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Chapter 1 What is CB, and Why Should I Care? What Do You Think Polling Question In any business, the customer is truly the most important person. _____ Strongly Disagree _____ Disagree _____ Somewhat Disagree _____ Neither Agree nor Disagree _____ Somewhat Agree _____ Agree _____ Strongly Agree Have students access Course Mate www.cengagebrain.com to answer the polling questions for each chapter of CB. Ask them to take the online poll to see how their answers compare with other students taking a consumer behavior course across the country. Then turn to the last page of the chapter to find the “What Others Have Thought” box feature. This graph is a snapshot of how other consumer behavior students have answered this polling question so far. Learning Objectives After studying this chapter, the student should be able to: 1-1 Understand the meaning of consumption and consumer behavior. 1-2 Describe how competitive marketing environments lead to better outcomes for consumers. 1-3 Explain the role of consumer behavior in business and society. 1-4 Be familiar with the basic approaches to studying consumer behavior. 1-5 Appreciate how dynamic the field of consumer behavior continues to be, particularly with respect to technological advances such as big data applications. Lecture Example New York Mayor Michael Bloomberg’s proposed ban on the sale of sodas and other such beverages larger than 16 ounces at restaurants, movie theatres, and street carts elicited mixed reactions from the public. The proposed ban was the consequence of research studies that indicated that the consumption of beverages had increased among children and adults, and this was a contributing factor to the increasing levels of obesity among Americans. While the beverage industry has made efforts to reduce calories in products, their best-sellers have always been the high-calorie drinks. This indicates that consumers prefer these beverages even though they are aware of their high calorie content. The proposed ban is an attempt to modify consumer behavior and preferences through legislation, but soda companies are fighting back. Source: Leon Stafford, “Soda makers in a new kind of cola war,” Atlanta Business News, June 3, 2012, http://www.ajc.com/business/soda-makers-in-a-1451241.html Lecture Outline with PowerPoint® Slides Consumers make decisions with the intention to improve their lives or do something of value. The process of making a purchase triggers a chain reaction of value creating actions. Marketers need to understand consumers to be able to design products with greater value potential and to enhance the well-being of stakeholders. An understanding of consumer behavior can mean better business for companies, better public policy for governments, and a better life for individuals and households. LO: 1-1. Understand the meaning of consumption and consumer behavior. [Instructor PPT Slide 4] I. Consumption and Consumer Behavior Consumer behavior can be looked at from two unique perspectives. The term consumer behavior refers to the actual human thoughts, feelings, and actions involved in consumption experiences, and/or a field of study (human inquiry) that is developing an accumulated body of knowledge about human consumption experiences. A. Consumer Behavior as Human Behavior Consumer behavior is the set of value-seeking activities that take place as people go about addressing and attempting to address real needs. In other words, when a consumer is motivated by a need, a process kicks in as the customer sets out to find ways to fill this need. The Basic Consumption Process A want is a specific desire that spells out a way a consumer can go about addressing a recognized need. A consumer feels a need to stay in touch, belong, socialize, or feel good about him or herself, and this need manifests itself in the want for better media access devices. An exchange is the acting out of a decision to give something up in return for something perceived to be of greater value. Costs are the negative results of consumption experiences. Benefits are the positive results of consumption experiences. Over time, the consumer evaluates the costs and benefits and reacts to the purchase in some way. These reactions involve thoughts and feelings. Ultimately, the process results in a perception of value. Q: Ask students to explain the consumer behavior process with an example of a product that they recently purchased. A: Students’ answers will vary but should include the various steps of the consumer behavior process, beginning with the student’s realization of the need for the product till the perception of value gained from the product. Consumption Consumption represents the process by which consumers use goods, services, or ideas and transform into value. It is a value-producing process in which the interactions the marketer and the consumer interact to produce value. B. Consumer Behavior as a Field of Study Consumer behavior as a field of study represents the study of consumers as they go through the consumption process. It is the science of studying how consumers seek value in an effort to address real needs. Exhibit 1.2 displays the relationship between CB and other disciplines. CB shares particularly strong interdisciplinary connections with economics, psychology, marketing, and anthropology. Economics and Consumer Behavior Economics often is defined as the study of production and consumption. As the definition implies, economics also involves consumption. Therefore, consumer behavior and economics have a lot in common. Psychology Psychology is the study of human reactions to their environment. Social psychology and cognitive psychology, in particular, are highly relevant to consumer behavior. Social psychology focuses on the thoughts, feelings, and behaviors that people have as they interact with other people (group behavior). Cognitive psychology deals with the intricacies of mental reactions involved in information processing. Today the study of cognitive psychology is assisted by developments in neuroscience. Neuroscience, the study of the central nervous system including brain mechanisms associated with emotion, offers potential for understanding CB by charting a consumer’s psychological brain functions during the consumption process. Marketing Marketing involves the multitude of value-producing seller activities that facilitate exchanges between buyers and sellers. Exchange is involved in marketing and exchange is central to consumer behavior too. Consumer Behavior and Other Disciplines Sociology focuses on the study of groups of people within a society. This has relevance for consumer behavior because consumption often takes place within group settings. Anthropology has contributed to consumer behavior research by allowing researchers to interpret the relationships between consumers and the things they purchase, the products they own, and the activities in which they participate. LO: 1-2. Describe how competitive marketing environments lead to better outcomes for consumers. II. The Ways in Which Consumers Are Treated Some organizations can survive while treating customers badly, while others need to pamper customers just to have a chance of surviving. Consider the following two questions in trying to understand why this is so: How competitive is the marketing environment? How dependent is the marketer on repeat business? Q: Students can be asked to list some businesses that depend on repeat businesses. A: Students’ answers will vary. Answers may include the publishing business, dry cleaners, and so on. A. Competition and Consumer Orientation Where do consumers go if they don’t like their service at the DMV (Department of Motor Vehicle)? If the choice comes down to visiting the bureau or not driving, nearly all consumers will put up with the less-than-immaculate surroundings, long waits, and poor service that all too typically go along with getting a driver’s license. Few Competitive Pressures? The DMV typifies a service organization that operates in a market with practically no competitive pressure and a captive audience. In a government service like this, the answers to the two questions above are not at all competitive and not at all dependent on keeping customers. No matter how poor the service is, they know consumers will return to do more business when the term on their license expires or they need to register a vehicle. However, private companies generally provide consumers with better service, and the DMV ends up with better and more accurate information about drivers. The company depends on repeat business in the form of a renewed contract. Many Competitive Pressures? The consumer deals with firms operating in a highly competitive market dependent on repeat business. Thus, firms are oriented toward value creation, and consumers typically receive better treatment. Firm Orientations and Consumers Consumer (customer) orientation is a way of doing business in which the actions and decision making of the institution prioritize consumer value and satisfaction above all other concerns. A consumer orientation is a key component of a firm with a market-oriented culture. Market orientation is an organizational culture that embodies the importance of creating value for customers among all employees. An even broader orientation comes when firms adapt stakeholder marketing. Under the orientation, firms recognize that more than just the buyer and seller are involved in the marketing process. Primary stakeholders include customers, employees, owners, suppliers, and regulating agencies. Secondary stakeholders include the mass media, communities, and trade organizations. [Instructor PPT Slides 5, 6] B. Relationship Marketing and Consumer Behavior Relationship marketing means the firm’s marketing activities aim to increase repeat business as a route to strong firm performance. Relationship marketing recognizes that customer desires are recurring and that a single purchase act may be only one touchpoint in an ongoing series of interactions with a customer. Touchpoints are direct contacts between the firm and a customer. Increasingly, multiple channels or ways of making this contact exist, including phone, email, text messaging, online social networking, and especially face-to-face contact. Every touchpoint, no matter the channel, should be considered as an opportunity to create value for the customer. Q: Students can be asked to list the strategies by which a retail store can strengthen its relationship with the customer. A: Suggestions could include membership cards, weekly offers or draws, discounts for customers with membership cards, daily alerts about offers through email, text messages, and so on. LO: 1-3. Explain the role of consumer behavior in business and society. III. The CB Field’s Role in Business, Society, and for Consumers Consumer behavior is important in at least the following three ways: CB provides an input to business/marketing strategy. CB provides a force that shapes society. CB provides an input to making responsible decisions as a consumer. [Instructor PPT Slides 7] A. Consumer Behavior and Marketing Strategy The ultimate hallmark of success for a business is long-term survival. Companies that achieve this goal do so by finding ways to continuously obtain resources from consumers in return for the value they offer. This is a basic tenet of the resource-advantage theory, a prominent theory that explains why companies succeed or fail. Exhibit 1.4 lists some famous international companies, their core business, and their age. What Do People Buy? An attribute is a part, or tangible feature, of a product that potentially delivers a benefit of consumption. Consumers don’t really pay for the physical attributes of a product. Marketing firms often implement poor strategies when they don’t fully understand what a product truly is. A product is not a collection of attributes but rather a potentially valuable bundle of benefits. Innovation Companies need to understand why people buy their products to recognize which other current and future products represent competitive threats. An innovation has to produce value for consumers to be successful. Over time, successful innovations exhibit all or some of these characteristics—relative advantage, simplicity, observable, trialability, and consistency. Ways of Doing Business Exhibit 1.5 summarizes different ways of doing business are in including: Undifferentiated marketing—the same basic product is offered to all customers. Undifferentiated marketers generally adopt a production orientation, wherein innovation is geared primarily toward making the production process as efficient and economical as possible. Differentiated marketing—serve multiple market segments, each with a unique product offering. One-to-one marketing is a plan wherein a different product is offered for each individual customer so that each customer is treated as a segment of one. Niche marketing—wherein a firm specializes in serving one market segment with particularly unique demand characteristics. Q: Students can be asked to list some niche products. A: Students’ examples will vary. Niche products can include designer watches, luxury cars, yachts etc. B. Consumer Behavior and Society The things that people buy and consume end up determining the type of society in which they live. For example, how does U.S. society treat smoking? Q: Students can be asked to determine the impact of legislation on consumer behavior. For example, what was the impact on consumer behavior following the recent ban on sale of sodas larger than 16 ounces in a few states? A: Students’ answers will vary. C. Consumer Behavior and Personal Growth Consumers’ face many important decisions. Among these are choices that will affect their professional careers, their quality of life, and their family lives. When consumers learn CB, they should be able to apply that knowledge by making better consumer decisions. Several topics can be particularly helpful in enlightening consumers, including: Consequences associated with poor budget allocation The role of emotions in consumer decision making Avenues for seeking redress for unsatisfactory purchases Social influences on decision making, including peer pressure The effect of the environment on consumer behavior LO: 1-4. Be familiar with basic approaches to studying consumer behavior. IV. Different Approaches to Studying Consumer Behavior The consumer researcher should realize that no single best way of studying CB exists. A brief overview of two basic approaches for studying consumer behavior have been provided. A. Interpretive Research Interpretive research seeks to explain the inner meanings and motivations associated with specific consumption experiences. Consumer researchers interpret these meanings through the words that consumers use to describe events or through observation of social interactions. Interpretive research generally falls into the broader category of qualitative research. Qualitative research tools include case analyses, clinical interviews, focus group interviews, and other means by which data are gathered in a relatively unstructured way. Data of this type requires that the researcher interpret its meaning. Hence, such results are considered researcher dependent. Interpretive researchers adopt one of several orientations. Two common interpretative orientations are as follows: Phenomenology—represents the study of consumption as a “lived experience.” Ethnography—has roots in anthropology and often involves analyzing the artifacts associated with consumption. More recently, ethnographic CB research takes a twist, brought on by the prominence of social networking in everyday life. Netnography applies ethnographic tools to study the behavior of online cultures and communities. [Instructor PPT Slides 8–10] B. Quantitative Consumer Research Quantitative research addresses questions about consumer behavior using numerical measurement and analysis tools. The measurement is usually structured, meaning that the consumer will choose a response from among alternatives supplied by the researcher. Exhibit 1.6 illustrates characteristics of quantitative and qualitative research. Quantitative research differs from interpretive research in the following areas: The data are not researcher dependent. It better enables researchers to test hypotheses as compared to interpretive research. It is more likely to stand on its own and does not require deep interpretation. [Instructor PPT Slide 11] LO: 1-5. Appreciate how dynamic the field of consumer behavior continues to be. V. Consumer Behavior is Dynamic The way marketers respond to consumer behavior is changing drastically. Marketers have historically used advances in technology to provide consumers with greater opportunities to communicate with companies. Today, billions of consumers around the world have 24-hour, seven-day-a-week access to markets via the Internet. Q: Students can be asked to identify and describe a company that adapted its core product with respect to the changing preferences of its customer base. A: Students’ answers will vary. McDonald’s has altered its menu to suit the changes in customers’ tastes. A. Internationalization Many store chains have expanded outside the United States. Consequently, companies must deal not only with geographical distances but with cultural distances as well. Starbucks and Outback Steakhouse have chains all over the world and they have incorporated changes according to the cultures in those regions. B. Technological Changes This is an age where technological advances seem to be coming at an ever-increasing rate. Technology has influenced business practices since the advent of industry. In the mid-20th century, television revolutionized consumer behavior. Home shopping became a possibility. A consumer now has 24/7 access to purchasing almost any type of product. The Internet has made geographical distance almost a nonissue. Changing Communications Consumers’ predominant form of communication was face-to-face. Many surveys of preferred communication methods don’t even list face-to-face communication. Customers still express a preference for a phone call (two-way communication) to the company just below one-way communication via email. Sending text messages, Tweeting, or attending a sponsored event come in near the bottom in terms of preferred communication tools. Facebook is second only to Google in total page views. Both are important sources of information for consumers. Marketers are fast learning how to use these tools to communicate with consumers. Big Data The term big data has come to be used to represent the massive amounts of data available to companies, which can potentially be used to predict customer behaviors. The data include internal records of customer behavior like scanner purchase data, survey responses, and web traffic records, as well as data from social network interactions and even things like GPS tracking. Researchers apply statistical tools to try to discover patterns in the data that will allow better prediction. The application of these statistical tools sometimes is referred to as predictive analytics. C. Changing Demographics In most of the Western world, notable demographic trends have shaped consumer behavior patterns greatly over the past quarter century or so. They include the following: Households increasingly include two primary income providers. Family size is decreasing throughout most of Western culture. Marketers around the world find it hard to ignore the nearly 2 billion consumers in China or the 1 billion in India. D. Changing Economy Recent years have seen a downturn in the economy in much of the developed world. A smaller percentage of the U.S. population is working today than since 1978. Today, under 63 percent have a job or are actively seeking work. Many college students are deciding to stay in school longer, given limited prospects in the work force. Mature workers are more apt to retire, given the decreased opportunity to work at an acceptable wage. These factors contribute to stagnant income. Moreover, economic, political, and social turmoil around the world contributes to a picture that leaves many consumers uneasy. As a result, consumer spending has changed in several ways. Consumers are more cautious about spending money and react more favorably to price-cutting policies. [Instructor PPT Slides 12, 13, 14, 15] Video material for this chapter is starting on page 21 of the IM Instructor Manual for CB Consumer Behaviour Barry J. Babin, Eric G. Harris 9781305403222, 9781305577244
