Chapter 5 – Analyzing Consumer Markets
I………………………………. Chapter Overview/Objectives/Outline
A. Overview
In addition to a company’s marketing mix and factors present in the external environment, a
market in the organization of economic activities. In analyzing a consumer market, one needs
to know the occupants, the objects, and the buyers’ objectives, organization, operations,
occasions and outlets.
The buyer’s behavior is influenced by four major factors: cultural (culture, subculture, and
decisions may involve several participants, who play such roles as initiator, influencer, decider,
buyer, and user. The marketer’s job is to identify the other buying participants, their buying
criteria, and their influence on the buyer. The marketing program should be designed to appeal
to and reach the other key participants as well as the buyer.
significant differences among the brands.
In complex buying behavior, the buyer goes through a decision process consisting of need
recognition, information search, evaluation of alternatives, purchase decision, and post
purchase behavior. The marketer’s job is to understand the buyer’s behavior at each state and
what influences are operating. This understanding allows the marketer to develop an effective
and efficient program for the target market.
itself as a lifestyle brand
B. Learning Objectives
Understand the major factors influencing consumer behavior.
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efforts.
Understand the stages in the buying decision process.
C. Outline
I. Introduction
II. What Influences Consumer Behavior? – Consumer Behavior is the study of how
A. Cultural factors
regions
3. Social class – hierarchically ordered divisions in a society; members
share similar values, interests, and behavior
a) Example of U.S. social class breakdown: lower lowers, upper
lowers, working class, middle class, upper middles, lower
uppers, upper uppers
b) Social class members can be grouped other ways;
(1) Distinct product and brand preferences
(2) Language differences
B. Social factors
1. Reference groups – all groups that have a direct or indirect influence on
a consumer’s attitudes or behavior
include religious, professional and trade-unions.
b) Aspirational – person hopes to join
c) Dissociative – values or behavior rejected
2. Family – most influential primary reference group
a) Family of Orientation – parents and siblings
b) Family of Protection – spouse and children
c) New pattern – increase in direct and indirect influence wielded
by children and teens on family purchases
3. Roles and Status
role)
1. Age and stage in the life cycle
a) People buy different goods over their lifetime
also shape buying habits
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college graduation)
d) Adults experience “transformations” as they progress through
life
first job, spousal death, career change)
2. Occupation and economic circumstances
choice
3. Personality and self-concept
a) Personality characteristics that influence buying behavior
(self-confidence, sociability, etc., tie to brand personality
same self-concept
(1) actual self-concept – how we view ourselves
(3) others
4. Lifestyle and values
a) Lifestyle – pattern of living as expressed by activities, interests,
constrained
b) LOHAS segments – Acronym for lifestyles of health and
sustainability. These people worry about the environment, care
attitudes and behavior
III. Key Psychological Processes
A………… Motivation – correlated to the strength of a need (Freud, Maslow, Herzberg)
unconscious; they cannot understand their own motivations
2. Maslow – hierarchy of needs
dissatisfiers
hunger, thirst)
5. Psychogenic needs – arise from psychological states of tension
(e.g. recognition)
B. Perception – process by which an individual selects, organizes, and
interprets information inputs to create a meaningful picture
1. Selective attention – increased amount of stimuli has led to
individuals ignoring stimuli unless it appears to relate to a
current need or appears to be outside the norm of other stimuli
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2. Selective distortion – tendency to modify input information into
personal meanings and interpret in a way to fit one’s
pre-conceptions
3. Selective retention – retain only that information that supports an
attitude or belief
4. Beliefs and attitudes – a belief is a descriptive thought a person
holds about something; an attitude is a person’s enduring
favorable or unfavorable evaluations, emotional feelings, and
action tendencies toward some object or idea
C. Learning – changes in behavior arising from experience
1. Drive – strong internal stimulus that impels action
2. Cues – minor stimuli that determine when, where, and how a
person responds
3. Generalization – make assumption and generalize future response
to similar stimuli source (e.g. good experience with a Dell
computer may lead one to assume that they will have a similar
experience with a Dell printer)
4. Discrimination – recognize differences in sets of similar stimuli
and adjust responses accordingly
D. Emotions – response may not be rational or cognitive
E. Memory
1. Short term memory (STM) – temporary repository
2. Long term memory (LTM) – more permanent repository.
Associative network memory model views LTM as a set of nodes
(information) connected by links that vary in strength. Brand
information can be in the node. Brand associations consist of all
brand-related thoughts, feelings, beliefs, perceptions, images,
experiences, attitudes, and so on that become linked to the Brand
node. See Dole example of a mental map in figure 5.2
3. Associative Network Memory Model
a. LTM can be viewed as a set of nodes and links. Nodes are
stored information connected by links that vary in
strength. ,
b. Refer to Figure 5.2 for a Hypothetical Mental Map
4. Memory Processes
a. Encoding – how and where information gets into memory
b. Strength of resulting association depends upon how much
of the information is processed at encoding.
5. Memory Retrieval – how information gets out of memory –
Three factors impact retrieval
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1. Other product information in memory can produce interference
effects causing one’s brand information to be overlooked or
confusing
2. The longer the time elapsed from encoding to recall, the weaker
the association
3. Information may be available in memory but not accessible
without cues or reminders
IV. The Buying decision Process: The Five-Stage Model
The five-stage model – the consumer may proceed sequentially through the following
stages, skip one or more stage, or move forward and backward depending on the
specific situation (refer to Figure 5.3)
A. Problem recognition: internal stimuli (e.g. feeling of hunger or thirst), or
external stimuli (e.g. advertisement) trigger need(s) or problem
recognition, which starts the buying process
B. Information search
1. Two levels of arousal
a) Heightened attention where consumer is open to
more information
resources: personal (e.g. family, friends,)
commercial variety of channel communications),
public (information and resources in public
domain), experiential (trying the good or service)
2. Steps to gathering more information (see figure 5.4)
a) Total potential brand set
not all brands
c) Consideration set: some brands will meet initial
buying criteria
d) Choice set: more information is gathered on brands
under consideration and a priority is set
C. Evaluation of alternatives
1. Consumers attempt to satisfy a need or resolve a problem
by determining if a brand’s attributes provide the
benefit(s) required to fulfill the need or resolve a problem
2. The evaluation process often reflects beliefs and attitudes
holds about something
b. An attitude is a person’s enduring favorable or
un-favorable evaluation, emotional feeling, and
action tendencies toward some object or idea
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than trying to change the attitudes
4. Consumers attitudes (i.e. judgments and preferences) are
derived via an attribution evaluation process
5. An expectancy-value-model can be used to identify the
importance a consumer places on each attribute and the
intentions
1. Attitudes of others may impact decision depending upon:
a. Intensity of other person’s attitude toward consumer’s
preferred alternative
b. Consumer’s motivation to comply with the other person’s
wishes
2. Unanticipated situational factors
loss, bad service, or opportunity costs
b. Consumer’s propensity for risk
E. Post-purchase behavior (refer to “Marketing Skills Inert: Dealing with
customer defections)
1. Consumers may experience post-purchase dissonance.
organization
3. Marketing skills: Winning back lost customers
a. It costs more to acquire new customers than to retain
existing customers or recapture lost customers
attrition
c. Effective post-purchase communications can reduce
product returns, speed problem resolution, and better
understand product use
4.
Marketing Insights: Predictably Irrational”.
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A. Decision Heuristics – “Mental shortcuts” or “rules-of-thumb”
1. Availabilty Heuristic – how quickly and easily a particular example of an
outcome comes to mind.B. Framing
the outcome is to other examples
3. Anchoring and Adjustment Heuristic – Consumers arrive at an initial
judgement and then adjust it based on additional information. ……………………
B. Framing
1. Decision framing – manner in which choices are presented to and seen by a
decision maker.
coding and evaluating financial outcomes.
3. Prospect Theory – Consumers fram their decision alternatives in terms of
gains and losses according to a value function. They are loss-averse.
VI. Executive Summary
II. Lecture(s)
various marketing management techniques and issues.
Teaching Objectives
Consider the role of marketing in the societal change and development process.
Introduce an example of one of the more important contemporary environment issues.
Discussion
driven by deficit reduction, low interest rates, and technological advances. Others pointed to
the Asian economic bust, the Dot-com stock market collapse in 2000, and began to consider the
inevitable limits to the economic and marketing environment. Some analysts felt that many
firms would not be able to maintain the pace of the new market environment, and they were
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Enron/Anderson corruption scandals at the end of 2001 set the groundwork for not just a
rethinking of America’s security and growth but also some rethinking about the way we would
NEW LIFE CYCLE PATTERNS
One of the more important predictors of the future direction for the new economy is life-cycle
stage. Typically, households headed by twenty-somethings spend less than average on most
products and services because their households are small and their incomes are low. Spending
reaches the maximum in middle age, as family size increases and incomes peak, then falls
the dramatic decline in spending by householders aged 35 to 44. This downturn is of
significance to business because the 35 to 44 age group accounts for the largest share of
American households, over 23 percent, and consequently the largest share of most consumer
markets. Ten years ago, this group spent 29 percent more than the average household on goods
the same period, the number of households headed by 45-to-54 year olds rose 44 percent, and
their aggregate spending rose an even faster 46 percent. The shift has spelled trouble for toy
companies, turmoil among fast-food retailers, and closings and consolidations in the shopping
center industry. Even though some of these changes have been beneficial, getting rid of some
that given the huge amount of debt and lack of a savings habit with this younger group, the
trend could be good for the future. The “big spender” title has moved on to another age group.
Older Americans account for the second quake in life-cycle spending patterns. Between 1987
and 2001, spending by the 65-plus set rose faster than in any other age group, fueled by a more
hyper-educated boomers hit their sixties in 2006.
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Many businesses still haven’t noticed the aging consumer markets. Some are ignoring it
entirely. Clearly older consumers are spending money, but they’re spending it on the
new consumer paradigm takes hold.
The Casual Consequence
Between 1987 and 1997, the average American household cut spending on apparel 15 percent,
after adjusting for inflation. Spending on women’s clothes fell even more, down 20 percent.
Householders aged 35 to 54 made the biggest cut. The average household in this age group
day of the week, not just on Fridays.
However, more important is the clothing industry’s failure to create products that appeal to
middle-aged women. The biggest spenders on women’s clothes are householders aged 45 to 54,
followed by those aged 55 to 64. Yet, most clothing is designed and marketed to teens and
money elsewhere.
One forward-thinking company that has captured the attention of older women is DM
Management in Hingham, Massachusetts, a catalog retailer that targets a neglected category:
affluent women over 35 (see “New Look, Better Numbers,” October 1998). Sales through its J.
Jill and Nicole Summers catalogs have grown rapidly, up more than 61 percent in 1998-9.
Focus on Fun
The entertainment industry continues to boom, not surprisingly. Each year since 1987,
Americans have devoted more of their budget to entertainment. In 2000, the average household
spent over $1,900 entirely discretionary dollars on good times, up from $1,686 in 1987, after
adjusting for inflation—an 8 percent jump. Behind this boom is an affluent population and the
group spent 33 percent more on entertainment than the average, pushing 35-to-44 –year olds
into second place. Rising to third place were householders aged 55 to 64, displacing the 25-to
-34 age group.
Nevertheless, the senior citizens have become America’s true party animals. The average
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revolution: Those aged 75-plus spent 98 percent more on entertainment in 2000 than in 1990,
the biggest increase of any age group.
The bottom line is that Americans aged 55 and older account for a larger share of spending on
entertainment than those under age 35. Despite this fact, the entertainment industry has done
possibly lure someone who is 49 or 59 years old?” asks a retail consultant. “If anything, they
are repelled by congested aisles and merchandise that is not appropriate.”
Stomach Wars
Americans are spending less on food than they once did, and that is a problem for the
USA, the trade magazine of the National Restaurant Association.
Younger householders have cut their food spending the most. In 1987, the best customers in the
food-away-from-home category were householders aged 35 to 44, but the recession took away
their appetites. From 1987 to 1997, they cut their restaurant outlays by an enormous 23
early-bird special.
Restaurants will have a difficult time recapturing those lost customers. “The low end of the
industry is in for big trouble,” says the editor and publisher of a weekly newsletter for food
marketers. “It’s falling behind because so many supermarket chains have made an effort to
supplement their sales with home meal replacements.”
of an occasion.”
Health Care Costs Continue the Spiral Upward
No one escaped the rising costs of medical care in the past decade: The average household
spent $1,914 out-of-pocket on health care costs in 1997, a 16 percent increase since 1987,
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spent the least.
Not surprisingly, health care consumes a sizable share of older householders’ budgets. People
aged 65 to 74 devote 10 percent of their annual spending to out-of-pocket health care costs.
Those aged 75 or older shell out even more—14 percent of spending overall, or $2,799 in
1997. Despite Medicare coverage, 53 percent of seniors’ health care dollars go to insurance
bills. Out-of-pocket Medicare costs, plus the supplemental insurance purchased by many,
boosts their spending on health insurance far above that of any other age group.
These facts are of utmost importance to today’s middle-aged adults. Proposals to raise the age
Changing Buying Patterns
Perhaps nothing exemplifies the battle for discretionary dollars better than the war between the
furniture and computer industries. As spending on computers has surged, spending on furniture
has fallen.
By all accounts, these should be golden years for the furniture industry. The economy is up,
decade ago.
Forget the new sofa: householders want a computer and Web access. In 2000, the average
household spent $260 on computer hardware, software, and online services for non-business
use. While that may not sound like much, it is an average and includes those who spent
something and those who spent nothing. More impressive: if you rank all the products and
more on computers than householders aged 25 to 34.
With computer spending surging, other discretionary categories have suffered-and a reversal is
unlikely as the Internet’s popularity grows.
The New Adventurers
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order. All other age groups spend less than average on travel. Householders aged 55 to 64
devote the largest share of their spending money to travel, nearly 5 percent. In fact, this age
group spends more on travel ($1,706 in 1997, on average) than it does on clothes ($1,656), and
almost as much as it spends on furniture, appliances, floor coverings, bed sheets, and bathroom
linens combined ($1,728).
industries that will lose out to wanderlust. Before the losses mount, businesses should follow
the money, targeting the growing numbers of affluent, sophisticated, older consumers.
Retail consultants are optimistic. As boomers inflate the ranks of older consumers, businesses
may finally begin to get it. “Boomers are actually going to convince us that youth is something
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