Consumer Behavior and Marketing Strategy

Consumer Behavior and Marketing Strategy

Consumer Behaviour and

Marketing Strategy

By

Dhanalakshmi Marar

Consumer Behavior and Marketing Strategy

Dhanalakshmi Marar

ISBN - 9789361523113

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Preface

Let me take this opportunity to you all to introduce my feeling of great pleasure in presenting and putting up this book titled Consumer Behavior and Marketing Strategy. The main purpose of writing and coming up with this book was to summarize the bulky, deep picture of this topic and present it as a quick ready to read extract.

The thought of writing this book was a result of visualization of changing trends in marketing with respect to consumer behavior. And that’s why the readers may experience to foresee the market.

Although the book is intended mainly as a self help guide for learners of the undergraduate level, hopefully, it can also be seen as an ideal choice for hobbyists seeking interesting information or for professionals involved with this industry of studies.

I think this book will present and engage the readers to understand the merit of using consumer behavior studies as a basis for forming an effective marketing strategy.

Businesses face many situations starting from designing the product to the course of launching their products or services. In recent years, the environment of the market has leapt ahead making the things difficult to handle the varying situations. The problem is being addressed with the fact of accepting market strategies as a multidisciplinary subject.

The content of this book is largely governed to focus on raising a thought activity in the minds of readers and transforming it into a solution activity. The main key aspect in mind while designing this book was to keep everything simple so that one can easily boost and build the foundation of the topic and lessen their struggle to approach the understanding. The quick summary boxes at the end of each chapter are handy to recall the rudimentary construct of the chapter. The final step towards this book was to include all of the emerging challenges, which I think is the most important action for the conclusion.

Thus, as you go ahead, it will reveal the relevance of transformative strategies. I hope you will find the resonance with the details as you read.

Contents

1 Overview of Marketing 1

1.1 What is Marketing? 1

1.1.1 Concepts of Marketing 1

1.1.2 Marketing, Selling and Advertising 2

1.1.3 Salient Features of Marketing 2

1.2 Evolution of Marketing Concept 3

1.2.1 What is Market? 3

1.2.2 How the Market Evolved? 3

1.3 Prominent tools used in Marketing Strategies 4

1.4 Product Life Cycle 5

1.5 Marketing Mix and its elements 6

Summary of the Chapter 8

Questions 8

References 8

2 Introduction to Consumer Behavior 9

2.1 Definition of Consumer Behavior 9

2.2 Difference between Consumer and Customer 10

2.3 Consumer Behavior as an Interdisciplinary Field 11

2.4 Consumer Behavior and its Major Features 11

2.5 Significance and Need for

Understanding Consumer Behavior 13

Questions 15

References 15

3 Consumer Buying Decision Process 17

3.1 Stages of Consumer Decision

Making Process 17

3.2 Types of Consumer Decision Making Process 20

3.3 Distinct Roles Played By Consumer in Buying Process 21

3.4 Different Views on Consumer

Decision Making 22

Summary 24

Questions 24

References 24

4 Consumer Behavior Buying Patterns 25

4.1 Factors influencing buying

patterns of consumer behavior 25

4.1.1. Individual Influence on Consumer Buying Behavior Patterns 25

4.1.2. Group Influence on Consumer Behavior 30

4.1.3. Situational Factors 32

4.2 Consumer Satisfaction 32

4.3 Consumer Buying Motive 34

4.4 Maslow’s Hierarchy Need Theory 36

4.5 Some other Important Theories of motivation 37

Summary 45

Questions 45

References 46

5 Understanding Various Consumer Behavior models 47

5.1 Traditional Models of Consumer Behavior 47

Summary 60

Questions 61

Referances 61

6 Customer Centric Marketing Strategy 63

6.1. Growth of Customer centric marketing strategy: A path from product centric to

consumer centric efforts 63

6.2 How to define Customer

Centricity? 64

6.3 The core pillars of customer

centric strategy/ Organizations 65

6.4 Forces driving customer

centricity at organizations 66

6.5 Product centric company vs.

customer centric company 67

6.6 How do people determine which Products or Services are best? 68

6.7 Data Collection 69

6.8 Diffusion of Innovation and

Consumer Behavior 70

Summary 73

Questions 73

References 73

7 Market Research and Consumer Behavior 75

7.1 Marketing Research Process and its Characteristics 75

7.2 Types of Market Research 77

7.3 Market Research vs. Marketing Information System 78

7.4 An Integrated Approach of Cross

Culture with Marketing Strategy 78

7.5 Consumer Behavior Audit 79

Summary 81

Questions 82

References 82

8 Market Segmentation 83

Summary 90

Questions 90

References 91

9 Organizational Buying Behavior 93

Summary 100

Questions 100

References 100

10 Challenges to Consumer Behavior Model in Marketing 103

10.1 Benefits of foreseeing the trends in consumer behavior 103

10.2 Major Worldwide Changing Trends 103

10.3 Consumer Protection 104

10.4 Emerging Issues in Consumer

Behavior Studies 106

Summary 107

Questions 107

References 107

11 Personality and Consumer Behavior 109

Summary 123

Questions 123

References 123

12 Theory of Consumer Behavior 125

Summary 134

Questions 135

References 135

13 Culture and Consumer Behavior 137

Summary 144

Questions 144

References 144

Appendix A: ABBREVIATIONS 145

APPENDIX B: GLOSSARY OF USEFULTERMS 145

Index 149

Chapter 1 Overview of Marketing

1.1 What is Marketing?

We live in a world surrounded by growing firms establishing their products each time over top of each other. With startups too gaining pace in the industry of business and products, the market rushes with overwhelming products. Customers now get a wide variety of choices to choose from a bulk of materials. The case not only increased the factor of a dilemma for the customers but also compelled the manufacturing firms to come up with quality over quantity.

Imagine a situation where two firms designed and launched their products of the same quality, let’s add one more factor to it, say homogeneity. Now, which product the customer will choose? Maybe now price becomes a major factor in the decision. But what if the customer doesn’t get to know about your product in the first place itself? The root cause and solution to the problem lies within the term ‘marketing’. Marketing- it is the key to accelerating any business. Marketing is a very fundamental operation in the conversion of a made product to a masses product. Marketing acknowledges customers to add value to the brand.

1.1.1 Concepts of Marketing

Let’s look at some of the definitions of marketing

American Marketing Association (AMA) says,

Marketing is the activity, set of institutions, and processes for creating, communicating, delivering and exchanging offerings that have value for customers, clients, partners, and society at large.

Father of Modern Marketing, Philip Kotler says,

Marketing is the science and art of exploring, creating, and delivering value to satisfy the needs of a target market at a profit.

Philip Kotler also explained the core concept of marketing through his book- Marketing Management

Fig 1: Core Concepts of Marketing by Philip Kotler

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Schiffman and Kanuk says,

A company determining accurately the needs and wants of specific target markets, and delivering the desired satisfactions better than the competitions.

Charles Lamb put it this way,

Marketing is about anticipating and satisfying consumer needs by means of mutually beneficial exchange processes and doing so profitably and more effectively than competitors utilizing efficient managerial processes.

Several more authors and organizations have defined marketing based on their flavors of viewpoints. Hence, sometimes the term becomes ambiguous. But what can be conferred as standard to the term is that it has two aspects- consumer and producer. The interlinkage between both aspects occurs through a means which is coined as exchanges. Marketing therefore can be analyzed in terms of exchanges, communications, conversations between consumer and producer and resulting action to improve the quality of offered goods and services. The producer identifies the consumer needs and then organizes and lays down his or her business strategy to meet these needs.

The key ideas that can be extracted from the marketing definition include:

•It is process involving tactics and strategies

•Marketing mix or 4P’s plays a major role

•Marketing is more than just goods

•Exchange is the central feature of marketing

•Marketing tends to satisfy both consumer and organizational needs

1.1.2 Marketing, Selling and

Advertising

People often correlate these three terms to be the same process or activity. Marketing, selling and advertising have different focus and their dynamics in the market often varies. If we start to sieve the strategies of marketing, some of the individual results may attribute to selling and advertising. In other words, marketing is a broader or wider term in the sense than selling or advertising.

Selling is a part of marketing which is product centric and emphasizes sales or profit as a primary motive for doing business. The motive of selling is to cater to companies needs and converts the value of a product that the company wants to offer into cash. It is also the

Marketing revolves around the interest of the consumer i.e. it is consumer centric. Here, priority is given to the customer’s satisfaction and needs. The activity converts consumer needs into products. Different types of marketing strategies are formulated here for a competitive advantage.

Now, what about advertising? It is basically introduced solely as a selling part of a marketing strategy to attract the customer to use the offered products or services. Like selling, advertisement is also product centric and involves strictly one way communication from the producer brand to the consumer.

1.1.3 Salient Features of Marketing

Marketing is present in all stages constituting the business activities, from beginning to end. It starts from the product planning, development of products or services, their selling and distribution methods, writing the description of the product to promote it, sales strategies, advertising and designing of customer services.

•Marketing satisfies what two ends need by facilitating the exchange of products and profit between them.

•Marketing is a discretionary process available for use at the discretion of the user. Both parties are free to accept or reject what they are offering to each other in exchange.

•Modern marketing involves consumer satisfaction and is not limited to profit orients.

1.2 Evolution of Marketing Concept

The evolution of the marketing concept refers to the set of distinct sequences or stages gone through by a company or business to refine its marketing strategies. Due to advances in the lifestyle of a person, change in the perception of an individual towards certain things and the advent of the technological era, the marketing concept from its naïve form evolved into a sophisticated shape.

Though the change had been gradual, it preceded the thinking strategy over action tactics. The phase of critical review of the marketing evolution dates back from the era of the industrial revolution till today. Marketing is not a modern terminology but is an ancient art practiced starting from the basic barter system of market culture. But every time someone hears the term, it gives a feeling about the discipline of recent origin. This deceptive vision demonstrated the fact that marketing concepts are constantly evolving.

1.2.1 What is Market?

Before discussing the evolution of marketing, it is important to know about the term market. It’s also a term that will be constantly used, so one should be clear with the meaning. The term market is not just restricted to a place where people go to purchase and sell things or products.

A market can assume many forms. It can be a system, institution, procedure, social relations or infrastructure where exchange between buyer and seller takes place. The market can be physical such as wholesale or non physical say, e commerce. Besides goods, marketing can be done for people, places, ideas, events, organizations, etc.

1.2.2 How the Market Evolved?

To trace the evolution, Philip Kotler has divided the history of evolution into five distinct stages- the production era, product era, selling era, marketing era and holistic (societal) era.

Fig 2: Evolution of Marketing as proposed by Philips Kotler

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Production Era

The oldest approach to look towards marketing by the business was by keeping a view that consumers favor those products which are widely available in the market and is cost effective. They believed that consumers will support those products which are produced in great volumes at low cost and this would help easily manage the market and make it limitless. The manufacturers and managers following this concept at that time focused on producing their products in bulk quantities so that operation cost is less. For this, they researched strategies to improve their production efficiencies and how these products can be easily and effectively distributed via channels to consumers. The era widely dominated the phase of post industrialization as new machines were constantly in innovation at that time. Quantity over quality dominated.

Product Era

The transition of marketing from low cost bulk production to quality product production is involved in the product concept. They started researching the product, and how to make it more good and competitive and innovative in the market. In this way, by developing the product to meet the high standard, the customer will get attracted to the business and profit and sales will flood the market. Labeling was made to highlight the products.

Sales Era

The focus was on sales. The era took the approach of having a good seller to represent their business. The business thought that if a seller is qualified based on good communication and influencing skills, the way by which they can easily convince the customers to have their product, and the way of making a good deal with people, then their market will easily gain profit. With this thought, they started recruiting sellers into their firm for door to door marketing. The results of such decisions were short term. Because customers would once purchase their product for the first time due to the seller’s influence, but not for the second time. Since this theory was not based on customer satisfaction, therefore once they used the product and if got dissatisfied they never returned to purchase the thing again. To increase sales, efforts were made on product promotion and publicity.

Kotler referred this to as selling what they make, rather than making what the market wants to buy.

Marketing Era

The last three eras resulted in the wastage of many products due to its bulk production in factories. The profits were declining. So, business marketing started a fundamental shift to produce the products as per the customer’s demand. In short, how much to produce by identifying and filling the needs of customers was the main agenda. In this way, the bulk wastage of products can be reduced. Customer satisfaction was used to tackle the increasing competition in the market. This concept of marketing of providing the right product to the right customer at the right place and where the market was on target is known as the marketing era.

Holistic Era

In today’s date, the holistic approach is practiced as a marketing means by large professional firms. Kotler defines this era as everything matters.

The holistic approach thought about the welfare of the society and environment. Here, definitely, the main objective was to make a profit, but not at the cost of customer dissatisfaction. The consumer was made a driver to drive the company’s long term goals.

Now we can see that the business takes into account ethics and morals while designing and distributing the products. The integration of eco-friendly commodities, concern for the environment, green tags, and organic tags, - all these things, takes into account broader social welfare interests.

The four main elements of this marketing approach are:

Internal marketing- Internal refers to the internal environment of the company, i.e. between the employee of a company and the employer. If the employee of the company is treated well and is satisfied with the work, then there will be an establishment of a good environment in the company, by which the production will prosper.

Integrated Marketing- The theory tried to integrate the relationship between the company and consumers. The company felt the need to make the voice of their products reach the customers so that people can favor their products more. The marketing mix is also considered a great factor in this.

Relationship Marketing- The aim was to build a long term strong bond or relationship with the customer by the company. The company wanted the customers to place trust in their products and increase brand loyalty so that people buy their product not only once, but multiple times (repeat purchase).

Performance Marketing- The lookout was on after sales service. Feedback from customers was taken into account to improve the product and overall performance of the company. In this way, the consumer will start recommending their products to others as well and sales will increase.

1.3 Prominent tools used in

Marketing Strategies

Marketing tools are techniques through which a company promotes their services or products. A great amount of proper planning as per the service that the company provides is essential for effective marketing. Design of logos, use of catchy phrases or slogans, a perfect description of the product discussing its prominent features, creativity, etc. all comes under perfect planning. Once planned, the next step is to choose the best marketing tool to reach the consumer and increase brand awareness.

Print Marketing

Print marketing is considered a traditional form of marketing, which is still in use today. Using newspapers to put on advertisements, brochures, direct mail and magazines come under this. While the number of dependencies on print media as a form of marketing has declined due to the surpassing of digital marketing techniques but is still a viable form of marketing in specific markets.

Digital Marketing

Whenever the company utilizes digital platforms or electronic means to promote its products or services are referred to as digital marketing. It is a subset of internet marketing. Digital Marketing can involve content marketing, mail marketing, search engine optimization (SEO), web design, display ads, application development, and video production.

Influencer Marketing

Influencer marketing can be considered as a widely adopted subset under the social media marketing. Influencer marketing is a hybrid strategy which combines the traditional idea of using the celebrity to promote the product and the online marketing tools. In influencer marketing, the celebrities who promote the product are called as influencers. The campaign is a result of collaboration between influencers and the company. The influencer can affect the decisions of consumer’s purchase because:

•Of their Authority

•Of their position

•Of their Knowledge

•Of their relationship with consumers

Affiliate Marketing

Affiliate marketing is a form in which a third party (known as affiliates) earns money or commissions every time the company’s products or services get promoted by them. It occurs through online mode and whenever a customer purchases a product of a particular company, which the third party has promoted on their website or blogs, they will get pay per click through the unique affiliate link.

Event marketing

In this type, the company uses a promotional strategy of face to face communication with the customers through special events like contests, concerts, fairs, show displays, etc. Conferences can be held online or offline. The resulting direct interaction of event attendees with the brand’s representatives converts them into valuable leads. The company can participate in and organize the events by:

•Hosting an event

•By acting as a sponsor to a particular event

•Attending as an exhibitor at that event

Event marketing is considered one of the valuable marketing forms as it increases customer engagement and immediate feedback can be obtained.

Viral marketing

Known by the name social media marketing, it utilizes social networks or media such as Facebook, Instagram, Youtube, etc to spread product information to consumers. The term viral is used in the sense that it can spread fast across people, just like a virus does among a population. When people start social sharing and forwarding messages, the process ensures to reach a large number of people within a short period.

1.4 Product Life Cycle

Fig 3: Graph showing the life cycle of a product with time

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The life cycle of a product involves those stages through which a product goes from the time it gets introduced into the market to its exit from the market. The study of a product’s life cycle is an important aspect of marketing as it can act as a forecasting tool to manage the planning strategies for a particular product.

The life cycle of a product can be broken down into four phases:

Introduction: The stage starts with the birth of the product. It’s an important stage as it forms the base of the product and the success or failure of the product in the market depends upon how strong this base is. A lot of promotional and advertising activities are undertaken for product awareness. Once it is developed fully, the product becomes ready to launch and gets introduced into the marketplace. The stage is also expensive due to investments, distribution costs, and developmental costs, moreover sales are also less. If not properly planned, the product will reach the decline phase much quicker than anticipated.

Growth: Here the consumer plays a major role and they assume the actions. Consumer buys the product and as a result, the sales start to increase gradually. In the mid of the growth stage, the profit starts to increase at an accelerated stage. Companies may also reinvest in this stage to increase distribution sales and gain large profit margins. The growing demand sharply upturns the company to increase their production level.

Maturity: Now that the product has been established and grown in its life cycle, it enters the maturity phase to face competition from other marketers. As the consumers have bought the product, due to competitors, the role of pricing will start to take a toll on the product. As a result of fewer sales, the industrial profit goes down.

Decline: The life cycle of a product ends in this stage due to increased competition. Competitors have introduced their products will lesser cost or better additional features. The customer will change their behavior and shift to the competitor’s side resulting in the elimination of the product from the market. At a saturation point, the company can either concentrate on replacement sales or make it available at a lower cost or allow it to decline.

1.5 Marketing Mix and its

elements

Marketing mix determines the position of the product in the targeted market and comes up with a solution of how to create an influence over it. A marketing mix is a controllable tool under various marketing strategies, which can be appropriately blended to create the wanted response from the target market and achieve marketing objectives.

Fig 4: Four elements of Marketing Mix

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A marketing mix is a mixture of four basic marketing elements or strategies known as the 4 P’s, which are described as follows:

Product

Product means the goods and services that