in real-
world situations

Intermarket segmentation: the
identification of groups of customers who
transcend traditional market or geographic
boundaries (similar segments around the world)
Intermarket segmentation plays a key role in
understanding the similarities and differences
between consumers and countries that become
the foundation of market standardization

Global Advertising Effectiveness
Global advertising sends the same
message to consumers around the world
Localized campaigns adapt messages to
the norms of the different cultures
When is global advertising most effective?
- Message is based on similar lifestyle
- Ad appeals to basic human needs and
emotions
- Product satisfies universal needs and
desires

Cultural Difference
• The appeal of whiteness in skin-care
and beauty products is very common for
oriental market, particularly in HK and
Japan
• Whiteness will not be featured in the
advertising appeal in the western
countries, healthy and cleanliness are
more important appeals

Global advertising sends the same
message to consumers around the world
Localized campaigns adapt messages to
the norms of the different cultures
When is global advertising most effective?

Before choosing a brand name, marketers
should consider the following:
- Does the name of the product have another
meaning in one or more of the countries where
it might be marketed?
- Can the name be pronounced everywhere?
- Is the name close to that of a foreign brand, or
does it duplicate another product sold in other
markets?
- If the product is distinctly American, will national
pride and prejudice work against the acceptance
of the product?

KitKat in Japan
• Students in Japan had caused the sales
to increase significantly in exam seasons
• It resembles the Japanese expression-
kitto katsu : good lucks in exam
• Ad message : I hope you will win

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