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Chapter 1 Assoc. Prof Sharmila Sethu Chapter 1 Consumers Rule Consumer Behavior Buying, Having, and Being Introduction • https://www.sophia.org/tutorials/consumerbehavior What is Consumer Behavior? • 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 • Role Theory: – Identifies consumers as actors on the marketplace stage • Consumer Behavior is a Process: – Exchange: A transaction in which two or more organizations give and receive something of value The Nature of Consumer Behavior Situations and Consumer Decisions Consumer decisions result from perceived problems and opportunities. Consumer problems arise in specific situations and the nature of the situation influences the resulting consumer behavior. Using Outdoor Media to Trigger Problem Recognition 1-5 Some Issues That Arise During Stages in the Consumption Process Figure 1.1 Consumer Behavior Involves Many Different Actors • Consumer: – A person who identifies a need or desire, makes a purchase, and then disposes of the product • Many people may be involved in this sequence of events. – Purchaser / User / Influencer • Consumers may take the form of organizations or groups. Consumers’ Impact on Marketing Strategy • Market 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 • Demographics: – Statistics that measure observable aspects of a population • Ex.: Age, Gender, Family Structure, Social Class and Income, Race and Ethnicity, Lifestyle, and Geography A Lesson Learned • Nike was forced to pull this advertisement for a running shoe after disabilities rights groups claimed the ads were offensive. • How could Nike have done a better job of getting its message across without offending a powerful demographic? Market Segmentation Finely-tuned marketing segmentation strategies allow marketers to reach only those consumers likely to be interested in buying their products. Consumers’ Impact on Marketing Strategy (cont.) • Relationship Marketing: Building Bonds with Consumers – Relationship marketing: • The strategic perspective that stresses the long-term, human side of buyer-seller interactions – Database marketing: • Tracking consumers’ buying habits very closely, and then crafting products and messages tailored precisely to people’s wants and needs based on this information Marketing’s Impact on Consumers • Marketing and Culture: – Popular Culture: • Music, movies, sports, books, celebrities, and other forms of entertainment consumed by the mass market. – Marketers play a significant role in our view of the world and how we live in it. Popular Culture Companies often create product icons to develop an identity for their products. Many made-up creatures and personalities, such as Mr. Clean, the Michelin tire man and the Pillsbury Doughboy, are widely recognized figures in popular culture. Marketing’s Impact on Consumers: The Meaning of Consumption • The Meaning of Consumption: – People often buy products not for what they do, but for what they mean. – Types of relationships a person may have with a product: • • • • Self-concept attachment Nostalgic attachment Interdependence Love Marketing’s Impact on Consumers: The Meaning of Consumption (cont.) • Consumption includes intangible experiences, ideas and services in addition to tangible objects. • Four types of Consumption Activities: – Consuming as experience – Consuming as integration – Consuming as classification – Consuming as play Marketing’s Impact on Consumers: The Global Consumer • By 2006, the majority of people on earth will live in urban centers. • Sophisticated marketing strategies contribute to a global consumer culture. • Even smaller companies look to expand overseas. • Globalization has resulted in varied perceptions of the United States (both positive and negative). The Global Consumer American products like Levi jeans are in demand around the world. Marketing’s Impact on Consumers: Virtual Consumption • The Digital Revolution is one of the most significant influences on consumer behavior. • Electronic marketing increases convenience by breaking down the barriers of time and location. • U-commerce: – The use of ubiquitous networks that will slowly but surely become part of us (i.e., wearable computers, customized advertisements beamed to cell phones, etc.) • Cyberspace has created a revolution in C2C (consumer-to-consumer) activity. Blurred Boundaries Marketing and Reality • Marketers and consumers coexist in a complicated two-way relationship. • It’s increasingly difficult for consumers to discern the boundary between the fabricated world and reality. • Marketing influences both popular culture and consumer perceptions of reality. Blurred Boundaries Marketing managers often borrow imagery from other forms of popular culture to connect with an audience. This line of syrups adapts the “look” of a pulp detective novel. Marketing Ethics and Public Policy • Business Ethics: – Rules of conduct that guide actions in the marketplace – The standards against which most people in the culture judge what is right and what is wrong, good or bad • Notions of right and wrong differ among people, organizations, and cultures. Needs and Wants: Do Marketers Manipulate Consumers? • Consumerspace • Do marketers create artificial needs? – Need: A basic biological motive – Want: One way that society has taught us that need can be satisfied • Are advertising and marketing necessary? – Economics of information perspective: Advertising is an important source of consumer information. • Do marketers promise miracles? – Advertisers simply don’t know enough to manipulate people. Discussion Question • This ad was created by the American Association of Advertising Agencies to counter charges that ads create artificial needs. • Do you agree with the premise of the ad? Why or why not? Public Policy and Consumerism • Consumer efforts in the U.S. have contributed to the establishment of federal agencies to oversee consumer-related activities. – – – – – Department of Agriculture Federal Trade Commission Food and Drug Administration Securities and Exchange Commission Environmental Protection Agency • Culture Jamming: – A strategy to disrupt efforts by the corporate world to dominate our cultural landscape Culture Jamming • Adbusters Quarterly is a Canadian magazine devoted to culture jamming. This mock ad skewers Benetton. Consumerism and Consumer Research • Green Marketing: – When a firm chooses to protect or enhance the natural environment as it goes about its activities • Reducing wasteful packaging • Donations to charity • Social Marketing: – Using marketing techniques to encourage positive activities (e.g. literacy) and to discourage negative activities (e.g. drunk driving) Consumer Related Issues • UNICEF sponsored this advertising campaign against child labor. The field of consumer behavior plays a role in addressing important consumer issues such as child exploitation. The Dark Side of Consumer Behavior • Consumer Terrorism: – An example: Susceptibility of the nation’s food supply to bioterrorism • Addictive Consumption: – Consumer addiction: • A physiological and/or psychological dependency on products or services • Compulsive Consumption: – Repetitive shopping as an antidote to tension, anxiety, depression, or boredom The Dark Side of Consumer Behavior (cont.) • Consumed Consumers: – People who are used or exploited, willingly or not, for commercial gain in the marketplace • Illegal Activities: – Consumer Theft: • Shrinkage: The industry term for inventory and cash losses from shoplifting and employee theft – Anticonsumption: • Events in which products and services are deliberately defaced or mutilated Consumer Behavior As a Field of Study • Consumer behavior only recently a formal field of study • Interdisciplinary influences on the study of consumer behavior – Consumer behavior studied by researchers from diverse backgrounds – Consumer phenomena can be studied in different ways and on different levels The Pyramid of Consumer Behavior Figure 1.2 The Wheel of Consumer Behavior Figure 1.3 What is Consumer Behavior? The study of how consumers • • • • Select Purchase Use Dispose of goods and services in the process of satisfying their personal and household needs and wants. Why did consumer behavior become a separate discipline from marketing? • Marketers came to realize that consumers did not always act or react as marketing theory suggested they would • Consumers rejected mass-marketed products, preferring differentiated products that reflected their own special needs, personalities and lifestyles • Even in industrial markets, where needs are more homogeneous than consumer markets, buyers exhibited diversified preferences and less predictable purchase behavior Other factors that contributed to the growing interest in consumer behavior • The accelerated rate of new product development • The consumer movement • Public policy considerations • Environmental concerns • The opening of national markets throughout the world What Do Buying Decisions Involve? Consider a decision to acquire a pet • Decision entails determining: – – – – – – – Where to learn about pets Where to purchase the selected pet How much to pay for it Who will take care of it What supplies or services are needed for it Where to purchase such supplies or services How much to pay for supplies and services Discussion Questions Why would someone shop on the Internet? Buy an iPod? Eat at TGI Friday’s frequently? – Why would someone else not make those purchases? – How would you choose one outlet, brand, or model over the others? Would others make the same choice in the same way? Discussion Questions • Describe your lifestyle. How does it differ from your parents’ lifestyle? • Describe a recent purchase you made. To what extent did you follow the consumer decision-making process described in this chapter? How would you explain any differences? Trends influencing consumer behavior in contemporary society The Information Superhighway Focus on Health and Beauty Shifting Roles of Sexes Telecommuting Personalized Economy Emphasis on Leisure Concern about Safety Focus on Ethics Diversity A Global Village Ecological Consciousness Changing Perception of Religion • https://www.youtube.com/watch?v=rDx27GXI Cy4 1. Growth of the information superhighway Positive Implications • Marketers can be in touch with anyone, anywhere and at any time • Availability of information increases consumers’ knowledge and power in the marketplace. Negative Implications • Increased information about consumers raises serious privacy issues • Creation of a digital divide that further stratifies society based on wealth, education and age • https://www.youtube.com/watch?v=oLXfTbE HCvY 2. Focus on health, fitness, and beauty • Golden opportunities are created for marketers of many products ranging from fat-free foods to vitamins, as well as for services ranging from plastic surgery to hair implants. 3. Shifting roles of men and women • • • • More women in the workforce More women in management positions More women raising children alone Gay and lesbian families changing the traditional model of the family • A redefinition of buying decision centers within the family • A redefinition of sales and advertising strategies 4. Telecommuting and the office of the future • Decline in demand for products and services such as cars, public transportation, automobile insurance, car repair, child care, and baby-sitting services • Increased need for efficient package-delivery services • Rise in demand for state-of-the-art communication devices 5. Emphasis on leisure • • People engage in leisure activities for different reasons Knowing those reasons helps marketers select appropriate promotional appeals 6. Concern About Personal Safety • Enhanced demand for defense-related products • Post 9/11 issues relating to travel 7. Diversity in the workplace and marketplace “Traditional” minority groups in the US include: • Women • African-Americans • Asian-Americans • Latinos 8. Focus on ethics • For much of history, business ethics was considered an oxymoron • In the 1980’s, ethics became an issue with the discovery of numerous instances of corporate wrongdoing – Ford Pinto – Bhopal disaster – Asbestos – Tobacco 9. Ecological consciousness Studies show that: • Consumers consider themselves “environmentalists” • They have changed their habits to protect the environment • They are willing to pay more for products that are considered environmentally safe • An increasing flow of environmentally friendly products • Positive shift in public attitudes toward firms and products that protect the environment • As a result, the rise of green marketing • Greater potential for deception based on false claims of environmental safety of products 10. The rise of the global village • An increasing acceptance of the free market system in many foreign countries (e.g., Eastern Europe) • Growth of major regional free-trade areas, such as NAFTA and the EU, resulting in increased trade • Expansion of American media—including advertising—to other nations exposes consumers to availability of American goods Interdisciplinary Influences Individual Focus Experimental Psychology Clinical Psychology Developmental Psychology Human Ecology Microeconomics Social Psychology Sociology Macroeconomics Semiotics/Literary Criticism Demography History Cultural Anthropology Social Focus