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Summary Principles of Consumer Behavior
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Industrial Psychology 224 (Consumer Psychology) Summaries of Textbook Chapters 1-7
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Samenvatting boek Consumer Behaviour en ArtikelenChapter 1: Technology-Driven Consumer Behaviour.
Marketing = the activity, set of institutions, and processes for creating,
communicating, delivering, and exchanging offerings that have value for customers,
clients, partners, and society.
Consumer behaviour = the study of consumers’ actions during searching for,
purchasing, using, evaluating, and disposing of products and services that they
expect will satisfy their needs.
The core of marketing is identifying unfilled needs and delivering products and
services that satisfy these needs. Consumer behaviour explains how individuals
make decisions to spend their available resources on goods that marketers offer for
sale.
The study of consumer behaviour describes what products and brands consumers
buy, why they buy them, when they buy them, where they buy them, how often they
buy them, how often they use them, how they evaluate them after the purchase, and
whether or not they buy them repeatedly.
Marketing and consumer behaviour stem from the marketing concept, which
maintains that the essence of marketing consists of satisfying consumers’ needs,
creating value, and retaining customers. It maintains that companies must produce
only those goods that they have already determined that consumers would buy.
Marketing-oriented companies do not try to persuade consumers to buy what the firm
has already produced, but rather to produce only products that they know they can
sell, thereby satisfying consumers’ needs and turning them into loyal customers.
The production concept, a business approach conceived by Henry Ford, maintains
that consumers are mostly interested in product availability at low prices; its implicit
marketing objectives are cheap, efficient production and intensive distribution. This
approach makes sense when consumers are more interested in obtaining the
product than they are in specific features, and will buy what’s available rather than
wait for what they really want.
Product concept = assumes that consumers will buy the product that offers them the
highest quality, the best performance, and the most features.
A product orientation often lead to marketing myopia, that is, a focus on the product
rather than on the needs it presumes to satisfy.
Evolving from the production concept and the product concept, the selling concept
maintains that marketers’ primary focus is selling the products that they have decided
to produce. The assumption is that consumers are unlikely to buy the product unless
they are aggressively persuaded to do so – mostly through the “hard sell” approach.
This approach does not consider customer satisfaction, because consumers who are
aggressively induced to buy products they do not want or need, or products of low
quality, will not buy them again.
The term consumer research refers to the process and tools used to study consumer
behaviour. Consumer research is a form of market research, a process that links the
consumer, customer, and public to the marketer through information in orde to
identify marketing opportunities and problems, evaluate marketing actions, and judge
the performance of marketing strategies.
,The focus of the marketing concept is satisfying consumer needs. At the same time,
recognizing the high degree of diversity among us, consumer researchers seek to
identify the many similarities that exist among the peoples of the world.
The commonality of need or interest constitutes a market segment, which enables
the marketer to target consumers with specifically designed products and/or
promotional appeals that satisfy the needs of that segment. The marketer must also
adapt the image of its product, so that each market segment perceives the product
as better fulfilling its specific needs than competitive products. Three elements of this
strategic framework are market segmentation, targeting, and positioning.
Market segmentation = the process of dividing a market into subsets of consumers
with common needs or characteristics.
Targeting = selecting the segments that the company views as prospective
customers and pursuing them.
Positioning = the process by which a company creates a distinct image and identity
for its products, services, and brands in consumers’ mind.
The marketing mix consists of four elements:
1. Product or service: the features, designs, brand, and packaging offered, along
with post-purchase benefits such as warranties and return policies.
2. Price: the list price, including discounts, allowances, and payment methods.
3. Place: the distribution of the product or service through stores and other
outlets.
4. Promotion: the advertising, sales promotion, public relations, and sales efforts
designed to build awareness of and demand for the product or service.
The societal marketing concept requires marketers to fulfill the needs of the target
audience in ways that improve, preserve, and enhance society’s well-being while
simultaneously meeting their business objectives. The societal marketing concept
maintains that companies would be better off in a stronger, healthier society and that
marketers that incorporate ethical behaviour and social responsibility attract and
maintain loyal consumer support over the long term.
In the online world, specialized “information exchanges” track who is interested in
what through “cookies”. When someone does a search, that information is captured
by a cookie and that website can sell that cookie using exchanges.
The internet drastically improved consumers’ access to the information they need
when they buy products for the first time or replace them. Simultaneously, the
internet enables marketers to gather truly behavioral data about consumers, because
they can observe shopping behaviour.
Cross-screen marketing consists of tracking and targeting users across their
computers, mobile phones, and tables. New software enables marketers to try to
figure out when a mobile user is the same person as a desktop user.
Customer value is the ratio between customers’ perceived benefits and the resources
they use to obtain those benefits.
Customer satisfaction refers to customer’s perceptions of the performance of the
product or service in relation to their expectations.
Customer retention involves turning individual consumer transactions into long-term
customer relationships by making it in the best interests of customers to stay with the
,company rather than switch to another firm. It is more expensive to win new
customers than to retain existing ones, for several reasons:
1. Loyal customers buy more products and constitute a ready-made market for
new models of existing products as well as new ones, and also represent an
opportunity for cross-selling.
2. Long-term customers who are thoroughly familiar with the company’s products
are an important asset when new products and services are developed and
tested.
3. Loyal customers are less price-sensitive and pay less attention to competitors’
advertising. They make it harder for competitors to enter the markets.
4. Servicing existing customers, who are familiar with the firm’s offerings and
processes, is cheaper
5. Loyal customers spread positive word-of-mouth and refer other customers.
6. Marketing efforts aimed at attracting new customers are expensive; indeed, in
saturated markets, it may be impossible to find new customers.
7. Increased customer retention and loyalty make the employees’ jobs easier
and more satisfying.
Researchers have identified two interrelated forms of customer engagement with
marketers:
Emotional bonds represent a customer’s high level of personal commitment
and attachment to the company.
Transactional bonds are the mechanics and structures that facilitate
exchanges between consumers and sellers.
Savvy marketers always strive to build emotional bonds with customers. Technology,
mostly in the form of social media, is the most innovative and versatile tool for
engaging customers with companies emotionally and far beyond the selling act.
Social media = means of interaction among people in which they create, share, and
exchange information and ideas in virtual communities and networks.
The objective of discerning customers’ emotional and transactional motives when
buying from a company is to understand the drivers of customer satisfaction, which
lead to customer retention and long-term relationships. As consumers buy more and
more online, it has become important to understand what makes them satisfied
during electronic transactions. Studies have identified the following determinants of
customer satisfaction with online websites and merchants:
1. Adaption: the merchant’s purchase recommendations match one’s needs; one
is enabled to order products that are tailor-made; personalized advertisements
and promotions; feeling like a unique and valued customer.
2. Interactivity: ability to view merchandise offerings from different perspectives;
search tool that enables one to quickly locate products; having tools that make
comparisons easy; useful information.
3. Nurturing: receiving reminders about making purchases; providing relevant
information for one’s purchases; acknowledgement of appreciating one’s
business; making an effort to increase business with the customer; cultivating
a relationship with the customer.
4. Commitment: delivering goods on time; responding to problems encountered;
customer-friendly return policies; taking good care of customers.
, 5. Network: customers sharing experiences about their product purchases on the
merchant’s website; useful network for sharing experiences; shoppers benefit
from the community of prospects and customers sponsored by the merchant.
6. Assortment: merchant provides “one-stop shopping” for most online
purchases; site satisfies shopping needs; merchant carries wide assortment
and selection of products.
7. Transaction ease: merchant’s website can be navigated intuitively; a first-time
buyer is able to make a purchase without much help; site is user-friendly and
enables quick transactions.
8. Engagement: the merchant’s site design is attractive; enjoyable shopping at
the site; feel that the site is inviting; feel comfortable shopping at the site.
9. Loyalty: seldom consider switching to another merchant; usually click on the
merchant’s site whenever needing to make a purchase; like to navigate the
site; one’s favorite merchant to do business with.
10. Inertia: unless becoming very dissatisfied, changing to a new merchant would
not be worth the bother; finding it difficult to stop shopping at the site; feeling
that the cost in time, money and effort to change merchants is high.
11. Trust: counting on the merchant to complete purchase transactions
successfully; trusting the site’s performance; feeling that the merchant is
reliable and honest.
Customers who are highly satisfied or delighted keep purchasing the same products
and brands, provide positive and encouraging word-of-mouth to others, and often
become “customers for life”. In contrast, those who are less satisfied or feel neutral
either switch to a competitor immediately, or wait until another marketer offers them a
somewhat lower price and then switch. Highly dissatisfied customers spread negative
and often exaggerated word-of-mouth.
A widely quoted study that linked levels of customer satisfaction with customer
behaviour identified several types of customers:
1. The Loyalists: completely satisfied customers who keep purchasing.
2. The Defectors: feel neutral or merely satisfied with the company and are likely
to switch to another company that offers them a lower price.
3. The Terrorists: are customers who have had negative experiences with the
company and spread negative word-of-mouth.
4. The Hostages: are unhappy customers who stay with the company because of
a monopolistic environment or low prices; they are difficult and costly to deal
with because of their frequent complaints.
5. The Mercenaries: are very satisfied customers who have no real loyalty to the
company and may defect because of a lower price elsewhere or on impulse,
defying the satisfaction-loyalty rationale.
Classifying customers according to profitability involves tracking the revenues
obtained from individual customers and then categorizing them into tiers. The
customer pyramid, customers are grouped into four tiers:
1. The Platinum Tier: includes heavy users who are not price-sensitive and are
willing to try new offerings.
2. The Gold Tier: consists of customers who are heavy users but not as
profitable because they are more price-sensitive than those in the higher tier,
ask for more discounts, and are likely to buy from several providers.
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