CHAPTER 1
Consumer Behavior and Technology
LEARNING OBJECTIVES
After reading, studying and analyzing this chapter, students should be able:
1.1 To understand the evolution of the marketing concept, what consumer behavior is,
and the components of strategic marketing.
1.2 To understand how technology has benefited both marketers and consumers.
1.3 To understand providing value and satisfaction and how technology has enhanced
customer loyalty and retention.
1.4 To understand marketers’ social and ethical responsibilities.
1.6 To explain how the knowledge of consumer behavior advances seeking employment
after graduation.
CHAPTER SUMMARY
Learning Objective 1.1: To understand the evolution of the marketing concept, what
consumer behavior is, and the components of strategic marketing.
determined that consumers will buy. Marketing myopia is a focus on the product rather
than on the needs that the product presumes to satisfy.
The marketing mix (also known as the four Ps) consists of product, price, place
(distribution), and promotion. Market segmentation, targeting, and positioning are the
foundation of turning consumers into customers. Market segmentation is the process of
dividing a market into subsets of consumers who share common needs or characteristics.
Targeting means selecting the segments that the company views as prospective customers
and pursuing them. Positioning is the process by which a company creates a distinct
image and identity for its products, services, and brands in consumers’ minds. The
societal marketing concept requires marketers to fulfill the needs of their target markets
in ways that improve, preserve, and enhance society’s well-being and simultaneously
meet their business objectives.
Learning Objective 1.2: To understand how technology has benefited both marketers
and consumers.
Technology has revolutionized the marketing mix, segmentation, targeting, positioning,
and customer retention. When consumers use their computers, cell phones, electronic
readers, tablets, and other electronic devices, they provide marketers with the kind of
information that enables companies to target them immeasurably more effectively than
during the pre-internet days. Online technologies create a “value exchange:” marketers
provide value to consumers in the form of information, opportunities to customize
Technology also enables marketers to refine their strategies because they can readily
customize their offerings and promotional messages, offer more effective pricing and
shorter distribution channels, and build long-term relationships with customers. By using
rapidly advancing technologies to track consumers, marketers can identify opportunities
for creating new offerings, as well as improving and extending existing products and
services. They can gather comprehensive consumer information by tracking consumers
online, requiring prospective buyers to register at their websites, and combining this
knowledge with demographic and lifestyle data gathered offline.
Learning Objective 1.3: To understand providing value and satisfaction and how
technology has enhanced customer loyalty and retention.
Customer value is the ratio between customers’ perceived benefits and the resources they
use to obtain those benefits. Customer satisfaction is customers’ 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. Technologies
allow marketers to retain more customers and collect highly sophisticated data about
shoppers’ preferences and post-purchase evaluations. Consumers who are highly satisfied
or delighted keep buying the same products and brands, provide positive word-of-mouth
Learning Objective 1.4: To understand marketers’ social and ethical responsibilities.
The marketing concept—fulfilling the needs of target audiences— is shortsighted. Some
products that satisfy customer needs are harmful to individuals and society, and others
cause environmental deterioration. Studying consumer behavior results in an
understanding of why and how consumers make purchase decisions. 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.
Learning Objective 1.5: To understand consumer decision-making as the foundation of
this book.
inputs influence the consumer’s recognition of a need, pre-purchase search for
information, and evaluation of alternatives. The output stage consists of two post-
decision activities: purchase behavior and post-purchase evaluation.
This book includes five parts. Part I provides an overview of marketing and consumer
behavior and the components of strategic marketing. Part II describes the consumer as an
individual and explains the psychological factors that affect consumer behavior. Part III
addresses the communication and persuasion process, the revolutionary impact of new
media, and the roles of reference groups, opinion leaders, and word-of-mouth. Part IV
examines consumers in their social and cultural settings. Part V includes discussions of
the consumer decision-making process, consumers’ reactions to innovative products,
marketers’ social responsibility and ethically questionable practices, and the methodology
of consumer research.
Learning Objective 1.6: To explain how the knowledge of consumer behavior advances
seeking employment after graduation.
Students with expertise in consumer behavior should pursue employment in three areas:
brand management, advertising, and consumer research.
CHAPTER OUTLINE
INTRODUCTION
1. Marketing is the activity, set of institutions, and processes for creating,
communicating, and delivering offerings that have value for customers, clients,
partners, and society.
2. Consumer behavior is the study of consumers’ actions during searching, evaluating,
3. Consumer purchases are determined not by needs alone, but also by how the product
helps owners express their characteristics.
*****Use Key Terms marketing, consumer behavior Here, Use Figure #1.1
Here*****
The Marketing Concept
1. Marketing and consumer behavior stem from the marketing concept, which
maintains that marketing consists of satisfying consumers’ needs, creating value, and
retaining customers, and that companies must produce only those goods that they
have already determined would satisfy consumer needs and meet organizational
goals.
*****Use Key Term marketing concept Here, Use Learning Objective #1.1 Here; Use
Figure #1.2 Here; Use Review and Discussion Question 1.1 Here*****
2. The production concept focused on cheap, efficient production and intensive
distribution.
4. A product orientation may lead to marketing myopia, or a nearsighted focus on the
product and its direct competitors vs. the market’s needs.
5. The selling concept maintains that marketers should sell the products they made
instead of only making products they could sell.
Market Segmentation, Targeting, and Positioning
1. Market segmentation is the process of dividing a market into subsets of consumers
2. Targeting is selecting the segments identified as prospective customers and pursuing
them with distinct offerings.
3. Positioning refers to the development of a distinct image for the product or service in
the mind of the consumer. The image should differentiate the offering from the
competition by stressing the product’s unique benefits.
4. The marketing mix consists of a company’s service and/or product offerings to
consumers and the methods and tools it selects to accomplish the exchange.
5. Four basic elements (known as the four Ps) include:
a) The product or service —features, designs, brands, packaging, post-purchase
benefits, etc.
b) The price—list price (including discounts, allowances, and payment methods).
c) The place—distribution of the product or service.
d) Promotion—advertising, sales promotion, public relations, and sales efforts
designed to build awareness of and demand for the product or service.
Technology Benefits Consumers and Marketers
*****Use Learning Objective #1.2 Here *****
2. Marketers provide value to consumers via opportunities to shop more efficiently,
customize products easily, and access entertainment content and information.
3. Consumers provide value to marketers by “revealing themselves” while online, which
enables companies to market their products more efficiently and precisely.
***** Use Hands-on Assignment #1.9 Here*****
4. Marketers have been offering more personalized products.
5. Figure 1.3 illustrates that across age groups, most Americans own technological
9. Cross-screen marketing consists of tracking and targeting users across their
computers, mobile phones and tablets.
Customer Value, Satisfaction, Trust, and Retention
*****Use Learning Objective #1.3 Here *****
1. Customer value is defined as the ratio between the customer’s perceived benefits
2. Customer satisfaction is the individual’s perception of the performance of the
product or service in relation to his or her expectations.
3. The overall objective of providing value to customers continuously and more
effectively than the competition is to have and to retain highly satisfied customers.
4. It is more expensive to win new customers than to retain existing ones for several
reasons:
a) 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.
b) 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.
the amortized cost.
e) Loyal customers spread positive word-of-mouth and refer other customers.
f) Marketing efforts aimed at attracting new customers are expensive; indeed, in
saturated markets, it may be impossible to find new customers. Low customer
turnover is correlated with higher profits.
Technology and Customer Relationships
1. Technologies often enhance customer relationships and retention by engaging
consumers with brands.
a. Emotional bonds represent a customer’s high level of personal commitment
and attachment to the company.
***** Use Key Terms emotional bonds, transactional bonds, social media Here *****
2. Emotional and transactional motives should be discerned to understand drivers of
customer satisfaction, which leads to retention and long-term relationships.
a. Determinants of customer satisfaction online include adaptation, interactivity,
nurturing, commitment, network, assortment, transaction ease, engagement,
***** Use Table 1.1 Here *****
3. Customers who are highly satisfied or delighted keep purchasing the same products
4. With respect to customer satisfaction there might be several types of customers:
a) Loyalists—completely satisfied customers who keep purchasing.
b) Apostles—those whose experiences exceed their expectations and who provide
very positive word of mouth about the company to others.
c) Defectors—those who feel neutral or merely satisfied and are likely to stop
doing business with the company.
5. Companies classify customers according to profitability by tracking revenues
obtained from individual customers and categorizes them. For example:
a. Diamonds – customers who travelled at least 250,000 miles in first class in
one year
***** Use Figure 1.5 Here *****
6. Companies must develop measures to assess customer retention strategies, which may
include:
Social Responsibility and Ethics
***** Use Learning Objective 1.4 Here*****
1. Socially responsible marketing suggests marketers would be better off if they
2. The societal marketing concept requires marketers to fulfill the needs of the target
4. Some companies incorporated social goals into their mission statements because they
believe it is important for organizational effectiveness.
5. Non-profit organizations also advance causes they believe are ethically and morally
right.
*****Use Key Term societal marketing concept Here; Use Figure 1.4 Here; Use
Review and Discussion Question 1.3 Here; Use Hands-On Assignment 1.10 Here
*****
Consumer Decision-Making
***** Use Learning Objective 1.5 Here *****
1. Marketing theorists borrowed heavily from concepts developed in other scientific
disciplines to understand consumer behavior:
a) Psychology—the study of the human mind and mental factors that affect
behavior.
***** Use Key Terms psychology, sociology, anthropology, communication
Here*****
2. The process of consumer decision making can be viewed as three distinct but
interlocking stages: the input stage, the process stage, and the output stage.
a) The input stage influences the consumer’s recognition of a product need and
consists of:
i) The firm’s marketing mix (the product itself, its price, promotion, and
distribution).
ii) The external sociocultural influences on the consumer (reference groups,
family, social class, culture and subculture).
iii) Both are communicated using different communication sources.
b) The process stage focuses on how consumers make decisions.
i) The psychological factors inherent in each individual (motivation,
perception, personality, attitudes, perception) affect how the external inputs
influence the consumer’s recognition of a need, prepurchase search for
information, and evaluation of alternatives.
ii) The experience gained through evaluation of alternatives, in turn, affects the
consumer’s existing psychological attributes.
c) The output stage of the consumer decision-making model consists of two
closely-related post decision activities:
i) Purchase behavior
ii) The post-purchase evaluation
*****Use Figure #1-10 Here*****
This Book
The book is divided into five parts:
1. Part I provides an overview of marketing and consumer behavior and the
components of strategic marketing.
2. Part II explains the psychological factors that affect consumer behavior.
a) Chapter 3 discusses consumer motivation and the impact of personality
characteristics on consumer behavior.
b) Chapter 4 explores consumer perception/how the way we view the world around
us affects our shopping patterns.
3. Part III addresses the communication and persuasion process along its components:
sender, message, media, receiver, and feedback.
a) Chapter 7 introduces the elements of the communication process and explains
4. Part IV examines consumers in their social and cultural settings.
a) Chapter 10 discusses the family as a consumption unit and its standing within
the social-class structure.
5. Part V consists of three chapters.
a) Chapter 14 discusses the consumer decision–making process and integrates parts
II, III, IV.
b) Chapter 15 explores marketers’ social responsibility and potential ethically
questionable practices.
c) Chapter 16 describes the methodology of consumer research.
Employability
*****Use Learning Objective #1.6 Here *****
2. Brand management is the process of maintaining, improving, and upholding a brand
so that it is clearly differentiated from other offerings in the same product category.
4. Students understand how consumers’ purchases are influenced by their peers, family,
and social standing, and their values and customs.
5. Advertising includes writing advertising copy, creating visuals, ensuring that the right
REVIEW AND DISCUSSION QUESTIONS
1.1 Describe the interrelationship between consumer behavior and the marketing
concept.
The term consumer behavior refers to the behavior that consumers display in
searching for, purchasing, using, evaluating and disposing of products and services
that they expect will satisfy their needs. The study of consumer behavior is the study
of how individuals make consumption-related decisions. The key assumption
underlying the marketing concept is that a company must determine the needs and
1.2 A company is introducing a new e-book reader. Suggest segmentation, targeting,
and positioning strategies for the new product.
The focus of the marketing concept is consumer needs. Three elements for creating a
strategic framework for discovering and analyzing those needs are market
segmentation, market targeting, and positioning. Market segmentation is the process
of dividing a market into subsets of consumers with common needs or characteristics.
Because most companies have limited resources, few companies can pursue all of the
1.3 Define the societal marketing concept and discuss the importance of integrating
marketing ethics into the company’s philosophy and operations.
The societal marketing concept requires marketers to fulfill the needs of the target
1.4 Describe how technology enhances the exchange between marketers and
consumers.
Marketers provide value to consumers in the form of information, including
opportunities to customize products easily and entertainment content. Consumers
1.5 It is often said that consumers receive “free” content online. Is this true? Why
or why not?
1.6 Discuss the interrelationships among customer expectations and satisfaction,
perceived value, and customer retention. Why is customer retention essential?
Perceived value is relative and subjective while customer satisfaction is the
individual’s perception of the performance of the product or service in relation to his
or her expectation. The concept of customer satisfaction is a function of customer
expectations. Customers whose experiences match expectations will be satisfied and
customers whose expectations are exceeded will be very satisfied or delighted.
1.7 How can marketers use technology to improve customer retention and enhance
their bonds with customers?
1.8 Discuss the role of the social and behavioral sciences in developing the consumer
decision-making model.
Consumer behavior was a relatively new field of study in the mid– to late-1960s.
Because it had no history or body of research of its own, marketing theorists
borrowed heavily from concepts developed in other scientific disciplines. These
HANDS-ON ASSIGNMENTS
1.9 Locate two websites that you visit regularly and discuss how they can (and
probably do) track your behavior and enable marketers to target you more
effectively.
Instructor’s Discussion
In order to answer this question, students should take notice of the use of information
technology, databases, interactive communications, and usage of satisfaction surveys.
Students might also wish to be aware of how technology’s impact on our
understanding of and interactions with consumers might be relevant to the exercise.
1.10 Locate two examples (one advertisement and one article) depicting practices
that are consistent with the societal marketing concept and two examples of
business practices that contradict this concept. Explain your choices.
Instructor’s Discussion
The societal marketing concept is described as being one where the marketer is
required to adhere to the principles of social responsibility in the marketing of their
goods and services; that is, they should endeavor to satisfy the needs and wants of
their target markets in ways that preserve and enhance the well-being of consumers
1.11 Locate two examples of technological innovations designed to enhance customer
retention and discuss them.
Instructor’s Discussion
Student examples may vary. Take the opportunity to remind students how the
examples relate to satisfaction, which contributes to retention, and review the
S.T.A.R. PROJECTS
Ethical Issues in Consumer Behavior
S.T.A.R. Project #1
H&R Block is the 500-pound gorilla of individual income tax preparation. The company
has a significant presence in the U.S. market (especially during the spring tax season).
H&R Block has always been an aggressive competitor in this highly competitive market.
A trade organization for accountants believes that H&R Block became too aggressive
when it ran an ad campaign that showed a consumer running in a dark alley confronted
with neon signs flashing “Prestige CPA,” “Taxes Here,” and “Tax Consortium.” The
consumer appears confused and frightened. At the end of the alley a solution to the fear
Instructor’s Discussion
S.T.A.R. Project #2
Many consumers trust their medical supply needs to Johnson & Johnson. Johnson &
Johnson is very clear as to its mission and commitment to the health and safety of its
customers. The company is often cited as an example of how to do things right with
respect to relations with customers and the public. Johnson & Johnson has gone so far as
to construct a company credo that it features on its Web site (see www.jnj.com : Our
Company: Our Credo Values).
a. Assume that you have just been hired as a customer relations expert by Johnson &
Johnson to answer a growing number of complaints that JNJ products are over–
priced and have lost their sense of value for the consumer. The complainants cite
lower priced private labels and store brands as illustrations of frustrations with JNJ.
As one consumer states, “A band aid is just a band aid after all!” What would be
your response?
b. How could you use the Johnson & Johnson Credo to aid you in your response?
Instructor’s Discussion
value? Take the two to three best responses and read them in class. An additional aid is to
download the JNJ credo and prepare it as a handout. What does the JNJ credo say about
the company’s commitment to ethical behavior?
Small Group Projects
S.T.A.R. Project #3
Who designed the chicken sandwich? According to information provided on the Chick-
fil-A Web site (www.chick-fil-a.com) it was Chick-fil-A founder Truett Cathy. Mr.
Cathy is also known for his unique approach to the fast food business. This unique
approach has at its center an appreciation of family values (the restaurants are closed on
Sundays and all children’s toys emphasize values rather than gimmicks or cartoon
characters). After visiting the company Web site, your group’s assignment is to list the
ways that Chick-fil-A provides customer value, satisfaction, and retention for its
customers.
Instructor’s Discussion
S.T.A.R. Project #4
Nike is not just for males. This shoe giant has made great strides in market segmentation,
customization, and customer relationship development. The result is that Nike is also a
premier female shoe company. Your group assignment is split your team and analyze
Nike. To do this, one team should review the www.nike.com Web site and analyze its
contents based on its appeals to the male market segment (i.e., styles, language, colors,
celebrity endorsers, games, customer relationships, etc.). The second team should analyze
the Web site based on its appeals to the female segment (i.e., styles, language, colors,
celebrity endorsers, games, customer relationships, etc.). The two teams should now
match their findings and write a summary report. What has Nike learned about market
segments and market targets? How do the two sections of the nike.com Web site assist
Nike in its marketing efforts?
Instructor’s Discussion
This exercise gives two small groups within a larger group the chance to explore Nike’s
