Roger D. Blackwell Paul W. Miniard James F. Engel

2. Consumer Behavior Roger D. Blackwell Paul W. Miniard James F. Engel Requests for permission to make copies of any part of the work should be mailed to the following address: Permissions Department, Thomson Business and Economics 5109 Natorp Boulevard Mason, OH 45040 800–423–0563

3. CHAPTER 2 Creating Marketing Strategies for Customer-Centric Organizations

4. Consumer Analysis The process of understanding consumer trends, global consumer markets, models to predict purchase and consumption patterns, and communication methods to reach target markets most effectively

5. Strategy A decisive allocation of resources (capital, technology, and people) in a particular direction

6. Customer-Centric Organizations A strategic commitment to focus every resource of the firm on serving and delighting profitable customers

7. Characteristics of Customer-Centric Organizations Shared Vision and Values Cross-Functional Integration System-Wide Simultaneous Training Customer Based Metrics

8. Characteristics of Customer-Centric Organizations Shared Vision and Values Cross-Functional Integration System-Wide Simultaneous Training Customer Based Metrics The goal of a customer-centric organization is to provide a consumer with more value than its competitors

9. Value The difference between what consumers give up (pay with time, money, or other resources) for a product and the benefits they receive

10. Marketing Strategy Involves the allocation of resources to develop and sell products or services that consumers will perceive to provide more value than competitive products or services

11. Where Does Consumer Behavior Fit In?

12. Marketing Strategy Involves the allocation of resources to develop and sell products or services that consumers will perceive to provide more value than competitive products or services The process includes market analysis, market segmentation, brand strategy, and implementation with the consumer at the core

13. Market Analysis Consumer Company Environmental Political/Legal Implementation in Marketplace Segmentation Demographic Situational Psychographic Marketing Mix Product, Brand, Price, Place Promotion, and 7Rs

14. Market Analysis The process of analyzing changing consumer trends, current and potential competitors, company strengths and resources, and the technological, legal, and economic environments

15. Market Analysis The process of analyzing changing consumer trends, current and potential competitors, company strengths and resources, and the technological, legal, and economic environments One goal is to minimize the number of failed products introduced to the market by better understanding the wants and needs of the market

16. Market Analysis: Consumer Insight and Product Development Consumer Insight: an understanding of consumers’ expressed and unspoken needs and realities that affect how they make life, brand, and product choices. Combines fact (from research) and intuition to yield an insight that can lead to a new product, existing product innovation, brand extension, or revised communication plan

17. Market Analysis: Consumer Environment Includes demographic trends, personal and group influences, knowledge, attitudes, motivation, purchase and consumption patterns, changing consumer needs, wants, and lifestyles

18. Market Analysis: Consumer Environment Includes demographic trends, personal and group influences, knowledge, attitudes, motivation, purchase and consumption patterns, changing consumer needs, wants, and lifestyles Changes in the consumer environment can lead to new product ideas, product adaptations, new packaging or new services to help consumers meet their changing needs -iPod Accessories

19. Market Analysis: Corporate Strengths and Resources Resources: - Financial - Technological - Personnel / managerial - Production - Development and design - Research - Marketing / advertising

20. Market Analysis: Corporate Strengths and Resources Resources: - Financial - Technological - Personnel / managerial - Production - Development and design - Research - Marketing / advertising -Proctor and Gamble once developed everything internally. Currently 35% of its innovations are based on licensing and strategic acquisitions

21. Market Analysis: Current and Potential Competitors • - Who are current competitors and which firms are likely to become competitors? • - What are advantages/disadvantages of competitors and competitive products? • What do alternative scenarios show of how competitors react to new products or innovations?

22. Market Analysis: Market Environment Government Stability and Regulations State of Economy Market Environment Physical Conditions Technology

23. Market Analysis Consumer Company Environmental Political/Legal Implementation in Marketplace Segmentation Demographic Situational Psychographic Marketing Mix Product, Brand, Price, Place Promotion, and 7Rs

24. Market Segmentation Process of identifying groups of people who behave in similar ways to each other, but somewhat differently than other groups

25. Inferring Other Behaviors From Product Usage

26. Inferring Other Behaviors From Product Usage

27. Market Segmentation Process of identifying groups of people who behave in similar ways to each other, but somewhat differently than other groups Results in market segment: a group of consumers with similar behaviors and needs that differ from those of the entire mass market Goal: minimize variance within groups and maximize variance between groups Opposite of market aggregation

28. Market Segmentation Market aggregation:when organizations choose to market and sell the same product or service to all customers (also known as mass marketing)

29. Market Segmentation Identifying Segments

30. Market Segmentation Increasing diversity in consumer needs and wants leads to mass customization: customizing goods for individual customers in high volumes and at relatively low costs

31. Market Segmentation Increasing diversity in consumer needs and wants leads to mass customization: customizing goods for individual customers in high volumes and at relatively low costs Key is understanding which customized features customers value the most

32. Market Segmentation Increasing diversity in consumer needs and wants leads to mass customization: customizing goods for individual customers in high volumes and at relatively low costs Key is understanding which customized features customers value the most Ability to reach “segment of one”

33. Market Segmentation Segmentation can increase customer satisfaction and profitability - decreases marketing expenses - increases value (and therefore price) to consumers

34. Criteria for Choosing Segments Measurability: ability to obtain information about the size, nature, and behavior of a market segment Accessibility: degree to which segments can be reached, either through targeted advertising and communication programs or multiple retail channels

35. Criteria for Choosing Segments Substantiality: size of the market—is it large enough to be profitable? Congruity: how similar members within the segment exhibit behaviors or characteristics that correlate with consumption behavior

36. Bayesian Analysis Statistical technique based on a theorem that expresses uncertainty in probability terms Allows consumer analysts to make “educated guesses” on how the human mind affects behavior or “why people buy” Analyzes data collected from point-of-sale (POS) scanners to identify patterns of behavior that define market segments

37. Market Analysis Consumer Company Environmental Political/Legal Implementation in Marketplace Segmentation Demographic Situational Psychographic Marketing Mix Product, Brand, Price, Place Promotion, and 7Rs

38. Market Mix Strategies: Product Product: the total bundle of utilities (or benefits) obtained by consumers in the exchange process

39. Market Mix Strategies: Product Product: the total bundle of utilities (or benefits) obtained by consumers in the exchange process Internal considerations External considerations

40. Market Mix Strategies: Product Internal considerations include: - What are the costs of developing, producing, distributing, and selling the product? External considerations include: - What form of product best serves consumption patterns for the target segment - What packaging will most likely attract consumers and fulfill transportation, usage, and disposal of the product? - How will consumers compare this product to competitive or substitute products?

41. Market Mix Strategies: Place Place: physical distribution and location of sale - Where will consumers expect and want to buy this product? - What are the most effective outlets through which to sell the product and how best to get it there?

42. Market Mix Strategies: Price Price: total bundle of disutilities (costs) given up by consumers in exchange for the product

43. Market Mix Strategies: Price Pricing considerations include: - What is the best pricing policy for the product or for the store? - How will consumers react to Everyday Low Prices or promotional prices? - Is it more important to have the “lowest price” or prices in the range consumers expect to pay? - What effect does price reduction or price ending have on perceived quality of product? - What does pricing policy need to be to maintain a healthy profit margin?

44. Market Mix Strategies: Promotion Promotion: activities involved in selling a product, including advertising, public relations, sales promotions, and personal sales - What message should be sent to consumers? - Which forms of communication will best reach specific segments? - What type of communication should occur at various stages of purchase and consumption - How should different product attributes be positioned through different forms of media?

45. Market Mix Strategies: Brand Brand: A product or product line, store, or service with an identifiable set of benefits, wrapped in a recognizable personality Functional elements Emotional elements Brand Promise

46. Market Mix Strategies: Brand Functional elements - Performance, quality, price, reliability, logistics Does the brand solve a problem as expected and do what it is supposed to do? Emotional elements - Image, personality, style, evoked feelings Does the brand create an emotional connections between the customer and the product or firm? Brand Promise What can consumer expect in exchange for their money?

47. Market Mix Strategies: Brand Brand: A product or product line, store or service with an identifiable set of benefits, wrapped in a recognizable personality Brand Equity Brand Personality Brand Protection

48. Market Mix Strategies: Brand Brand Equity Difference in value created by the brand minus the cost of creating the brand Brand Personality Reflection consumers see of themselves or think will develop by using a brand Brand Protection By promising a certain outcome, brands reduce the risk to consumers that the product may not deliver as expected

49. Transforming Customers into Friends and Fans

50. Market Analysis Consumer Company Environmental Political/Legal Implementation in Marketplace Segmentation Demographic Situational Psychographic Marketing Mix Product, Brand, Price, Place Promotion, and 7Rs