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MNM2605NOTES 2023.
, MNM2605 Consumer Behaviour
Study Unit 1
1 Defining consumer behaviour
Consumer behaviour definition: It is the study of individuals, groups or organisations 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.
This definition implies that there are indirect influences on consumer decisions and that
decisions involve more than the buyer and seller.
Also implies consumers doesn’t only refer to individual’s bur organisations, families and
groups (types of consumer) – distinguish between business and household consumers.
Noted that mental and physical activities are included in consumer behaviour
There are three consumer roles e.g. buyer, payer and user
Study Guide Definition: a subject studying how individuals spend their available resources (time,
money, effort) on consumption related items. Includes what they buy, when they buy it and why
they buy it and how often they buy it and frequently they use it.
2 Importance of consumer behaviour
Businesses becoming increasingly aware of and recognising the importance of understanding
consumer behaviour and the vital role it plays in their success. Compete for patronage even
though products are virtually the same.
Organisations can achieve competitive advantage by anticipating and predicting customer
needs and wants and providing benefits which customers may be unaware of at the time but
may desire in the future.
Over-arching goal of a consumer-centred organisation is to maximise long term customer
value, satisfaction and happiness whilst maximising profits (being better at this than the
competition)
By learning more about how consumers behave, can gain better understanding of why
customers buy what they buy or why they respond to market stimuli in a certain way
Such an understanding makes it possible to develop marketing communications that are
focused on the way that customers react.
For a benefit to be meaningful, consumer must perceive it to be so.
Can only achieve long-term value if they retain customers (by satisfying needs, adopting
marketing concept and focusing on customer)
Three basic reasons for understanding consumer behaviour:
Customer satisfaction customer retention
The marketing concept focus on needs Long term survival
Customer focus serve needs of society
1 Customer satisfaction and customer retention
Cost of organising and recruiting customers is far greater than cost associating with
retention
Growth in customer loyalty schemes as businesses have realised advantages of retention
No longer sufficient just to satisfy customer needs in single transaction, must aim to retain
the customer for life – customer retention
Organisations that meet or exceed customers’ expectations of service, quality, price and
delivery achieve such lucrative relationships.
The realisation that long-term survival is possible only if customer satisfaction is achieved
has led companies and their employees to change the way in which they treat customers.
, Employees are told that customer satisfaction is the bottom line
Key to business success is in building relationships between brands and customers that
will last a lifetime (retaining customers)
Marketers who believe in relationship marketing are making it company policy to build
mutually-satisfying long-term relationships with key constituents to earn and retain their
business.
2 The marketing concept
Marketing maturity tends to be a gradual development process and firms that have
reached full marketing orientation have done so by evolving through secondary steps of
development.
Four competing orientations have strongly influenced marketing activities over the years:
Production orientation: in 19th and most of 20th century primary purpose of
business was production. Production orientation focused on the internal
capabilities rather than desires and needs of the marketplace. Management
assessed resources and asked “what can I do best” “where do our talents lie”. Major
shortcoming is fact that this orientation didn’t consider whether goods and services
produced met the needs of the marketplace.
Sales orientation: Not enough to produce goods efficiently in an increasingly
competitive environment. Demand needed to be created through art of persuasion.
Based on premise that people would buy more products and services if aggressive
sales techniques were used. Marketing then simply meant selling. Major
shortcoming: lack of understanding of needs and wants of marketplace – can’t
convince people to buy things they don’t need or want.
Marketing orientation: Marketing orientation is seen as the implementation of the
marketing concept and is based on premise that a marketer should make what it
could sell and NOT sell what it could make. Focussed on needs of buyers. Through
focusing on customer need satisfaction companies could ensure that increased sales
and profits followed. To marketing oriented firms, marketing means building long-
term relationships with customers. This orientation has led to what is commonly
called the pure marketing concept.
Marketing concept can be regarded as an ethical code/philosophy according to
which the marketing task is performed. Serves as a guideline for management
decision making about an organisation’s entire spectrum of activities. Essence lies in
following three principles:
Consumer orientation (all actions should be to satisfy needs but this should be
balanced with organisational resources)
Profit orientation (consumer orientation viewed as a means of achieving goals
of the business; must try to maximise profits)
Organisational integration (e.g. systems orientation: organisation is seen as an
integrated whole / group of units working together to achieve a joint objective.
All business units should be targeted toward satisfaction of customer needs and
wants)
Societal marketing orientation: Societal marketing orientation questions whether
the marketing concept as it stands is adequate in age of environmental problems,
resource shortages, rapid population growth, worldwide economic problems and
neglected social services. Requires marketers to balance company profits, customer
wants AND society’s interests. Businesses often demonstrate social responsibility
through sponsoring community projects and employee programmes such as health
programmes. Abstains from any action conflicting with society’s current norms,
moral and ethical standards.
, 3 Customer focus
Organisations that focus on needs of customers ensure that the needs of society as a whole
are served better. Customers express their support for the company by buying and
continuing to buy their products. Generally loyalty depends on the perceived value of the
products to the customer.
3 The applications knowledge of consumer behaviour
Consumer behaviour plays an important role in the following aspects:
Marketing strategy: Any marketing strategy is based on beliefs about consumer behaviour.
Decisions based on assumptions and sound theory, as well as on results of relevant market
research are more likely to be successful than decisions based on intuition alone. Thus c
company who knows a great deal about its consumers has a significant advantage over
competitors. Understanding consumer behaviour reduces chances of marketers making
incorrect decisions. Consumer behaviour affects the strategic situation and strategy
selection of the organisation.
Social marketing: Organisation endeavours to determine needs and wants of target
markets and satisfying them more effectively whilst preserving or enhancing the long term
well-being of both consumers and society. Marketers should see their role in broader
terms and should consider the ethical, environmental, legal and social context of activities.
Social marketing can be carried out in various ways e.g.:
Supporting behaviour change campaigns
Promoting awareness of social issues through activities such as sponsorships, licensing
agreements and advertising
Donating a percentage of revenue earned during a specified period of support to a
particular cause
Donating money, goods or time to help non-profit organisations, groups or individuals
Providing in-kind or volunteer services in the community
Implementing business practices protecting the environment and animal rights.
Becoming better-informed individuals: By knowing how consumers behave we can
increase our understanding of ourselves and the environment. Organisations all over the
wold are spending millions to firstly gain understanding of customers and secondly
influence society as a whole and certain groups in particular to buy their goods. This is
done by advertising, product packaging, product features, sales themes and store
environment. It is important that customers are aware of the methods used by companies
to influence them as this will enable them to make properly informed decisions about what
they buy instead of being unwitting “victims”.
4 Role of consumer behaviour in a marketing strategy
Companies fight for patronage of customers. Even through products are virtually the same,
organisations try to use their understanding of customers’ buying motives to offer these
customers better value.
Organisations attempt to differentiate themselves from their competitors based on some
benefits that its products or operations offer to its customers.
In order for this value to be meaningful, the customer must perceive it to be meaningful.
Customer value: the difference between the benefits derived from a product and the costs
that the consumer had to incur to acquire those benefits. E.g. a car can provide freedom,
image, better use of time, social acceptance but consumer must pay for car and insurance
and risk the fact that it may get damaged and stolen. Difference between total benefits and
total cost makes up customer value.
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