Chapter 1 Consumer Behavior: Its Origins and Strategic Applications Consumer Behavior, Ninth Edition Schiffman & Kanuk

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Learning Outcome
Application of Schiffman Model in Consumer Research

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Chapter Outline
Overview of Consumer Behavior The Marketing Concept The Marketing Mix and Relationships A Simplified Model of Consumer Decision Making-Schiffman CB Model by Hawkins Important CB Concepts (Babins)

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 The study of Consumer Behaviour is the study of how individuals make decisions to spend their available resources; money, time and effort on consumption related items. It comprises the study of what they buy, why they buy it, how they buy it, when they buy it, from where they buy it and how often do they buy it, how often they use it, how they evaluate it after the purchase and the impact of such evaluations on future purchases and how they dispose of it (Schiffman and Kanuk, 2004, p.8).

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Consumer Behavior
The behavior that consumers display in searching for, purchasing, using, evaluating, and disposing of products and services that they expect will satisfy their needs.

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Personal Consumer
The individual who buys goods and services for his or her own use, for household use, for the use of a family member, or for a friend.

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Organizational Consumer
A business, government agency, or other institution (profit or nonprofit) that buys the goods, services, and/or equipment necessary for the organization to function.

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Development of the Marketing Concept

Production Concept
Product Concept Selling Concept Marketing Concept
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The Production Concept

Assumes that consumers are interested primarily in product availability at low prices Marketing objectives:
Cheap, efficient production Intensive distribution Market expansion

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The Product Concept

Assumes that consumers will buy the product that offers them the highest quality, the best performance, and the most features Marketing objectives:
Quality improvement Addition of features

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The Selling Concept

Assumes that consumers are unlikely to buy a product unless they are aggressively persuaded to do so Marketing objectives:
Sell, sell, sell

Lack of concern for customer needs and satisfaction

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The Marketing Concept

Assumes that to be successful, a company must determine the needs and wants of specific target markets and deliver the desired satisfactions better than the competition Marketing objectives:
Make what you can sell Focus on buyers needs

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The Marketing Concept

Implementing the Marketing Concept
Consumer Research Segmentation Targeting Positioning The process and tools used to study consumer behavior

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The Marketing Concept

Implementing the Marketing Concept
Consumer Research Segmentation Targeting Positioning Process of dividing the market into subsets of consumers with common needs or characteristics

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The Marketing Concept

Implementing the Marketing Concept
Consumer Research Segmentation Targeting Positioning The selection of one or more of the segments to pursue

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The Marketing Concept

Implementing the Marketing Concept
Consumer Research Segmentation Targeting Positioning
Developing a distinct image for the product in the mind of the consumer Successful positioning includes: Communicating the benefits of the product Communicating a unique selling proposition
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Successful Relationships
Value, Satisfaction, and Retention
Customer Value Customer Satisfaction Customer Retention
Defined as the ratio between the customers perceived benefits and the resources used to obtain those benefits Perceived value is relative and subjective Developing a value proposition is critical
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Successful Relationships
Value, Satisfaction, and Retention
Customer Value Customer Satisfaction Customer Retention
The individual's perception of the performance of the product or service in relation to his or her expectations.

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Successful Relationships
Value, Satisfaction, and Retention
Customer Value Customer Satisfaction Customer Retention
The objective of providing value is to retain highly satisfied customers. Loyal customers are key They buy more products They are less price sensitive They pay less attention to competitors advertising Servicing them is cheaper They spread positive word of mouth
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Customer Profitability-Focused Marketing

Tracks costs and revenues of individual consumers Categorizes them into tiers based on consumption behavior A customer pyramid groups customers into four tiers

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Customer Profitability-Focused Marketing

Tier 1: Platinum
Tier 2: Gold Tier 3: Iron Tier 4: Lead
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 Platinum : includes heavy users who are not price sensitive and are willing to try new offerings. Gold : includes customers who are heavy users but not so profitable, as they are price sensitive. Iron : Spending volume and profitability does not matter much for company.
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 Lead : Who actually cost the company money, claim more attention, than their spending, tie up company resources and spread negative word of mouth.

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Traditional Marketing Concept Vs. Value and Retention Focused Marketing Table 1-2
Traditional Marketing Concept
Make only what you can sell instead of trying to sell what you make

Value and Retention Focused Marketing

Use technology that enables customers to customize what you make

Do not focus on the product; focus on Focus on the products the need that it satisfies perceived value, as well as the need that it satisfies Market products and services that match customers needs better than competitors offerings Utilize an understanding of customer needs to develop offerings that customers perceive as more valuable than competitors offerings
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Societal Marketing Concept

Marketers adhere to principles of social responsibility in the marketing of their goods and services; that is, they must endeavor to satisfy the needs and wants of their target markets in ways that preserve and enhance the wellbeing of consumers and society as a whole.

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A Simplified Model of Consumer Decision Making Figure 1-1

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LO1

Consumption
Process by which goods, services or ideas are used and transformed into value.
THOMAS BARWICK/PHOTOGRAPHERS CHOICE/GETTY IMAGES

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LO1 Exhibit 1.2: Consumer Behavior and Closely

Related Disciplines

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LO1 The Consumer Value Framework

(CVF) Represents consumer behavior theory illustrating factors that shape consumption-related behaviors and ultimately determine the value associated with consumption.

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LO1 Exhibit 2.1: The Consumer Value

Framework (CVF)

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 Read Case (Refer UMS for case details)

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