Chapter 2: Consumer Behavior - Lecture Notes

Introduction

  • Lectures and textbooks complement each other, providing additional context.

Office Hours

  • Wednesday mornings: 8 a.m. to 9 a.m. (Eastern Time).
  • Wednesday evenings: 8 p.m. to 9 p.m. (Eastern Time).

Resources

  • Textbook.
  • Wall Street Journal (access provided to Longwood students).
    • Links posted on Longwood/Greenwood Library website.
    • Reading lists available within the Wall Street Journal context area.
    • Articles from the last few months provide real-world context.

Learning Objectives

  • Describe the phases of the purchase process (beginning, middle, and end).
  • Discuss the types of purchases and challenges for marketers (B2B and B2C).
  • Understand consumer psychology and its impact on marketers.

Marketing Framework

  • Relates to the five C's: consumer.
  • Choices in positioning.
  • Influencing decisions on product, price, place, and promotion (especially promotion).

Key Questions

  • What are the three phases of the buying process?
  • What kinds of purchases are there?
  • How do consumers make purchase decisions?
  • How can marketers use this information?

Consumer Behavior

  • Known, reliable patterns.
    • Phases of the consumer purchase process.
    • Types of purchases.
    • How consumers sense and perceive.
    • Motivation, attitudes, and decisions.
    • Cultural differences.

Three Phases of the Purchase Process

1. Pre-Purchase

  • Identifying the need or want.
  • Searching for possible solutions.
  • Building a consideration set (who is in the running?).

2. Purchase

  • Narrowing down the consideration set.
  • Deciding on the retail channel (store, online, etc.).

3. Post-Purchase

  • Customer satisfaction.
  • Likelihood of repeat purchases.
  • Word of mouth (positive or negative).
  • Underscore: This stage matters!

Detailed Breakdown of Phases

Pre-Purchase Phase

  • Recognizing need and desire (heavily marketed vs. not heavily marketed, e.g., trendy clothes vs. food).
  • Searching and evaluating (online searches, asking friends).
  • Creating a consideration set (brands being considered).
Example: College Choice
  • What needs/desires drove you to purchase that college?
  • How did you search for information?
  • Which colleges were in your consideration set?
  • What criteria did you utilize?
Key Questions to Consider
  • What was lacking (internal/external factors)?
  • Difference between current and desired state?
  • Criteria (location, state/private, professors)?

Purchase Phase

  • Narrowing the consideration set.
  • Potential delays in purchase.
  • Deciding not to purchase.
  • Choosing a retail channel.
    • Hesitancy towards buying clothing online (not being able to try it on).

Post-Purchase Phase

  • Assessing the purchase and process.
  • Did I get what I wanted?
  • Determining satisfaction (expectations met?).
  • Likelihood of return purchases.
  • Word of mouth.
  • Product returns.

Application of the Purchase Process

  • Applies to both B-to-B and B-to-C customers.
  • Time spent depends on what's being bought.
  • B-to-B: Agents buying on behalf of the organization.

Types of Consumer Purchases

  • Textbook presents three types:
    • Convenience.
    • Shopping.
    • Specialty.
  • Additional type (from experience and other sources):
    • Unsought.

Four Types of Consumer Purchases

1. Convenience Purchase
  • Low involvement.
  • Casual purchases (vending machines).
2. Shopping Purchase
  • Medium involvement.
  • Comparing prices, reading labels (parents in shopping aisle).
3. Specialty Purchase
  • High involvement.
  • Major thinking involved (wedding dresses, homes).
4. Unsought Purchase
  • Purchase you have to make, no real choice.
  • Little persuasion involved (e.g., root canal, tow truck).

Determining Purchase Type

  • Determined by customer perception (involvement).
  • 99% of people:
    • Potato chips are convenience.
    • Sneakers are shopping.
    • Wedding dresses/antiques are specialty.
    • Root canal/ tow truck are unsought.

Exceptions to Purchase Typology

  • Depends on involvement, which depends on the customer and their interests.
    • Shoe collector: sneakers are a specialty product.

Importance of Knowing Your Customer

  • Varies by segment.
  • Understand what unites customers and their values.
    • High-end sneakers: target the community that sees them as a specialty product.
    • Impromptu wedding: rental is a convenience purchase.

Types of Business Purchases

1. Straight Rebuy

  • Low involvement.
  • Purchase just like the last one (Give me another one like the other one).
  • Leads to economies of scale.

2. Modified Rebuy

  • Medium involvement.
  • Something altered, requiring some thought (Give me red and a different size).
  • Not as profitable as straight rebuy.

3. New Buy

  • High involvement.
  • Something not purchased before, requiring much thought (Request for proposal from multiple vendors).

Customer Involvement

  • Customer refers to both consumer and B2B.

B2C

  • Convenience, shopping, specialty.

B2B

  • Straight rebuy, modified rebuy, new buy.

Action

  • Low involvement: click, habit.
  • Medium involvement: some modification.
  • High involvement: serious evaluation.

High vs. Low Involvement Purchases

Low Involvement
  • More price sensitivity.
  • Use price discounts.
  • Don't generate much word of mouth.
  • Distributed extensively.
  • Marketers focus on capturing attention.
High Involvement
  • Less price sensitivity.
  • Brand communities and events generate word of mouth.
  • Distributed selectively.
  • Marketers focus on providing information.

Marketer's Perspective

Incumbent

  • Wants low involvement.

Challenger

  • Wants high involvement.
  • Make them think.

Anatomy of a Grocery Store

  • Arranged by similarity, complementary products.
  • Common purchases far from the entrance.
  • Groups of products to form consideration sets.
  • High profit and impulse purchases at the end of aisles.

Example: Silk Soy Milk

  • Initially placed near cereal due to complementary products.
  • Did not sell because people didn't associate soy milk with milk.
  • Had to pay higher slotting fees to be placed in the dairy section to stay in the consideration set.

Science of Consumer Behavior

Sensation and Perception

  • Senses convey information.
  • Consumers have selective attention.
Vision
  • Colors, brand identity (Coca-Cola Red).
Hearing
  • Increase spending, convey brands (Harley-Davidson's sound).
Smell
  • Get attention (Cinnabon).
Taste
  • Distinguish brands (Coke vs. Pepsi).
Touch
  • Convey brand imagery (Starbucks Frappuccino in glass bottles).

Subliminal Advertising

  • Debunked. Tales of popcorn ads in theaters are false.

Mere Exposure

  • Exposure to an ad brings familiarity and positive feelings.
  • Product placement is one example.

Perceptual Fluency

  • How colors, fonts, etc., make a brand impression.
  • Dunkin' Donuts font: fun, but not for eulogies.

Learning and Memory

  • Sensory perception impressions become brand associations.
  • Filter: not worth remembering vs. worth remembering.
  • Marketers want to get past the filter.

Types of Conditioning

1. Classical Conditioning

  • Pavlov's dog: default reaction associated with a new stimulus.
  • Jingles in advertising.

2. Operant Conditioning

  • Learning occurs by positive reinforcement.
  • Fixed ratio: rewards given every time or every fourth time.
  • Variable schedule: frustration can serve as motivation.

Motivation

Maslow's Hierarchy of Needs

  • Physiological, safety, love/belonging, esteem, self-actualization.
  • People must meet basic needs before moving up.
  • Marketers identify products with needs.
  • Example: Volvo (safety).

Considerations

  • Once a need is met, it doesn't mean you fall back down if it's knocked out.
    • Military: belonging and commitment, willing to sacrifice basic needs.

Marketers Use Hierarchy For Positioning

  • Safety (insurance companies).

Distinguishing Motivations

Hedonic vs. Utilitarian

  • Utilitarian: to get something done.
  • Hedonic: for fun.
  • Example: Parachuting (skydiving vs. crashing plane).

Conformity vs. Individuality

  • Standing out vs. fitting in.
  • May vary over a lifetime.

Risk-Taking vs. Risk-Averse

  • Risk tolerance may vary with product knowledge.
  • Example: Adjustable-rate mortgages (2007-2008 crash).
  • Example: NASCAR driver (risk-averse due to knowledge).

Attitudes and Decision-Making

  • Influence what the consumer buys, repeats, becomes loyal, recommends.
  • Attitudes: mix of beliefs and importance.
  • Decision-making:
    • Determining the consideration set.
    • Comparing brands to make the purchase decision.

Stages of Decision-Making

Stage 1

  • Non-compensatory method.
  • Lexicographic method.
  • Example: Buying a car.

Stage 2

  • Comparing brands in detail.
  • Compensatory model: weighing out the specifics.

Behavioral Economics Principles

  • System 1 vs. System 2 Thinking.

System 1

  • Fast, heuristic decisions.
  • Automated, unconscious routines.

System 2

  • Effortful, conscious reasoning.
  • Weighing everything out.
  • We need both because we don't have time to weigh everything out all the time.

Psychological Prospect Theory

  • Consumer values perceived loss and gain differently, even if the amount is equal.
  • Example: Placing an item on sale.

The Nudge

  • Gentle means of mental persuasion.
  • Marketing tools: color, font, voice, etc.
  • Style complements substance.
  • Fine line between helpful and unethical.

Cultural Differences

  • Social class, age, gender influence decisions.

Age

  • Young people buy furniture then buy diapers and minivans, and college and financial, health care etc..
  • Be skeptical of targeting markets based on age.

Managerial Recap

  • Three phases of consumption: pre-purchase, purchase, post-purchase.
  • B2C: convenience, shopping, specialty, unsought.
  • B2B: straight rebuy, modified rebuy, new buy.
  • Involvement determines the type of purchase.

Consumer Thinking

  • Sensing and perceiving information.
  • Motivations help consumers understand what they are seeking.
  • Attitudes and decision-making influenced by information and bias.
  • Social norms define consumers.

Question

  • A low involvement purchase would have which of the following characteristics?
    • Price sensitivity.
  • Use of a price discount.

End of Chapter 2

  • Consumer Behavior.
  • Office hours: Wednesdays, 8 a.m. to 9 a.m. and 8 p.m. to 9 p.m.
  • Feedback welcome.