Marketing Chapter 1 What And Why Should Care Learning Objectives After Studying This

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Chapter 1

What Is CB, and Why Should I Care?

Learning Objectives

After studying this chapter, students should be able to achieve the objectives given below.

1-2 Describe how competitive marketing environments lead to better outcomes for

consumers.

1-4 Be familiar with basic approaches to studying consumer behavior.

1-5 Appreciate how dynamic the field of consumer behavior continues to be, particularly with

respect to technological advances such as big data analytics and the sharing economy.

Lecture Example

New York Mayor Michael Bloomberg’s proposed ban on the sale of sodas and other such

beverages larger than 16 ounces at restaurants, movie theatres, and street carts elicited mixed

reactions from the public. The proposed ban was the consequence of research studies that

indicated that the consumption of beverages had increased among children and adults, and this

was a contributing factor to the increasing levels of obesity among Americans.

Lecture Outline with PowerPoint® Slides

Introduction

A consumer makes a decision with the intention of improving his or her life—that is, doing

something of value. The process of making a purchase starts a chain reaction of value-creating

actions. As one can see, people’s behavior as consumers is critically important not just to

themselves but to many other people. This is why so many people, not just marketing people, are

interested in learning about consumer behavior (CB). True, the marketer who understands

consumers will be able to design products with greater value potential and thus a greater chance

of enhancing the well-being of stakeholders, including the company and customers. Thus, an

understanding of consumer behavior can mean better business for companies, better public

policy for governments, and a better life for individuals and households.

LO 1-1: Understand the meaning of consumption and consumer behavior.

I. Consumption and Consumer Behavior

People consider CB from two unique perspectives:

• The actual human thoughts, feelings, and actions involved in consumption experiences,

and/or

• A field of study (human inquiry) that is developing an accumulated body of knowledge

about human consumption experiences.

A. Consumer Behavior as Human Behavior [Instructor PPT Slide 4]

Consumer behavior is the set of value-seeking activities that take place as people go about

The Basic CB Process [Instructor PPT Slide 5]

At some point, the consumer realized a need to more conveniently access outside media,

such as Snapchat, Viber, and email, via the Internet. The realization of a need creates a

want. A want is a specific desire that spells out a way a consumer can go about addressing

a recognized need. A consumer feels a need to stay in touch, belong, socialize, or feel good

about himself or herself, and this need manifests itself in the want for better media access

devices. Realizing the need, the consumer decides to visit the new HH Gregg store

(consumer electronics and appliances retailer). Having made a choice, the consumer

that they recently purchased.

A: Students’ answers will vary but should include all the steps of the consumer behavior

process, which begins with students’ realization of their needs for the product and results

in a perception of value gained from the product.

Consumption [Instructor PPT Slide 6]

Consumption represents the process by which consumers use goods, services, or ideas and

transform the experience into value. Consumption is a value-producing process in which

the marketer and the consumer interact to produce value.

B. Consumer Behavior as a Field of Study [Instructor PPT Slides 7 and 8]

Consumer behavior as a field of study represents the study of consumers as they go through

the consumption process. In this sense, consumer behavior is the science of studying how

Economics and Consumer Behavior [Instructor PPT Slides 9 and 10]

Economics often is defined as the study of production and consumption. As the definition

implies, economics also involves consumption. Therefore, consumer behavior and

economics have a lot in common.

Psychology [Instructor PPT Slide 11]

Psychology is the study of human reactions to their environment. Psychology itself

Social psychology focuses on the thoughts, feelings, and behaviors that people have as

they interact with other people (group behavior). Consumer behavior most often takes

or reacts to product consumption, information is processed. Thus, cognitive psychology is

also very relevant to consumer behavior.

Today the study of cognitive psychology is assisted by developments in neuroscience.

Neuroscience, the study of the central nervous system including brain mechanisms

associated with emotion, offers potential for understanding CB by charting a consumer’s

Marketing [Instructor PPT Slide 12]

Marketing consists of the multitude of value-producing seller activities that facilitate

exchanges between buyers and sellers. The value-producing activities include the

production, promotion, pricing, distribution, and retailing of goods, services, ideas, and

Consumer Behavior and Other Disciplines [Instructor PPT Slide 13]

Sociology focuses on the study of groups of people within a society. Sociology’s relevance

for CB lies in the fact that consumption often takes place within group settings or is in one

way or another affected by group dynamics.

Anthropology has contributed to consumer behavior research by allowing researchers to

LO 1-2: Describe how competitive marketing environments lead to better outcomes for

consumers.

II. The Ways in Which Consumers Are Treated

Some organizations can survive while treating customers badly, while others need to pamper

customers just to have a chance of surviving. Consider the following two questions in trying to

understand why this is so:

• How competitive is the marketing environment?

• How dependent is the marketer on repeat business?

Q: Ask students to list some businesses that depend on repeat businesses.

A. Competition and Consumer Orientation

Where do consumers go if they don’t like their service at the DMV (Department of Motor

Vehicles)? If the choice comes down to visiting the bureau or not driving, nearly all

consumers will put up with the less-than-immaculate surroundings, long waits, and poor

service that all too typically go along with getting a driver’s license.

Few Competitive Pressures?

In essence, the DMV typifies a service organization that operates in a market with

practically no competitive pressure and a captive audience. In a government service like

this, the answers to the two questions above are (1) not at all competitive and (2) not at all

A few states have turned to combinations of technology and private outsourcing to improve

service. Some states have outsourced DMV offices to private companies. The private

companies generally provide consumers with better service, and the DMV ends up with

better and more accurate information about drivers.

Many Competitive Pressures?

Firm Orientations and Consumers [Instructor PPT Slides 14 and 15]

Competition eventually drives companies toward a high degree of consumer orientation.

Consumer (customer) orientation is a way of doing business in which the actions and

decision making of the institution prioritize consumer value and satisfaction above all other

concerns. A consumer orientation is a key component of a firm with a market-oriented

culture. Market orientation is an organizational culture that embodies the importance of

creating value for customers among all employees.

A market orientation represents a less narrow focus than a strategic orientation that focuses

more solely on production. However, an even broader orientation comes when firms adapt

stakeholder marketing. Under the orientation, firms recognize that more than just the

buyer and seller are involved in the marketing process. In fact, primary stakeholders

include customers, employees, owners (or shareholders), suppliers, and regulating

agencies; secondary stakeholders include the mass media, communities, and trade

organizations.

B. Relationship Marketing and Consumer Behavior [Instructor PPT Slide 16]

Relationship marketing means the firm’s marketing activities aim to increase repeat

business as a route to strong firm performance. Relationship marketing recognizes that

customer desires are recurring and that a single purchase act may be only one touchpoint in an

ongoing series of interactions with a customer. Touchpoints are direct contacts between the

Q: Ask students to list the strategies by which a retail store can strengthen its relationship

with its customers.

LO 1-3: Explain the role of consumer behavior in today’s business and society.

III. The CB Field’s Role in Business, Society, and for Consumers [Instructor PPT Slide 17]

CB is important in at least the following three ways:

• CB provides an input to business/marketing strategy.

• CB provides a force that shapes society.

• CB provides an input to making responsible decisions as a consumer.

A. Consumer Behavior and Marketing Strategy [Instructor PPT Slide 18]

The ultimate hallmark of success for a business is long-term survival. Exhibit 1.4 lists some

famous international companies, their core business, and their age. None of these companies

are even 100 years old. Even though people may think about companies like this as lasting

forever, chances are some of these giants will not be around even 100, 50, or perhaps even 20

years from now. So, surviving is not a trivial goal, and the companies that do survive long

What Do People Buy?

Innovation [Instructor PPT Slide 19]

Ultimately, companies need to understand why people buy their products to recognize

which other current and future products represent competitive threats. Newness alone does

not make an innovation. An innovation has to produce value for consumers to be

successful. Over time, successful innovations exhibit all or some of these characteristics

given below.

• Relative advantage: Makes things better than before

• Simplicity: All things equal, a simpler innovation is better than a complex innovation

Ways of Doing Business [Instructor PPT Slide 20]

Exhibit 1.5 summarizes different ways of doing business. Each way of marketing coincides

In undifferentiated marketing, the same basic product is offered to all customers.

Differentiated marketers serve multiple market segments, each with a unique product

offering. Marketers can take differentiated marketing to the extreme with a practice known

Q: Ask students to list some niche products.

[Instructor PPT Slide 21]

B. Consumer Behavior and Society

The things that people buy and consume end up determining the type of society in which they

live. Certainly, not every society around the world is the same. Additionally, when

governments create laws that govern the way people buy and consume products, consumer

Q: Ask students to determine the impact of legislation on consumer behavior. For

example, what was the impact on consumer behavior following the FDA’s ban on 19

ingredients in antibacterial soaps and washes?

C. Consumer Behavior and Personal Growth

People face many important decisions as consumers. Among these are choices that will affect

their professional careers, their quality of life, and the very fiber of their families. Some

decisions are good; some are not. All consumers make dumb decisions occasionally. Thus,

when consumers learn CB, they should be able to apply that knowledge by making better

consumer decisions.

Several topics can be particularly helpful in enlightening consumers, including the following:

• Consequences associated with poor budget allocation

LO 1-4: Be familiar with basic approaches to studying consumer behavior.

IV. Different Approaches to Studying Consumer Behavior

Consumer researchers have many tools and approaches with which to study CB, and researchers

don’t always agree on which approach is best. In reality, the consumer researcher should realize

that no single best way of studying CB exists. Rather, different types of research settings may

call for different approaches and the use of different tools. Thus, a brief overview of two basic

approaches for studying CB have been provided.

A. Interpretive Research [Instructor PPT Slides 22 and 23]

Interpretive research seeks to explain the inner meanings and motivations associated with

specific consumption experiences. Consumer researchers interpret these meanings through the

Qualitative research tools include things such as case analyses, clinical interviews, focus

considered researcher dependent, because the interpretation is a matter of opinion until

corroborated by other findings.

B. Quantitative Consumer Research [Instructor PPT Slides 24 and 25]

Statistical models can be applied to retail sales data to identify clusters of consumers who are

more likely to be in the market for specific types of products. Sometimes, the results are so

spot-on they become controversial. Other types of quantitative research exist as well.

Researchers also employ quantitative measurement through surveys and very often use

surveys to capture responses to some experiment that may manipulate some characteristic of

an ad or product.

LO 1-5: Appreciate how dynamic the field of consumer behavior continues to be,

particularly with respect to technological advances such as big data analytics and the

sharing economy.

V. Consumer Behavior is Dynamic [Instructor PPT Slide 26]

All one has to do is examine the differences in standards of living between today’s American

dramatically. Marketers have historically used advances in technology to provide consumers

with greater opportunities to communicate with companies. Today, billions of consumers around

the world have 24-hour, seven-day-a-week access to markets via the Internet.

Q: Ask students to identify and describe a company that adapted its core product due to

the changing preferences of its customers.

A. Internationalization

Although fast food and restaurant chains can be found worldwide, consumers are not alike

everywhere these firms operate. An Outback Steakhouse in Seoul will offer kimchi (fermented

cabbage) on the menu, something neither American nor Australian. Companies must therefore

deal with geographical distances as well as cultural distances. The international focus of

today’s modern company places a greater demand on CB research. Every culture’s people

will interpret products and behaviors differently. The meanings these consumers perceive will

determine the success or failure of the product being offered.

B. Technological Changes

Changing Communications

As technology changes, so do the ways that people communicate with each other. Once

upon a time, consumers’ predominant form of communication was face-to-face.

Interestingly, many surveys of preferred communication methods don’t even list face–to–

face communication. Among other sources, email appears far from dead. Google,

website.

Big Data [Instructor PPT Slide 27]

The term big data has come to be used to represent the massive amounts of data available

to companies, which can potentially be used to predict customer behaviors. The data

C. Changing Demographics

In most of the Western world, notable demographic trends have shaped consumer behavior

patterns greatly over the past quarter century or so. First, households increasingly include two

primary income providers. Second, family size is decreasing throughout most of Western

D. Changing and Sharing Economy [Instructor PPT Slide 28]

Recent years have seen a downturn in the economy in much of the developed world. A

smaller percentage of the U.S. population is working today than since 1978. Today, under 62

percent have a job or are actively seeking work. Many college students are deciding to stay in

school longer, given limited prospects in the work force. Mature workers are more apt to

retire, given the decreased opportunity to work at an acceptable wage. These factors

End of Chapter Material

Review Questions

(*) Indicates material on prep cards.

1. *What does the term “chain reaction” refer to in discussing the role of consumer behavior

in greater society?

BUSPROG: Analytic

DISC: Customer

LO: 1-1

Topic: A-head: Consumption and Consumer Behavior

Bloom’s: Knowledge

Difficulty: Easy

2. List two perspectives from which consumer behavior can be examined.