Lecture notes, Consumer Behavior textbook PDF

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Chapter 1 – An Introduction to Consumer Behavior ←

What is Consumer Behaviour?: 

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Consumer behavior: the study of the processes involved when individuals or groups select, purchase, use, or dispose of products, services, ideas, or experiences to satisfy needs and desires

Consumer Behaviour is a Process:  In early stages of development, consumer behavior was referred to as “buyer behavior” – reflecting an emphasis on the interaction between consumers and producers at the time of purchase  

Consumer behavior is more than just a purchase, it is an ongoing process Exchange: two of more organizations or people give and receive something of value o Integral part of marketing

It involves the issues that influence the consumer before, during, and after a purchase Consumers’ Impact on Marketing Strategy:

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Understanding consumer behavior is good business

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Firms exist to satisfy consumers’ needs better than their competitors Consumer response is the ultimate test of whether a marketing strategy will succeed Knowledge about consumers is incorporated into virtually every facet of a successful marketing plan

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Understanding consumers can help the marketer identify threats to a brand and opportunities for it

 The purpose of understanding consumer behavior is to predict the future Segmenting Consumers: 

Marketing segmentation: identifies groups of consumers who are similar to one another in one or more ways and then devises marketing strategies that appeal to one or more groups

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Building loyalty to a brand is a very smart marketing strategy, so sometimes companies define market segments by indentifying their more faithful customers or heavy users

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Demographics: statistics that measure observable aspects of a population, such as birth rate, age, income, etc

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Statistics Canada is a major source of demographic data on families

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Changes and trends revealed in demographic studies are of great interest to marketers, because the data can be used to locate and predict the sizes of markets for many products

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Psychographics: differences in consumers’ personalities, attitudes, values, and lifestyles

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Demographics:

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1. Age:  Consumers of different age groups obviously have different needs and wants

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Marketers initially develop a product to attract one age group and then try to broaden its appeal later on

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Ex: red bull started for bars, nightclubs, gym, young people, and now adapting for commuters, cab drivers, car-rental agencies to stay alert on the road

2. Gender:  

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Many products are targeted at either men or women Differentiating by gender starts at a very early age

 Ex: diapers – pink for girls, blue for boys 3. Family Structure and Life Stage: 

A person’s family structure and marital status is an important demographic variable, because it have such a big effect on a consumers’ spending priorities

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Ex: young singles and newlyweds go to gyms, bars, concerts, movies, etc

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Ex: families with children buy health foods and fruit juices Ex: single parents with older children buy more junk food

 Ex: older couples and dual-career couples use home maintenance 4. Social Class and Income:  People grouped within the same social class are approximately equal in terms of their incomes and social standing in the community 

Working in roughly similar occupations, similar tastes in music, clothing, art, etc

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Share many ideas and values regarding the way life should be lived The distribution of wealth is of great interest to marketers because it determines which groups have the greatest buying power and market potential

5. Ethnicity:  Canada and multiculturalism go hand in hand  

Immigrants from all over the globe Highest per capita rate of immigration in the world

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Diverse in out languages and in the cultural consumption that stems from out different ethnicities

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Ex: everyone eats sushi all over world Ex: Vancouver: English is now a minority language (trilingual labeling of some products)

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6. Geography:  The climate changes drastically from region to region in Canada, which makes segmenting some products by region obvious 

Within region, there are some different cultural pockets and hence differences in food tastes

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Ex: New Brunswick highest consumption of white bread, Alberta leads in bubblegum sales, cornflakes sales highest in prairies, etc

Lifestyles: Beyond Demographics:  Consumers also have very different lifestyles, even if they share other characteristics such as gender or age 

Factors that determine which products will push our buttons, or even those that will make us feel better: o The way we feel about ourselves o The things we value o Out attitudes to things and others around us o The things we like to do in our spare time

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Relationship Marketing: Building Bonds with Consumers: 

Key to success is building relationships that will last a lifetime between brands and customers (a bond)

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Regular interaction with customers Giving them a reason to maintain a relationship with the company

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Relationship marketing: making an effort to interact with customers on a regular basis, giving them reasons to maintain a bond with the company over time

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Marketers significantly influence lifestyles and consumption habits: combinations of Integrated Marketing Communications, rewards, and social media create strong

loyalty Marketing’s Impact on Consumers: 

We all live in a world that the actions of marketers and the media significantly influence

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Surrounded by marketing stimuli in the form of advertisements, stores and products competing for our attention and our dollars

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“At the mercy” of marketers, since we rely on them to sell us products that are safe and that perform as promised, to tell s the truth about what they are selling, and to price and distribute these products fairly

Marketing and Culture:

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Popular culture: the music, movies, sports, books, celebrities, and other forms of entertainment consumed by the mass market o Both a product and an inspiration/influence to marketers

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Many people do not seem to realize how much their views of the world around them are affected by marketers o Ex: Mythical creatures such as Pillsbury dough boy which is a “Spokes character”

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Consumers-generated content: consumers themselves voice their opinions about products, brands, and companies on blogs, podcasts, and social networking sites, and even film their own commercials that thousands view on sites o Also an important part of marketing’s influence on culture o Ex: Doritos super bowl commercial, Rebecca Black’s song “Friday”

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The Meaning of Consumption:  People often buy products not for what they do but for what they mean  The roles of products play in our lives go well beyond the tasks they perform 

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A person will choose the brand that has an image consistent with his or her underlying needs

 Help us to form bonds with others who share similar preferences The Global Consumer:  The majority of people on Earth live in urban centers 

One by-product of sophisticated marketing strategies is the movement toward a global consumer culture, in which people around the world are united by their common develop to brand-name consumer goods, movie stars, and celebrities

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We owe much of this interconnectedness to developments in technology that allow us to link with companies – and with each other – regardless of our physical location

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U-commerce: the use of ubiquitous networks, whether in the form of wearable computers or customized advertisements beams to us on our cell phones

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RFID tags: plastic tag containing a computer chip and a tiny antenna that lets the chip communicate with a network (many products already have these) o Ex: in grocery stores it will tell them when to restock and when items are expired

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Rise of global marketing means that even smaller companies are looking to expand overseas – and this increases the pressure to understand how customers in other counties are the same as or different from the customers in the host country

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Virtual Consumption:

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Electronic marketing increases convenience by breaking down many of the barriers caused by time and location o Ex: 24/7 shopping without leaving home

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B2C commerce: businesses selling to consumers

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C2C commerce: consumer-to-consumer activity The web also provides an easy way to consumers around the world to exchange information about their experiences

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Digital native: students that have grown up “wired” in a highly networked, always-on world where digital technology had always existed

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Horizontal revolution: information flows across people o Characterized in part by the prevalence of social media

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Social media: the online means of communication, conveyance, collaboration, and cultivation among interconnected and interdependent networks of people, communities, and organizations enhanced by technological capabilities and mobility

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Synchronous interactions: ones that occur in real time (ex: texting back and forth) Asynchronous interactions: ones that don’t require all participants to respond immediately (ex: you text a friend and get an answer the next day)

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Culture of participation: a belief in democracy o The ability to freely interact with other people, companies, and organizations o Open access to venues that allows users to share content from simple comments to reviews, ratings, photos, stories, etc o Power to build on the content of others from ones own unique point of view

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Marketing Ethics and Public Policy: 

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In business, conflicts often arise between the goal of succeeding in the marketplace and the desire to conduct business honestly and to maximize the well-being of consumers by providing them with safe and effective products and services

Business Ethics:  Business ethics: rules of conduct that guide actions in the marketplace – the standards against which most people in the marketplace judge what is right, wrong, good, or bad  

Ethical business is good business Consumers think better of products made by firms they feel are behaving ethically

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Notions of right and wrong do differ across people, organizations, and cultures Because every culture has its own set of values, beliefs, and customers, ethical business behaviors are defined quite differently around the world

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Various cultures and organizations may conduct themselves differently in certain situations

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These cultural differences certainly influence whether business practices such as bribery are acceptable

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Giving “gifts” in exchange for getting business from suppliers or customers is common and acceptable in many counties, even though this practice may be frowned upon in Canada

Prescribing Ethical Standards of Conduct:  

Professional organizations often devise a code of ethics for their members Prescribed code of ethics guidelines: o Disclosure of substantial risks with a product o Identifying added features that will increase the cost o Avoiding false or misleading advertising o Avoiding selling or fundraising under the guise of market research

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Intentionally or not, some marketers do violate their bond of trust with consumers

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In some cases these actions are actually illegal Industry is increasingly coming to realize that ethical behavior is good business in the long run, since consumer trust and satisfaction translates into years of loyalty

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Sometimes consumers’ buying behavior is not consistent with their positive attitudes about ethical products

 Ex: Are you willing pay more for fair trade coffee that helps various cultures? Needs and Wants: Do Marketers Manipulate Consumers?: 

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One the most common criticisms of marketing is that marketing techniques (especially advertising) are responsible for convincing consumers that they “need” many material things and that they will be unhappy and somehow inferior people if they do not have these “necessities”

Do Marketers Create Artificial Needs?: 

A need is a basic biological motive, while a want represents one way society has taught us to satisfy that needs

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The need is already there – marketers simply recommend ways to satisfy it A basic objective of advertising is to create awareness that these needs exist, rather than to create the needs

Are Advertising and Marketing Necessary?:  Do marketers give people what they want or, do they tell people what they should want? 

Critics suggest we buy things we do not need, just because we can

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On the other hand, products are designed to meet existing needs, and advertising merely helps to communicate the products’ availability

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Advertising is an important source of consumer information

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Consumers are willing to pay for advertising because the information it provides reduces search time

Welcome to Consumer Space:  Marketer space: companies called the shots and decided what they wanted their customers to know and do (dead and gone) 

Many people now feel empowered to choose how, when, or if they will interact with corporations as they construct their own consumer space (and make consumer decisions)

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People still “need” companies – but in new ways and on their own terms

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In today’s consumer space, we have the potential to shape out own marketing destinies

Public Policy and Consumerism: 

The welfare of the consumer is protected by many laws at the deferral, provincial, and municipal levels

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The main thrust of regulation is to protect the consumer from unfair business practices and to protect eh broad interests of society

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Consumer behavior can play an important role in improving our lives as consumers

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Consumers depend on governments to regulate and police safety and environmental standards

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Protecting consumers is more problematic this century as the majority of manufacturing has moved offshore

 Ex: lead in paint on baby toys Consumer Activism and Its Impact on Marketing:  Adbusters is a not-for-profit organization that advocated for “the new social activist movement of the information age” 

Adbusters sponsors numerous initiatives intended to discourage rampant commercialism

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Adbusters’ initiatives such as “buy nothing day” and “Turn off TV week” Culture jamming: aims to disrupt efforts by the corporate world ot dominate out cultural landscape

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Corporate social responsibility (CSR): voluntarily choose to protect or enhance their positive social and environmental impacts as they go about their business activities

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This is often driven by consumer demand, as companies attempt to differentiate themselves in the marketplace

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Corporate giving: marketers donate their own money to good causes

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Cause-related marketing: others promise donations to charity as purchase incentives Green marketing: approach in which they offer products in ways that are less harmful to the environment

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Social marketing: the promotion of causes and ideas (social products), such as energy conservation, charities, and population control o Ex: The United Way

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Techniques to encourage positive behaviors such as increasing literacy and discouraging dangerous activities such as drunk drivers

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Consumer researchers are studying and rectifying what they see as pressing social problems in the marketplace

Transformative consumer research (TCR): helping people or bringing about social change The Dark Side of Consumer Behavior:

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Sometimes consumers’ are their worst enemies

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Consumers’ desires, choices, and actions often result in negative consequences to the individual or the society in which he or she lives

Addictive Consumption: 

Consumer addition: a physiological or psychological dependency on products or services o Ex: alcohol, drugs, cigarettes

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Many companies profit from selling addictive products or by selling solutions to addiction

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Any product or service can be seen a relieving some problem or satisfying some need to the point the reliance on it because extreme

 Addiction to technology – “Crackberry” Compulsive Consumption:  

The expression “born to shop” is quite literal These consumers shop because they feel compelled to do so rather than because hopping is a pleasurable or functional task

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Compulsive consumption: repetitive shopping, often excessive, done as an antidote to tension, anxiety, depression, or boredom o Ex: gambling

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Compulsive consumption is distinctly different from impulse buying

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The impulse to buy a specific item is temporary, and it centers on a specific product at a particular moment

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In contrast, compulsive buying is an enduring behavior that center on the process of buying, not the purchase themselves

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negative or destructive consumer behavior can be characterized by the following three common elements: o 1. The behavior is not engaged in by choice o 2. The gratification derived from the behavior is short-lived o 3. The person experiences strong feelings of regret or guilt afterwards

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Illegal Activities:

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Consumer Theft:  Shrinkage: the industry term for inventory and cash losses from shoplifting and employee theft

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This is a massive problem for businesses, and the cost is passed on to consumers in the form of higher prices

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Fraudulent abuse of exchange policies in retail Unethical activities include lying and taking credit for someone else’s work

Anti-consumption:  Anti-consumption: rebelling against the idea of consumption itself  Product tampering, graffiti and political protests where property is destroyed How Do We Find Out About Consumers? – The Role of Co...