Readings Summary - Consumer Behavior PDF

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Consumer Intelligence Chapter 1: Consumer Behavior and Marketing Strategy 1. Consumer Behavior  The study of individuals, groups, or organizations and the processes they use to select, secure, use, and dispose of products, services, experiences, or ideas to satisfy needs and the impacts that these processes have on the consumer and society  Four key aspects:  Consumer behavior is a complex, multidimensional process (decisions involve numerous steps, influential factors, and often multiple individuals)  Successful marketing decisions by firms, nonprofit organizations, and regulatory agencies require an understanding of the processes and underlying consumer behavior  Successful marketing decisions require organizations to collect information about the specific consumers involved in the marketing decision at hand  Marketing practices designed to influence consumer behavior involve ethical issues that affect the firm, the individual, and society  Applications of Consumer Behavior  Marketing Strategy – an accurate understanding of consumer behavior creates a competitive advantage  Regulatory Policy – designed to protect and aid consumers  Social Marketing – the application of marketing strategies and tactics to alter or create behaviors that have a positive effect on the targeted individuals or society as a whole  Informed Individuals – consumption societies – an understanding of consumer behavior can establish a foundation for reasoned business ethics 2. Marketing Strategy and Consumer Behavior

 Customer Value = Difference between all benefits and all costs – critical for a firm to consider value from the consumer’s perspective  Market Analysis Components:  The Consumers (market segments, target markets, consumer behavior, needs)  The Company (understand a firm’s own ability to meet customer needs)

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The Competitors (capabilities and strategies) - If we are successful, which firms will be hurt? - Of those firms, which have the capability to respond? - How are they likely to respond? - Is our strategy robust enough to withstand the likely actions of our competitors, or do we need additional contingency plans? The Conditions (PESTEL)

3. Market Segmentation  Market segment = portion of a larger market whose needs differ somewhat from the larger market  Behavioral target = online activity is tracked  Four steps of market segmentation:  Identifying product-related need sets - Need set = reflects the fact that most products satisfy more than one need - What need sets is the firm capable of meeting  Grouping customers with similar need sets  Describing each group (in terms of their demographics, lifestyles, and media usage)  Selecting an attractive segment(s) to serve - Target markets (the segment(s) on which a firm focuses its marketing effort) - Based on ability to provide the segment with superior customer value at profit - Market segment attractiveness worksheet (Size, growth, fit with image, risk etc.) 4. Marketing Strategy  Is the answer to the question: How will we provide superior customer value to our target market?  Marketing Mix:  Product - Anything a consumer acquires or might acquire to meet a perceived need - Consumers are generally buying need satisfaction, not physical product attributes - Refers to physical products or primary/core services - Includes issues of packaging, branding, logos etc.  Price - The amount of money one must pay to obtain the right to use the product - Ownership vs. limited usage rights - Symbolic role of price for the target market (e.g. quality, status) - Consumer costs = everything the consumer must surrender in order to receive the benefits of owning/using the product - Attempt to provide customer value: Reduce the nonprice costs of owning or operating a product  Communications - Any signal that the firm provides about itself and its products - Target audience, effect, message, media, timing  Distribution (Channel decisions)  Services - Auxiliary or peripheral activities that are performed to enhance the primary product or primary service (not the primary/core service) - Competitive advantage  Digital Signage keeps the marketing message fresh  Consumer Decisions: The CDP intervenes between the marketing strategy, as implemented in the marketing mix, and the outcomes 5. Outcomes

 Firm Outcomes:  Product Position = an image of the product or brand in the consumer’s mind relative to competing products and brands (determined by communications and experience)  Sales and Profits  Customer Satisfaction

 Customers need to continue to believe that a brand offers superior value after use  Individual Outcomes:  Need Satisfaction (actual vs. perceived need fulfillment)  Injurious Consumption = when individuals or groups make consumption decisions that have negative consequences for their long-run well-being  Society Outcomes:  Economic Outcomes  Physical Environment Outcomes  Social Welfare 6. The Nature of Consumer Behavior

 Self-concept = the totality of an individual’s thoughts and feelings about oneself  Lifestyle = How one lives, including the products one buys, how one uses them, what one thinks about them, and how one feels about them  Self-concepts and lifestyles produce needs and desires  CDP is activated, when individuals encounter relevant situations  In turn influences the consumers’ self-concept and lifestyle by affecting their internal and external characteristics  Consumer problems arise in specific situations and the nature of the situation influences the resulting consumer behavior 7. The Meaning of Consumption  Goes beyond satisfaction of minimum or basic consumer needs  Symbolic needs: Status, Identity, Group Acceptance

Chapter 2: Cross-Cultural Variations in Consumer Behavior

1. Cultural Factors affect Consumer Behavior and Marketing Strategy

 Cultures may differ in demographics, language, nonverbal communications, and values  Globalization (as an issue of cross-cultural marketing, along with multinational brands):  Adjustments to products, packaging, and communications are sometimes necessary to match consumer tastes and expectations  Changing from one-way influence (US to other countries) to mutual influence  Four basic types of world citizens: - Global citizens (Positive toward international brands, view them as signal of high quality, concerned about corporate responsibility to the local country) - Global dreamers (Positive toward international brands, positive symbolic aspects, less concerned about CR to the local country) - Antiglobals (Negative toward international brands, don’t trust multinationals) - Global agnostics (Don’t base decisions on global brand name, evaluate as they would local brands, don’t see them as special) 2. The Concept of Culture  Culture = the complex whole that includes knowledge, belief, art, law, moral, customs, and any other capabilities and habits acquired by humans as members of society  Comprehensive concept – includes almost everything that influences an individual’s thought processes and behaviors  Is acquired – does not include inherited responses and predispositions  Culture seldom provides detailed prescriptions for appropriate behavior  People are seldom aware of cultural influences (Framework, loose boundaries)  Cultural values give rise to norms and associated sanctions, which in turn influence consumption patterns

 Cultural values = widely held beliefs that affirm what is desirable  Violation of norms results in sanctions (ranging from mild disapproval to banishment from a group)  We tend to “obey” cultural norms without thinking  Cultures are not static – they typically evolve and change slowly over time  A failure to understand cultural differences can produce negative consequences 3. Variations in Cultural Values

 Values affect behavior through norms, which specify an acceptable range of responses to specific situations  Classifications scheme of the numerous values that differ across cultures and affect consumption:  Other-oriented values - Individual/Collective » Are individual activity and initiative valued more highly than collective activity and conformity? » Individuals vs. groups » Key factor in differentiating cultures, heavily influences the self-concept of individuals - Youth/Age » Is family life organized to meet the needs of the children or the adults? Are younger or older people viewed as leaders and role models? » Children’s influence on purchases and the tactics used vary - Extended/Limited Family » To what extent does one have a lifelong obligation to numerous family members? » Definition of the family and the rights and obligations of family members varies - Masculine/Feminine » To what extent does social power automatically go to males? » Generally, masculine-oriented world, but the roles of women are changing » Modern vs. traditional markets - Competitive/Cooperative » Does one obtain success by excelling over others or by cooperating with them? » E.g. comparative advertising - Diversity/Uniformity » Does the culture embrace variation in religious belief, ethnic background, political views, and other important behaviors and attitudes? » Diversity: accepts a wide array of personal behaviors, welcomes variety in terms of food, dress, and other products and services  Environment-oriented values - Cleanliness » To what extent is cleanliness pursued beyond the minimum needed for health? » Economically developed vs. underdeveloped nations - Performance/Status » Is the culture’s reward system based on performance or on inherited factors such as family or class? (E.g. great rewards for athletes/celebrities) » Equal opportunities vs. privileges given to certain groups » Closely related to the concept of power distance (= the degree to which people accept inequality in power, authority, status, and wealth as natural or inherent in society) - Tradition/Change » Are existing patterns of behavior considered to be inherently superior to new patterns of behavior? - Risk Taking/Security » Are those who risk their established positions to overcome obstacles or achieve high goals admired more than those who do not? » Tolerance for ambiguity and uncertainty avoidance » Has a strong influence on entrepreneurship and economic development as well as new-product acceptance -

Problem Solving/Fatalistic

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Are people encouraged to overcome all problems, or do they take a “what will be, will be” attitude? » Fatalists tend to feel they don’t have control over the outcome of events - Nature » Is nature regarded as something to be admired or overcome? » Environmental regulations, consumption practices, recycling efforts Self-oriented values - Active/Passive » Is a physically active approach to life valued more than a less active orientation? » Affects advertising themes and formats - Sensual Gratification/Abstinence » To what extent is it acceptable to enjoy sensual pleasures such as food, drink, and sex? » Conservative – fewer sex appeals; legal regulations - Material/Nonmaterial » How much importance is attached to the acquisition of material wealth? » Instrumental materialism = acquisition of things to enable one to do sth (e.g. skis) » Terminal materialism = for the sake of owning the item itself (e.g. art) » Centrality dimension of materialism (obtaining possessions) vs. success dimension (means for demonstrating success) - Hard Work/Leisure » Is a person who works harder than economically necessary admired more than one who does not? - Postponed Gratification/Immediate Gratification » Are people encouraged to “save for a rainy day” or to “live for today”? » Short-term vs. long-term orientation » Has an influence on how people go through the CDP - Religious/Secular » To what extent are behaviors and attitudes based on the rules specified by a religious doctrine? » Many of a culture’s values are formed in part by historical religious influences

4. Cultural Variations in Nonverbal Communications  Attempts to translate marketing communications from one language to another can result in ineffective communications (symbolic meanings associated to words, absence of words from language, pronunciation)  Preferences for humor, style, and pace can also cause difficulties  Each culture also has nonverbal communication systems (= the arbitrary meanings a culture assigns actions, events, and things other than words)  Seven variables influence nonverbal communications:

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Time:

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The meaning of time varies between cultures in two major ways Time perspective (overall orientation toward time) » Monochromic time perspective: inescapable, linear, fixed in nature; orientation toward the present » Polychronic time perspective: less discrete, simultaneous involvement; orientation toward the present and the past » Even within a culture, time perspectives can vary by age and by situation - Time interpretations (e.g. promptness; time required for a decision is often proportional to the importance of the decision) Space: - Overall use and meanings assigned to space vary widely among different cultures - Personal space (“pushy vs. cold”) Symbols: - Colors, animals, shapes, numbers, and music have varying meanings across cultures - Failure to recognize the meaning assigned to a symbol can cause serious problems

Relationships: - Rights and obligations imposed by relationships and friendship - E.g. Americans tend to form relationships easily and quickly and drop them easily too - Chinese relationships are much more complex and characterized by guanxi (reciprocal relationships) Agreements: - How does a culture ensure business obligations are honored? How are disagreements resolved? - Some cultures rely on a legal system; others rely on relationships etc. - E.g. taxi rides: prices are negotiated prior to sale in some countries Things: - The cultural meaning of things leads to purchase patterns that one would not otherwise predict - The differing meanings that cultures attach to things, including products, make gift giving a particularly difficult task (e.g. inappropriate gifts) Etiquette: - The generally accepted ways of behaving in social situations - Behaviors considered rude or obnoxious in one culture may be quite acceptable in another - Normal voice tone, pitch, and speed of speech differ between cultures and languages, as do the use of gestures - Subtleties of doing business

5. Global Cultures

 Shared set of consumption-related symbols with common meaning and desirability among members  A Global Youth Culture?  Mass media and the Internet have had an impact of uniformity among teens around the world  They tend to watch many of the same shows, movies and videos, listen to the same music, and dress alike  Technology is an important factor, but US youth and brands no longer lead the way  Marketers are using the similarities among youth across cultures to launch global brands 6. Global Demographics  Demographics describe a population in terms of its size, structure, and distribution  Size = number of individuals  Structure = society in terms of age, income, education, and occupation  Distribution = physical location of individuals  Demographics are both a result and a cause of cultural values  Disposable income (and distribution of income) is one aspect of demographics – the rapid growth in personal income in parts of China has led to an overall market explosion  Marketers increasingly use Purchasing Power Parity (PPP) to evaluate markets (based on the cost of a standard market basket of products bought in each country – e.g. Switzerland) 7. Cross-Cultural Marketing Strategy  Sometimes necessary to adapt products and services to local considerations  Glocalization (global localization)  Cost savings vs. inappropriate  In addition to values and demographics, attitudes toward international brands can influence the need to customize offerings  Considerations in Approaching a Foreign Market 1) Is the geographic area homogenous or heterogenous with respect to culture?  cross-country vs. within-country 2) What needs can this product or a version of it fill in this culture? 3) Can enough of the people needing the product afford to buy it?  demographic analysis, possibilities of establishing a credit etc. 4) What values or patterns of values are relevant to the purchase and use of the product? 5) What are the distribution, political, and legal structures for the product?  E.g. legal restrictions limit the ability of companies to use standardized approaches 6) In what ways can we communicate about the product?  available media, needs, values, verbal/nonverbal, promotional mmix etc. 7) What are ethical implications of marketing this product in this country?

Chapter 3: The Changing American Society (Values) 1. Changes in American Cultural Values  Cultural values are not constant – changes occur slowly and unevenly across individuals and groups  Observable shifts in behavior often reflect underlying shifts in cultural values  Therefore, it is necessary to understand the underlying value shifts in order to understand current and future consumer behavior

 Self-oriented values  Environment-oriented values: Prescribe a society’s relationship to its economic and technical as well as its physical environment  Other-oriented values: Reflect a society’s view of the appropriate relationships between individuals and groups within that society 2. Marketing Strategy and Values  Four evolving American values  Green Marketing  Americans’ increasing concern for the environment  Generally involves one of these: - Developing products whose production, use, or disposal is less harmful to the environment than the traditional versions of the product - Developing products that have a positive impact on the environment, or - Tying the purchase of a product to an environment organization or event  Shades of Green Market Segments (Values vary across consumers): - Eco-Centrists and Respectful Stewards (highly motivated overall and will pay more for eco-friendly) - Proud Traditionalists and Frugal Earth Mothers (motivated by efficiency, practicality, and family) - Eco-Villains (very dismissive of environmental concerns)  Green Marketing and Regulation - The FTC has updated its Green Guides relating to environmental claims - Thus, firms must avoid greenwashing (promoting environmental benefits that are unsubstantiated and on which they don’t deliver)  Cause-related Marketing (CRM)  Marketing that ties a company and its products to an issue or cause with the goal of improving sales or corporate image while providing benefits to the cause  Vs. social marketing (without advancing profits or image)  To create long-term relationships, brand equity, and sales  The foundation of CRM is marketing to consumers’ values  Enhances corporate trust and WOM – if there is a “fit” between the company and the cause and it’s not only to enhance corporate image  Marketing to Gay and Lesbian Consumers

Gay market is substantial both in size and purchase power in America  many companies find it a highly attractive segment  Product and communication issues are major considerations - Product: In many cases the lifestyles of gay consumers do not differ sufficiently to require product modifications - Communications: » Should the firm advertise in gay-oriented media using its standard ads? » Should it advertise in gay media using ads with gay themes? » To what extent should the firm be involved in gay community activities? » Should its ads in mainstream media include gay themes?  Gender-Based Marketing  Gender roles in the US are shifting, both ways (more women take on male-oriented tasks and vice versa)  Importance of women as market segment (e.g. influence 80% of car sales)  Sex and gender refer to biological predispositions  Gender identity = the traits of femininity and masculinity (continuum, expressive traits vs. instrumental traits)  Gender roles = behaviors considered appropriate for males and females in a given society  G...