Consumer Behavior:

Meeting Changes and

Challenges
CHAPTER
ONE

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.


The what, why, when, where, and how of consumer
purchases are examined in consumer behavior.

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2 Chapter One Slide
Two Consumer Entities
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3
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.
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.
Chapter One Slide
Development of the
Marketing Concept
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4
Production
Orientation
Sales
Orientation
Marketing
Concept
Chapter One Slide
Production Orientation
From the 1850s to the late 1920s
Companies focus on production capabilities
Consumer demand exceeded supply
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5
Production
Orientation
Sales
Orientation
Marketing
Concept
Chapter One Slide
This was the time that the control was in
the hands of the producers who said, if
we make it they will buy it.
Sales Orientation
From the 1930s to the mid 1950s
Focus on selling
Supply exceeded customer demand
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6
Production
Orientation
Sales
Orientation
Marketing
Concept
Chapter One Slide
the manufacturers focused on selling the
product which they had overproduced
Marketing Concept
1950s to current - Focus on the customer!
Determine the needs and wants of specific
target markets
Deliver satisfaction better than competition

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7
Production
Orientation
Sales
Orientation
Marketing
Concept
Chapter One Slide
Understanding the consumer and in
delivering products that meet their needs
Societal Marketing Concept
Considers consumers
long-run best interest
Good corporate
citizenship
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Chapter One Slide 8
The Marketing Concept
Consumer Research
Segmentation
Market Targeting
Positioning
The process and tools
used to study consumer
behavior

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall
Embracing the Marketing
Concept
Chapter One Slide 9
The Marketing Concept
Consumer Research
Segmentation
Market Targeting
Positioning
Process of dividing the
market into subsets of
consumers with
common needs or
characteristics

Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall
Implementing the
Marketing Concept
Chapter One Slide 10
The Marketing Concept
Consumer Research
Segmentation
Market Targeting
Positioning
The selection of one or
more of the segments
identified to pursue
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall
Implementing the
Marketing Concept
Chapter One Slide 11
The Marketing Concept
Consumer Research
Segmentation
Market 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



Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall
Implementing the
Marketing Concept
Chapter One Slide 12
The Marketing Mix
Product Price
Place Promotion
Marketing
Mix
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13 Chapter One Slide
Customer Value, Satisfaction, Trust,
and Retention
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14
Successful Relationships
Customer
value
High level
of
customer
satisfaction
Strong
sense of
customer
trust
Customer
retention
Chapter One Slide
Successful Relationships
Customer Value
Customer
Satisfaction
Customer Trust
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
Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall
Value, Satisfaction,
Trust, and Retention
Chapter One Slide 15
Successful Relationships
Customer
Value
Customer
Satisfaction
Customer Trust
Customer
Retention
The individual's perception
of the performance of the
product or service in
relation to his or her
expectations.
Customer groups based on
loyalty include loyalists,
apostles, defectors,
terrorists, hostages, and
mercenaries


Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall
Value, Satisfaction,
Trust, and Retention
Chapter One Slide 16
Customer Satisfaction
Loyalists

Apostles
Defectors

Terrorists
Hostages

Mercenaries
When customers are highly satisfied,
they continue to purchase
Provide very positive word-of-mouth
When customers are disappointed, they
move to the competition
Who spread negative word-of-mouth
Dissatisfied customers and they stay
with the company but are very unhappy
Satisfied but are not really considered
loyal and will move from company to
company

17
The Customer Satisfaction
Loyalty Relationship
0
20
40
60
80
100
1 2 3 4 5
L
o
y
a
l
t
y

(
R
e
t
e
n
t
i
o
n
)

Very
Dissatisfied
Dissatisfied Neither

Satisfied Very
Satisfied
Satisfaction
Near Apostle
Zone of Defection
Zone of Indifference
Zone of Affection
Terrorist
Apostle
Source: Adapted from Thomas O. Jones and W. Earl Sasser, Jr., Why Satisfied Customers Defect,
Harvard Business Review, November-December 1995, p. 91.
Successful Relationships
Customer Value
Customer
Satisfaction
Customer Trust
Customer
Retention


Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall
Establishing and
maintaining trust is
essential.
Trust is the
foundation for
maintaining a long-
standing relationship
with customers.


Value, Satisfaction,
Trust, and Retention
Chapter One Slide 19
Successful Relationships
Customer Value
Customer
Satisfaction
Customer Trust
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
Servicing them is
cheaper
They spread positive
word of mouth


Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall
Value, Satisfaction,
Trust, and Retention
Chapter One Slide 20
Top 10 Ranked U.S. Companies in Terms of Consumers
Trust and Respect of Privacy
Table 1.2
Top 10 Companies
American Express
eBay
IBM
Amazon
Johnson & Johnson
Hewlett-Packard
U.S. Postal Service
Procter and Gamble
Apple
Nationwide
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Chapter One Slide 26
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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22
Platinum
Gold
Iron
Lead
Chapter One Slide
Segmentation scheme used by
marketers is to segment customers by
their profitability to the firm
Effective Tiering of Service
The Customer Pyramid
Which segment sees high value in
our offer, spends more with us over
time, costs less to maintain, and
spreads positive word-of-mouth?
Which segment costs us time,
effort, and money, yet does not
provide return we want? Which
segment is difficult to do
business with?
Lead

Iron
Gold
Platinum
Good Relationship
Customers
Poor Relationship
Customers
Source: Valarie A Zeithaml, Roland T Rust, and Katharine N. Lemon, The Customer Pyramid:
Creating and Serving Profitable Customers, California Management Review 43, no. 4, Summer 2001,
pp.118142.
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Chapter One Slide 24
THE TRADITIONAL MARKETING CONCEPT VALUE- AND RETENTION-FOCUSED
MARKETING
Make only what you can sell instead of trying
to sell what you make.
Use technology that enables customers to
customize what you make.
Do not focus on the product; focus on the
need that it satisfies.
Focus on the products 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.
Research consumer needs and characteristics. Research the levels of profit associated with
various consumer needs and characteristics.
Understand the purchase behavior process and
the influences on consumer behavior.
Understand consumer behavior in relation to
the companys product.
Realize that each customer transaction is a
discrete sale.
Make each customer transaction part of an
ongoing relationship with the customer.
Impact of Digital Technologies
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25
Marketers
More products and
services through
customization
Instantaneous exchanges
Collect and analyze data
Consumers
Power
Information
Computers, phones, PDA,
GPS, smart TV




Chapter One Slide
The Mobile Consumer
Wireless Media
Messages will
expand as:
Flat-rate data
traffic increases
Screen image
quality is enhanced
Consumer-user
experiences with
web applications
improve
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26 Chapter One Slide
Penetration of Internet Usage Among Mobile
Subscribers in 16 Countries - FIGURE 1.3
Consumer Behavior Is
Interdisciplinary
Psychology
Sociology
Social
psychology
Anthropology
Economics
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27 Chapter One Slide
A Simple Model of Consumer Decision Making - Figure 1.4
Chapter One Slide 28
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This model will
guide our studies
of consumer
behavior