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Consumer Behavior

Consumer
CONSUMER An individual who buys products or services for personal use and not for manufacture or resale. A consumer is someone who can make the decision whether or not to purchase an item at the store, and someone who can be influenced by marketing and advertisements. Any time someone goes to a store and purchases a toy, shirt, beverage, or anything else, they are making that decisions a consumer

Customer
someone who pays for goods or services A customer: One that buys goods or services. A customer can in turn resell to a consumer.

Difference between Consumer & Customer


A consumer buys goods for his/her consumption, but a customer is simply a buyer of goods or services,may be to resell them. Example : Purchase of Baby Food. Customer is Mother or who purchases the product, Consumer is the baby. Example : Purchase of Shaving Set. Customer can be anyone who purchases the product but consumer is the person using that product.

Concepts of Marketing
Production Concept Product Concept Selling Concept Marketing Concept

Production Concept
One of the oldest Concept Prevailed from the time of industrial revolution till 1920s. Firms mostly concentrating on producing low cost products Consumers too interested in purchasing low cost & which is readily available. Consumers not specific/particular about product features. Consumers used to buy what is available rather then what they want.

Product Concept
Consumers will Favor those products which are of good Quality & have innovative features. Products should be better packed, better designed, & should have attractive prices. Product Concept with respect to Marketing Product marketing in a business addresses four important strategic questions:[1] What products will be offered (i.e., the breadth and depth of the product line)?

Product Concept
Who will be the target customers (i.e., the boundaries of the market segments to be served)? How will the products reach those customers (i.e., the distribution channels to be used)? Why will customers prefer our products to those of competitors (i.e., the distinctive attributes and value to be provided)?

Selling Concept
By the early 1930's however, mass production had become commonplace, competition had increased, and there was little unfulfilled demand. Around this time, firms began to practice the sales concept (or selling concept), under which companies not only would produce the products, but also would try to convince customers to buy them through advertising and personal selling.

Selling Concept
Many organizations follow the selling concept, which holds that consumers will not buy enough of the organization's products unless it undertakes a large scale selling and promotion effort. The concept is typically practiced with unsought goods, those that buyers do not normally think of buying such as encyclopedias or insurance. These industries must excel at tracking down prospects and selling them on product benefits.

Selling Concept
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. Such marketing carriers high risks. It focuses on creating sales transactions rather than on building long-term, profitable relationships with customers.

Marketing Concept
Concept focus on achieving Organizational Goals depends on Knowing the needs & wants of Market. Instead of focusing on Product Centered ( Make & sell philosophy & concentrate on Customer Centered ( Sense & respond philosophy ) Focus not on finding right customers to your products but to find right products for your customers.

Marketing V/s Selling


Marketing Concepts Starts with :
Well Defined Market Understanding customer need Integrating all marketing activates Sales Post Sales Function Profits through customer satisfaction

Selling Concepts starts with : Factory


Focus on existing products

Sell the existing products

Profit counted through sales volume

Market Segmentation
Segmentation : Division of Markets . Companies divide large heterogeneous market into smaller segments Types of Markets Consumer Goods and Services

Industrial Goods and Services

Classes of Consumer Products


14-1 Convenience Shopping Specialty

Services $

POP
ATM

Goods

Market Segmentation
With a large country Many different types of people
- it is too difficult to create a product that will satisfy everybody, that is why we focus on a segment of the total market

Market Segmentation
Characteristics
age gender geographic location income spending patterns cultural background demographics marital status education language mobility

Market Segmentation
4 commonly used bases for Segmentation
Descriptive

geographic location demographic


Behavioural

psychographic benefits

Slide 3-7

Figure 3.1 Bases for Market Segmentation

Market Segmentation
geographic location - based upon where people
live (historically a popular way of dividing markets)

demographic - based upon age, gender and income


level (very often used)

Market Segmentation
Psychographic / lifestyles - based on peoples
opinions, interests, lifestyles eg, people who like hard rock music probably prefer beer to wine

benefits - based on the different expectation that


customers have about what a product/service can do for them eg. People who want to but lite food cause ti will help them lose weight

Demographic Segmentation
Demographic Segmentation is the most common approach to Market Segmentation Variables are: age gender (male/female) income occupation education

household (family - style) size

Demographic Segmentation
Demographic Segmentation is the most common approach to Market Segmentation

Variables are:
gender (male/female) gender is an obvious way to divide the market into segments since so many products are gender-specific

clothing
medical products sports products/services entertainment

Examples ??

Demographic Segmentation
Demographic Segmentation is the most common approach to Market Segmentation

Variables are:
age age is another obvious way to divide the market into segments since so many products are based upon time of life

diapers for babies


toys for children entertainment for over 19

Examples ??

Demographic Segmentation
age also, people have different consumption patterns at different ages

eg. Milk products


children and teens drink a lot of milk adults dont older adults need calcium, but dont drink milk (they take pills)

Examples ??

Demographic Segmentation
household (family - style) size BUYING PATTERNS 0-5 20-34 young children 6-19 school children young adults

35-49
50-64

younger middle-aged
older middle-aged

65+ seniors 80+ SUPER seniors

Demographic Segmentation
household (family - style) size THE CHANGING HOUSEHOLD half of the households in Canada are only one, or two people number of married couples forming a household is decreasing many unmarried people, and old widowed people, live by themselves

Demographic Segmentation
household (family - style) size FAMILY LIFE CYCLE STAGES 1. Young Single 2. Young Married with no Children (DINKS) 3. Young - married with children

- divorced without children - divorced with children

Demographic Segmentation
household (family - style) size FAMILY LIFE CYCLE STAGES 4. Middle Aged a. married without children b. divorced without children

c. married with children


d. divorced with children e. married without dependent children f. divorced without dependent children

Demographic Segmentation
household (family - style) size FAMILY LIFE CYCLE STAGES 5. Older a. older married b. older unmarried (divorced, widowed)

6. other

Demographic Segmentation
household (family - style) size

SSWDs
single separated widowed divorced in Canada, 1.6 million people live alone - they buy different sizes of products eg. Single serving soup, etc.

Demographic Segmentation
Demographic Segmentation is the most common approach to Market Segmentation

Variables are:
age gender (male/female)

income
occupation education household (family - style) size

Demographic Segmentation income


Segmenting markets on the basis of income and expenditure patterns - The number of single mom families has increased by 12.8% between 1985 and 1994 - Male single parent families have more income, on average, than Female single parent families

Psychographic Segmentation The use of psychological attributes, lifestyles and attitudes in determining the behavioral profiles of different customers

Psychographic Segmentation
Psychographic profiles on a target market segment are obtained by doing a lot of questionnaires and surveys to ask people if they agree/disagree with certain statements made about particular activities, interests or opinions

AIO - activities, interests, and opinions

Benefit Segmentation

It is based on the Attributes (characteristics) of products, as seen by the customers example, people buy something because it causes a benefit
ie. Diet coke - less sugar, lose weight ie. Extra white toothpaste, whiter teeth, better smile

Target Matket
Target Marketing involves breaking a market into segments and then concentrating your marketing efforts on one or a few key segments.

Target marketing can be the key to a small businesss success.

The beauty of target marketing is that it makes the promotion, pricing and distribution of your products and/or services easier and more cost-effective. Target marketing provides a focus to all of your marketing activities.

So if, for instance, I open a catering business offering catering services in the clients home, instead of advertising with a newspaper insert that goes out to everyone, I could target my market with a direct mail campaign that went only to particular residents.

Market Positioning Concept


Positioning is a perceptual location. It's where your product or service fits into the marketplace. Effective positioning puts you first in line in the minds of potential customers.

As individuals, we continually position ourselves. The responsible older sibling, the class clown, a number cruncher, a super genius are all examples of positioning. These identifiers help us define ourselves and distinguish our abilities as unique and different from other people.

Market Positioning Concept


Positioning is a powerful tool that allows you to create an image. And image is the outward representation of being who you want to be, doing what you want to do, and having what you want to have. Positioning yourself can lead to personal fulfillment. Being positioned by someone else restricts your choices and limits your opportunities. That's why it's so important for entrepreneurs to transform their passion into a market position. If you don't define your product or service, a competitor will do it for you. Your position in the market place evolves from the defining characteristics of your product. The primary elements of positioning are: Pricing. Is your product a luxury item, somewhere in the middle, or cheap, cheap, cheap.

Market Positioning Concept


Quality. Total quality is a much used and abused phrase. But is your product well produced? What controls are in place to assure consistency? Do you back your quality claim with customer-friendly guarantees, warranties, and return policies? Service. Do you offer the added value of customer service and support? Is your product customized and personalized? Distribution. How do customers obtain your product? The channel or distribution is part of positioning. Packaging. Packaging makes a strong statement. Make sure it's delivering the message you intend. Positioning is your competitive strategy. What's the one thing you do best? What's unique about your product or service? Identify your strongest strength and use it to position your product.

Market Positioning Concept


An Example of Great Market Positioning Great Call is a different kind of cell phone company. They recognized a cell phone market segment that was large, had unsatisfied demand, and was essentially free of serious competitors. That market segment is comprised of millions of senior citizens who want to use a cell phone but find the hightech, feature-loaded phones widely sold to teenagers to be too complex, if not downright intimidating. Recognizing the opportunity, Great Call teamed with Samsung to create a cell phone designed specifically to appeal to people over 50. The phone, named the Jitterbug, has over-sized, easy-toread buttons and is very easy to use. The advanced features younger users care about are lacking, but advanced features are not important to customers in this segment. Great Call has defined a large, profitable market segment and created a product that is successfully differentiated from its potential competitors in satisfying the most important customer requirements.

Marketing Mix Strategies


Marketing decisions generally fall into the following four controllable categories: Product Price Place (distribution) Promotion The term "marketing mix" became popularized after Neil H. Borden published his 1964 article,

The Marketing Mix

The Marketing Mix


The tools available to a business to gain the reaction it is seeking from its target market in relation to its marketing objectives 7Ps Price, Product, Promotion, Place, People, Process, Physical Environment Traditional 4Ps extended to encompass growth of service industry

Price

Price
Pricing Strategy Importance of:
knowing the market elasticity keeping an eye on rivals
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Product

Product
Methods used to improve/differentiate the product and increase sales or target sales more effectively to gain a competitive advantage e.g. Extension strategies Specialised versions New editions Improvements real or otherwise! Changed packaging Technology, etc.

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Promotion

Promotion
Strategies to make the consumer aware of the existence of a product or service NOT just advertising

Place

Place
The means by which products and services get from producer to consumer and where they can be accessed by the consumer
The more places to buy the product and the easier it is made to buy it, the better for the business (and the consumer?)

People

People
People represent the business
The image they present can be important First contact often human what is the lasting image they provide to the customer? Extent of training and knowledge of the product/service concerned Mission statement how relevant? Do staff represent the desired culture of the business?

Process

Process
How do people consume services? What processes do they have to go through to acquire the services? Where do they find the availability of the service?
Contact Reminders Registration Subscription Form filling Degree of technology

Physical Environment

Physical Environment
The ambience, mood or physical presentation of the environment
Smart/shabby? Trendy/retro/modern/old fashioned? Light/dark/bright/subdued? Romantic/chic/loud? Clean/dirty/unkempt/neat? Music? Smell?

The consumer bill of rights


1) The right to safety: To be protected against the marketing of goods that are

hazardous to health or life.


2) The right to be informed To be protected against fraudulent, deceitful, or grossly

misleading information, advertising, labeling, or other practices, and to be given the facts to make an informed choice.
3) The right to choose To be assured, wherever possible, access to a variety of products and

services at competitive prices and in those industries in which competition is not workable and government regulation is substituted, to be assured satisfactory quality and service at fair prices.
4) The right to be heard To be assured that consumer interests will receive full and sympathetic

consideration in the formulation of government policy, and fair and expeditious treatment in its administrative tribunals.

Major consumer protections specified by consumer laws


Information protections

Hazardous home appliances must carry a warning label. Home products must carry a label detailing contents. Autos must carry a label showing detailed breakdown of price and all related costs.

Tobacco advertisements and products must carry a health warning label.


Alcoholic beverages must carry a health warning label. All costs related to real estate transactions must be disclosed. Warranties must specify the terms of the guarantee and the buyers rights. False and deceptive advertising can be prohibited. Food and beverage labels must show complete information. Food advertising must not make false claims about nutrition.

Figure 15-1b

Major consumer protections specified by consumer laws


Direct hazard protections Hazardous toys and games for children are banned from sale.

Safety standards for motor vehicles are required. National and state speed limits are specified. Hazardous, defective, and ineffective products can be recalled under pressure from EPA, CPSC, NHTSA, and FDA Pesticide residue in food is allowed only if it poses a negligible risk.
Pricing protections

Unfair pricing, monopolistic practices, and noncompetitive acts are regulated by FTC and Justice Department and by states.
Liability protections When injured by a product, consumers can seek legal redress. Other protections No discrimination in the extension of credit.

Goals of consumer laws


1) To provide customers with better information when making purchases.

2) To protect consumers against possible hazards from products they may purchase.
3) To promote competitive pricing and consumer choice.

4) To protect privacy.

Protecting consumer privacy


Consumer self-help

Internet users should use technologies that enable them to protect their own privacy.
Industry self-regulation

Businesses should adopt voluntary policies and technical standards that protect the privacy of their customers.
Privacy legislation

The government should pass laws that establish minimum privacy standards for collecting information online.

Marketing Ethics
Marketing ethics is the area of applied ethics which deals with the moral principles behind the operation and regulation of marketing. Some areas of marketing ethics (ethics of advertising and promotion) overlap with media ethics.

Ethics in Marketing
Ethics are a collection of principles of right conduct that shape the decisions people or organizations make. Practicing ethics in marketing means deliberately applying standards of fairness, or moral rights and wrongs, to marketing decision making, behavior, and practice in the organization.

Marketing Impact on Individual Consumers


Harming Consumers through High Price Deceptive Products High Pressure selling Selling of unsafe products Planned obsolescence Poor service

Marketing Impact on Society as a Whole


False wants & too much materialism Too few social goods Cultural pollution Too much political power