Marketing Chapter 2 Value And The Consumer Behavior Framework Learning Objectives After Studying This

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Chapter 2

Value and the Consumer Behavior Framework

Learning Objectives

After studying this chapter, the student should be able to accomplish the following objectives.

2-2 Define consumer value and compare two key types of value.

2-4 Explain the way market characteristics like market segmentation and product

differentiation affect marketing strategy.

2-6 Justify consumers’ lifetime value as an effective focus for long-term business success.

Lecture Example

Walmart, considered the world’s largest retailer, is facing stiff competition from Amazon these

days. Shoppers, who are primarily focused on value, are now turning to the world’s largest

online retailer Amazon for many common purchases. Walmart’s target consumers were those

who were primarily interested in low prices and not the overall shopping experience. This is

Lecture Outline with PowerPoint® Slides

LO 2-1: Describe the consumer value framework, including its basic components.

Q: Ask students to identify some of the factors that affect a consumer’s choice of brands or

products over time.

brands or products over time include declining quality of products, the perception that the

value gained from a product is less than its perceived value, increase in prices of the

products, changes in a consumer’s social environment, and changes in a consumer’s

situational factors.

I. The Consumer Value Framework and Its Components

A. The Consumer Value Framework [Instructor PPT Slides 4 and 5]

Given the potential complexity involved in explaining consumption, a framework for studying

consumer behavior is useful. Exhibit 2.1 displays the framework. The Consumer Value

Framework (CVF) represents consumer behavior theory, illustrating factors that shape

consumption-related behaviors and ultimately determine the value associated with

consumption. Each aspect of the CVF is related in some way to other components of the

model. The model consists of the following elements:

• Internal influences

• External influences

• Consumption process

• Value

• Relationship quality

B. Value and the CVF Components

Value is at the heart of experiencing and understanding consumer behavior.

Relationship Quality

Over the past two decades or so, Customer Relationship Management (CRM) has

become a popular catchphrase, not just in marketing but in all of business. A basic CRM

premise is that customers form relationships with companies as opposed to companies

conducting individual transactions with customers. A CRM system tracks detailed

information about customers so marketers can make more customer-oriented decisions that

hopefully lead to longer-lasting relationships.

CRM means each customer represents a potential stream of resources rather than just a

single sale. Relationship quality reflects the connectedness between a consumer and a

retailer, brand, or service provider. When relationship quality is strong between customer

and company, customers are highly receptive to brand extensions and thus the brand enjoys

a near ready market for new products. A customer who experiences high value from

service realizes that relationship quality is high. Over time, the consistent value delivery

builds customer loyalty.

Consumption Process

Consumers must decide to do something before they can receive value. The consumption

process involves deciding what is needed, what the options for exchange might be, and the

inevitable reaction to consumption. The consumption process can involve a great deal of

decision making and thus represents a consumer decision-making process and the results of

service. Service can be thought of as the organization’s efforts and resources applied

toward value creation. Many factors influence this process, and these factors can be

divided into different categories, such as internal and external influences.

Internal Influences: The Psychology and Personality of the Consumer

The Psychology of the Consumer

Internal influences are things that go on inside the mind and heart of the consumer or

that are indeed truly a part of the consumer psychologically. The psychology of the

consumer involves both cognitive and affective processes. The term cognition refers to

the thinking or mental processes that go on as people process and store things that can

become knowledge. Affect refers to the feelings experienced during consumption

activities or feelings associated with specific objects.

The Personality of the Consumer

External Influences [Instructor PPT Slide 6]

Every consumer contains a storehouse of information internally, but in many cases some

external influence triggers the consumption process or provides information necessary for a

consumer to make a decision. The “zero moment of truth” is the point when a passive

shopper becomes an active shopper and actively seeks out exchange alternatives.

Numerous external influences come together to change the value equation for a consumer,

change the relationship with his or her current product, activate a need, and trigger the

desire for a better product. External influences include social, cultural, media,

environmental, and temporal factors, among others. They are critical to understanding

consumer behavior (CB).

Social Environment

The social environment includes people and groups who help shape a consumer’s

everyday experiences. Some influence is personal, meaning the consumer actually knows

the people; some is impersonal, coming from unknown people like celebrities; and still

Situational Influences

External influences also include situation influences. Situational influences are

temporary factors unique to a time or place that can change the value seen in a decision

and received from consumption. Situational influences include the effect that the

physical environment has on consumer behavior.

Q: Ask students to recall a recent solitary shopping experience. How was this

shopping experience different from the shopping experience with a group? Does

shopping with peers or family members influence their buying decisions?

LO 2-2: Define consumer value, and compare two key types of value.

II. Value and its Two Basic Types [Instructor PPT Slide 7]

The heart of the Consumer Value Framework, and the core concept of CB, is value. Value is a

personal assessment of the net worth a consumer obtains from an activity. Value is what consumers

ultimately pursue, because valuable actions address motivations that manifest themselves in needs

A. The Value Equation

Exhibit 2.3 reflects some components of value and how a consumer might put these together

to determine the overall worth of something—or its value. Value can be modeled by playing

the “what you get” from dealing with a company against the “what you have to give” to get

B. Utilitarian Value [Instructor PPT Slide 8]

Activities and objects that lead to high utilitarian value do so because they help the consumer

accomplish some task. Utilitarian value is gratification derived from something that helps the

consumer solve problems or accomplish tasks that are a part of being a consumer. When

consumers buy something in pursuit of utilitarian value, they can typically provide a clearly

rational explanation for the purchase.

C. Hedonic Value [Instructor PPT Slide 9]

The second type of value is referred to in CB as hedonic value. Hedonic value is the

immediate gratification that comes from experiencing some activity. Conceptually, hedonic

value differs from utilitarian value in several ways. First, hedonic value is an end in and of

itself rather than a means to an end. Second, hedonic value is very emotional and subjective in

nature. Third, when a consumer does something to obtain hedonic value, the action can

sometimes be very difficult to explain objectively.

decision of just how to deliver value becomes an important marketing strategy question.

Firms that offer low utilitarian and low hedonic value typically are failing.

Q: Ask students to give examples (other than the ones provided in the text) of

products that deliver both hedonic and utilitarian values.

LO 2-3: Apply the concepts of marketing strategy and marketing tactics to describe the

way firms go about creating value for consumers.

III. Marketing Strategy and Consumer Value

One way that a company can enhance the chance of long-run survival is to have an effective

marketing strategy. Generally, a strategy is a planned way of doing something to accomplish

some goal.

A. Marketing Strategy [Instructor PPT Slides 10 and 11]

If strategy is a way of doing something, given the purpose of business, a marketing strategy

is the way a company goes about creating value for customers. The strategy also should

provide an effective way of dealing with both competition and eventual technological

obsolescence, by making sure the firm’s offerings deliver value in a way that competitors

cannot duplicate easily and in a way not defined only in terms of the tangible product offered.

Strategies exist at several different levels. Basically, corporate strategy deals with how the

firm will be defined and sets general goals. This strategy is usually associated with a specific

B. Total Value Concept [Instructor PPT Slide 12]

Exhibit 2.7 displays the approximate relative market share for the top athletic shoe companies.

If all the products are much the same and sell for about the same prices, then they should have

comparable market share. Yet that’s not nearly the case. Nike dominates with about half the

total market. A couple of interesting facts that may be more than coincidental:

The term augmented product means the original product plus the extra things needed to

increase the value from consumption. Thus, every product’s value proposition is made up of

the basic benefits, plus the augmented product, plus the “feel” benefits. A company must try

C. The Total Value Concept Illustrated

Consider a consumer who purchases a 2017 Ferrari 458 Speciale. What does the Ferrari 458

Speciale value proposition offer?

• The negative feelings that go along with ownership

D. Value is Co-Created [Instructor PPT Slide 13]

Alone, a marketer can only propose a way of creating value to consumers. Rather, consumers

add resources in the form of knowledge and skills to do their own part in the consumption

process. The marketer’s offering does not create value directly, but rather consumption

involves value co-creation. The marketer serves its customer by making potentially

beneficial outcomes of consumption available, but the customer plays a role in whether or not

Q: Ask students to explain the total value concept for different types of products and

services, such as fast food, coffee, jeans, and a massage.

LO 2-4: Explain the way market characteristics like market segmentation and product

differentiation affect marketing strategy.

[Instructor PPT Slides 14–16]

IV. Market Characteristics: Market Segments and Product Differentiation

Marketing management involves managing the marketing mix and deciding to whom the effort

will be directed. The marketing mix is simply the combination of product, pricing, promotion,

and distribution strategies used to position some product offering or brand in the marketplace.

Marketers often use the term target market to signify which market segment a company will

serve with a specific marketing mix.

Q: Give students a product, such as a car, and ask them to list its characteristics and

attributes. Based on these characteristics, students must identify some possible target

markets for the car and justify their answers.

A. Market Segmentation

Market segmentation is the separation of a market into groups based on the different

demand curves associated with each group. Market segmentation is a marketplace condition;

numerous segments exist in some markets, but very few segments may exist in others.

B. Product Differentiation

Product differentiation is a marketplace condition in which consumers do not view all

competing products as identical to one another. Consumers looking for companionship do not

see all online dating sites as the same. Some offer to narrow the market based on offering

services ostensibly to those only of a certain age group, ethnicity, religion, or lifestyle. Thus,

farmersonly.com brings together farmers. In the same way, most markets are characterized by

product differentiation and market segmentation.

Q: Ask students to choose a product category and analyze the ways in which brands

differentiate their product offerings. How do they differentiate their product

offerings for consumers within the same market segment (e.g., teenagers, Hispanics,

and professional women) and across different market segments?

LO 2-5: Analyze consumer markets using elementary perceptual maps.

V. Analyzing Markets with Perceptual Maps

Product differentiation becomes the basis for product positioning. Positioning refers to the way

a product is perceived by a consumer and can be represented by the number and types of

characteristics that consumers perceive.

A. Perceptual Maps [Instructor PPT Slides 17 and 18]

Marketing analysts use perceptual maps to depict graphically the positioning of competing

products. When marketing analysts examine perceptual maps, they can identify competitors,

B. Illustrating a Perceptual Map [Instructor PPT Slide 19]

Exhibit 2.9 illustrates a perceptual map. Perceptual mapping is used as a way to link

differences in consumer behavior to changes in marketing strategy or tactics. In this case, the

perceptual map depicts consumer beliefs about tourist attractions in New Orleans, Louisiana.

competitors are not likely to see the new offering as a threat.

Perceptual maps are widely used to plot the way consumers view competitors in an industry.

The simple two-dimensional graphics give the user an easy way to analyze a market.

Q: Have students choose an example of a product (i.e., car, makeup, household

product). With the help of Exhibit 2.9, students can draw a perceptual map in their

notebooks or on the class board for a classroom discussion.

C. Using Consumer Behavior Theory in Marketing Strategy

Businesses are constantly using consumer behavior to make better strategic and operational

marketing decisions. Exhibit 2.10 displays a checklist inspired by the CVF framework—the

CB idea checklist.

LO 2-6: Justify consumers’ lifetime value as an effective focus for long-term business

success.

VI. Value Today and Tomorrow—Customer Lifetime Value [Instructor PPT Slide 20]

Not every customer is equally valuable to a firm. Firms increasingly want to know the customer

lifetime value associated with a customer or customer segment. Customer Lifetime Value

assumes a 5% operating margin, he yields IKEA a net $520 per year. Thus, marketers can

maximize the value they receive from exchange by concentrating their marketing efforts on

consumers with high CLVs.

Q: Ask students to explain the following statement: The value that a company receives

from an exchange may be slightly easier to explain than the value that a consumer

receives from the exchange.

Video material for this chapter can be found on page 21 of the IM.

End of Chapter Material

Discussion Questions

(*) Indicates material on prep cards.

1. Why do a consumer’s “favorite things” differ from one consumer to the next?

2. How is the Customer Value Framework (CVF) useful?

3. *What is the difference between an internal influence and an external influence?

4. List three examples of products you have consumed recently that provide high utilitarian

value. Likewise, list three examples of items that provided high hedonic value. Think of at

least one product or brand that you would associate with both high utilitarian and hedonic

value.

Answer: Students’ answers will vary. Typical items possessing high utilitarian value

include fast food, mass transit (subway, bus ride), and cleaning products. Typical items

possessing high hedonic value include attending a sports event, going to an amusement

park, or going shopping to an exciting venue.

BUSPROG: Analytic

DISC: Product

LO: 2-2

Topic: A-head: Value and Its Two Basic Types

Bloom’s: Application

Difficulty: Moderate

5. *In what ways can sending tweets to others via Twitter provide value? What type of value

does tweeting provide?

6. What is the core concept of consumer behavior? Define it, and use an example from your

own life to illustrate its meaning.

10. In what way are market segmentation and product differentiation similar? How are the two

concepts different?

11. What is a perceptual map? What are the dimensions of a perceptual map?

12. What is meant by product positioning?

13. List at least three ways in which a firm can use a perceptual map to analyze a given

consumer market.

14. *How do marketing firms assess the value of a given customer?

15. How do you feel about companies that give special benefits like discounts or preferred

seating to their “best” customers? Is this a fair way for companies to treat their consumers?

Group Activity

Assign each team member to closely examine a different component of the consumer value

framework (CVF)—internal influences, external influences, etc. Have the members develop and

act out a short skit in which each person explains to a store clerk why he or she is selecting a

specific type of smartphone to purchase, in terms of the concepts that go along with the

particular component of the CVF. In other words, is there a certain type of device that would be

more likely to be selected based on external influences rather than internal? In the skit, each

person must use the following words: value, hedonic value, utilitarian value, motivation,

benefits, cost, and time. Have some fun with this activity.

Assignments

1. Interview three consumers from your town. Ask them how they believe the following

companies provide value to consumers.

• Home Depot

• Apple

• Barnes and Noble

• John Deere

2. From the list of companies in Question 1, use Internet resources (such as the Wilson

Business Resource Database, Hoovers, or Corporate sites) to learn about the corporate and

marketing strategies of these companies. From your experience, does it seem that they truly

understand the value that consumers desire from companies in their respective industries?

3. *List 10 fast-food restaurants. Consider what a typical lunch would be like at each place.

Use their websites if you need to review the menu. Rank them from the least expensive to

the most expensive. Then, using the same ten restaurants, rank them from the least to the

most healthy. Form “dimensions” with these rankings and then create a perceptual map

illustrating the fast-food market formed by these 10 restaurants.

4. Interview several consumers, and ask them about their concerns when choosing a fast-food

restaurant. Using these results, estimate the location of the ideal points for different fast-

food markets on the perceptual map that you developed in Question 3. Then, prepare an

executive summary (bulleted list) indicating the potential opportunities that exist within

this market. Also, state the restaurants that appear to have the best and the worst

positioning strategy, respectively.

5. Assume that someone wishing to start a band in your town has come to you for advice on

positioning the band to be a commercial success. Using the customer value framework and

your knowledge of market positioning, what factors do you think would ultimately explain

how or if the band will be successful? Some general advice on successful bands can be

found at www.epinions.com.