Busn3140 CONSUMER BEHAVIOR Chapters 1-4 Review

Segmentation

Identification of groups of people who have common needs (Geographic, demographic, psychographic, behavior)

Geographic segmentation

• Climate

• Population density

• Urban-rural

Demographic segmentation

• Age

• Life stage segmentation

• Gender

• Ethnic background

• Income, education, occupation

• Social class is determined by one’s occupation

Psychographic segmentation

How consumers describe themselves

• ALO (activities, interests, opinions)

• Values

• Lifestyle (what they like to do, leisure time, spend income…)

Behavior segmentation

Benefit desired- Product use, Need

Usage rate - Heavy, medium, light, none

User status - Current, future, ex

Occasion - where/when the product is used

• Customer entry points (CEPs) - OCCASION

Positioning Process

In the eyes and mind of the buyer

→ develop a brand image

Positioning objective

→ to differentiate from other brands

→ perceive the brand favorably compared to others

Tasks of positioning

1. Define the product

2. Help customers remember

3. Communicate the product’s attributes

Best strategies to position

1. By attributes

- economy, reliability, durability, consistency…

2. By benefits

3. By usage, occasions (Category Entry Points)

4. By users

5. By product class/category

- to get consumers to associate (disassociate) a product with a positive (negative) image

6. By competitors

7. By an affiliated brand (partners)

Value

Benefits - cost

Needs/Wants

Specific ways to specify your need

Consumption

Process by which goods, services, or ideas are used and transitioned into value

The Basic Consumption process

→ Need

→ Want

→ Exchange

→ Costs & benefits

→ Reaction

→ Value → Need

Product

A solution to a consumer problem

Benefits

Rational/functional

Psychological (prestige, peace of mind, confidence…)

Social (relationship, status)

Costs

Price, time, effort

Marketing myopia

A shortsighted business approach that focuses on selling specific products rather than understanding and fulfilling broader customer needs

The meaning of consumption

• People buy products for what they mean but for what they mean

• Create an image/make a lifestyle statement/social identity

• People generally choose a brand with an image (personality) that matches underlying needs

• Conspicuous consumption- the practice of buying luxury goods and services publicly to display wealth and social status rather than to meet practical needs

Consumer orientation

A business approach that puts the needs, wants, and preferences of the customer first

Market orientation

A business approach that prioritizes identifying and satisfying customer needs and wants before creating or selling a product

Stakeholder marketing

A strategy where a company creates value and builds relationships with stakeholders for long-term mutual benefit

• employees, customers, suppliers, local community, general public

Relationship marketing

Long-term business strategy focused on building genuine, ongoing connections and loyalty with customers

Touchpoints

Any interactions a person has with a brand at any stage of their journey

• online, offline, physical, virtual interactions

Consumer behavior study

When individuals or groups select, purchase, use, and dispose of goods, services, ideas, or experiences to satisfy needs and desires

Relationship quality

• build and maintain relationships with customers

• loyal customers are five times more profitable than new ones

• satisfied customers bring other customers

  • buy other products

  • product line/mix extension

Consumer behavior

helps consumers in making better decisions

• consequences of poor budgeting

• role of emotions

• avenues for redress

• social influences

• environmental effects

Trends

1. Globalization

2. Technological changes

3. Changing demographics

4. Changing economy

Cognition

thinking/mental processes that go on as we process and store things that can become knowledge (rational)

Affect

feelings experienced during consumption activities or associated with specific objects (emotions)

2 types of benefits/values

Utilitarian (rational)

Hedonic (immediate gratification)

Consumer Value equation

Benefits - Costs = Value

1. Rational

2. Psychological/emotional

3. Social

Utilitarian

product helps the consumer solve problems and accomplish tasks that are part of being a consumer (rational)

Hedonic

immediate gratification that comes from experiencing some activity

Total Value Concept (augmented product)

The original value plus the extra things needed to increase the value from consumption

• every products value = basic benefits + augmented product + “feel” benefits

Perceptual map (product differentiation)

Marketplace condition in which consumers do not view all competing products as identical to one another

• unique positioning

Customer Lifetime value

Represents the approximate worth of a customer to a company in economic terms

CLV = (sales-costs)+(equity)

Consumer value transformation

The shifting process where companies continuously refine and elevate the benefits of a product or service

Personal values

Enduring beliefs that a given behavior or outcome is desirable or good

• what a person should do

• what is wrong/right/good/bad/important/less

• our preferences and behaviors as consumers

ex: recycled materials, animal-free test products

Somatic maker hypothesis (Dr. Damasio and Elliot case)

Emotional processes guide behavior (decision-making)

• Somatic markers are physical reactions that are associated with emotions, influencing subsequent decision-making

ex: rapid heartbeat, dry mouth, nausea

Means-end chain model

Link personal values (END) with products and product benefits (MEANS)

• physical, tangible attributes of products can be psychologically linked with personal values

Terminal values

The end-state we hope to achieve in life

Instrumental values

Means of achieving terminal values

Laddering

A research method of analyzing means-end chains

• Keep asking why: create hierarchical value maps

Perception

How an individual gathers, processes, and interprets information from the environment

• Perception represents a subjective reality

Sensing

Vision, smell, hear, touch, taste

Organization reactions

1- Assimilation

2- Accommodation

3- Contrast

Assimilation

When a stimulus has characteristics that allow for easy recognition as an example of some category

Accommodation

When a stimulus shares some, but not all, of the characteristics that would lead it to fit neatly in an existing category

• Consumers prefer slightly different products

Contrast

When a stimulus does not share enough in common with existing categories to allow categorization

• People tend not to like things are so completely unknown

Selective perception

1- Exposure

2- Attention

3- Distortion

4- Retention

Selective exposure

Screen out the most stimuli and expose oneself to only a small portion of stimuli

Selective attention

Tendency of a consumer to pay attention only to messages that address a need or interest or are consistent with the consumer’s attitudes, opinions, and beliefs

Selective distortion

People tend to interpret information in a way that supports what they already believe

Selective retention

Process when people more accurately remember messages that are closer to their interests, values, and beliefs

Absolute threshold

The minimum amount of energy that can be detected by a particular sensory receptor

Adaptation

To “get used to” certain sensations

To increase sensory input, use unusual media to place an advertisement

Differential threshold

The ability of our sensory system to detect changes or differences in stimuli

Just Noticeable Difference (JND)

The minimum actual change in a stimulus that can be detected as a change

• Marketing implication

Marketing implication of JND

Marketers want to find the relevant JND for their products

• Negative changes may not be noticeable

• Product improvements are apparent

• Update existing packaging, logo, or corporate symbols

Weber’s Law

Law that states that the change in a stimulus that will be just noticeable is a constant ratio of the original stimulus

• The stronger the initial stimulus, the greater the change must be for it to be noticed

Subliminal perception

“Below threshold” = stimuli presented below the level of conscious awareness

1- Briefly presented visual stimuli

2- Accelerated speech in low-volume auditory messages

3- Embedded or hidden sexual imagery or words

Mere Exposure Effect

Consumers will prefer an object to which they have been exposed

• Consumers prefer stimuli they have previously exposed to over stimuli
  which they have not

Familiarity

Humans gravitate to the known, the safe, and the trusted

Enhancing attention

Intensity- stronger stimuli, color sound

Movement

Size

Contrast- Color vs. B&W

Surprise

Involvement- Personal relevance

Classical conditioning

A change in behavior that occurs simply through associating some stimulus with another stimulus that naturally causes a reaction

Classical conditioning theory

All organisms (animal & human) are passive entities that could be taught certain behaviors through repetition

Advertising wear out

After a certain number of repetitions, retention declines
• need to vary the advertising message.

Stimulus generalization

Making the same response to slightly different stimuli
• Family branding (brand extension)

Stimulus discrimination

Marketers want consumers to distinguish their brand in the consumers’ minds

Instrumental conditioning

A learning process that modifies voluntary behaviors through the use of rewards and punishments

• Behavior is conditioned through reinforcement

Positive/Negative reinforcement

Behavior modification is reinforced or rewarded by a positive consequence and punished by a negative one

Punishments

A positive stimulus is removed
A negative stimulus is presented

Shaping

A process through which the desired behavior is altered over time in small increments

Message congruity

A business’s communication matches, aligns, and makes sense to consumers

Figure-Ground distinction

The brain organizes visual information by separating the figure (main object/focus) from the ground (the background/negative space)

Framing

The same information can take on different meanings based on the way in which the information is presented

Prospect theory

A decision can be framed in different ways and the framing affects risk assessment

• 50% off or $10 off (for a $20 product)

Loss aversion

The tendency to feel the pain of a loss twice as intensely as the pleasure of an equivalent gain

• losing $100 feels twice as bad as gaining $100 feels good

Multiple store theory of memory

Three memory process utilizing different storage areas within the brain

1- Sensory memory

2- Workbench (short-term)

3- Long-term

Sensory memory

Stores everything that we encounter with our five senses, lasting less than a second

• unlimited capacity and very limited duration

• works w/ other memories (workbench/long-term)

Workbench (short-term memory)

Bits of data are worked on to create knowledge for active problem-solving

• limited capacity and limited duration

• coding

Long-term memory

Permanent information storage

• unlimited capacity and duration

• semantic/associative network

4 mental processes that help consumers remember things

1-Repetition

2-Dual coding

3-Meaningful coding

4-Chunking

Exemplar (prototypical)

A concept within a schema that is the single best representative of some category

• Children’s entertainment: Disney

• Bleach: Clorox

Episodic memory

The memory for past events in one’s life

• childhood, graduation

Cognitive schema

Consumers assign meaning to stimuli based on a set of beliefs (schema) and one’s previous experience

-Social schema

-Social identity

Priming

Certain properties of a stimulus typically will evoke a schema

• exposure to a stimulus influences response to a later stimulus