Chapter 1, Introduction To Consumer Behavior.docx 21114o

Chapter 1 – Introduction to consumer behavior

Chapter 1 – Introduction to consumer behavior LEARNING OBJECTIVES After reading this chapter, students should be able to:  Understand why marketers need to understand consumer behaviour  Discuss the role of marketing in organisations  Illustrate that business and personal consumers have different buying processes, influences and patterns  Identify the different roles played by consumers in making a purchase decision  Discuss the factors that influence consumer behaviour  Understand the impact of technology on buying behaviour and consumption in Australia (and globally).

CHAPTER TOPICS 1. 2.

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4. 5. 6. 7.

What is consumer behaviour?  Influences on consumer behaviour Approaches to studying buyer behaviour  Consumer psychology—what makes consumers tick?  Behaviourist and cognitive approaches What is marketing?  The marketing concept  The marketing mix The role of marketing in organisations  Evolution of the marketing concept Organisational buying  Importance of marketing research Market segmentation The impact of technology on buying behaviour and consumption in Australia

What is consumer behaviour? Encourage discussion to introduce subject: Ask students if they have ever bought something because it was on special, had a gift attached or the possibility of winning a competition prize. Discuss what drives them to buy a particular brand—both time and time again, and as a one-off purchase. Encourage them to think as ‘consumers’. This is the trick to understanding consumer behaviour. Influences on consumer behaviour Consumer behaviour is the actions of consumers in their ‘quest’ to satisfy their needs. The process involves these key steps: 1. Need recognition (I want to be like everyone else at a party) 2. Information search (What are people wearing? Look at brands, ask friends, visit shops, recall from memory. What have I been complimented on before? What do I think looks good? What do celebrities wear? What would my family think? etc.) 3. Evaluation of alternatives (different ways we weigh up alternatives) 4. Purchase decision (to buy or not to buy) 5. Postpurchase evaluation and use of product (Is it performing how I expected? Does it suit me? Is it comfortable? Satisfaction with product.) 6. Disposal of product (What I do with clothing when out of style?)

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Chapter 1 – Introduction to consumer behavior Refer to Figure 1.1 (text, p. 4) as a summary of the factors influencing the buyer decision process. The first box considers influences on the consumer buying to satisfy personal needs (not organisational). The marketer does not really have control over external and internal influences, but still needs to understand them to know what drives consumers’ decisions. The second box discusses influences that the marketer has more control over—marketing decisions they need to make to encourage the consumer to choose their brand. Roles of consumers also need to be highlighted here. These will be discussed in detail later, in Chapter 11. Roles to raise include initiator, influencer, decider, buyer and .

Approaches to studying buyer behaviour Social science disciplines are the foundation of consumer behaviour. Some of the specific disciplines used to understand consumers include:  Psychology  Social psychology  Sociology  Anthropology  Demographic research  Psychographic research. Behaviourist and cognitive approaches Throughout this course, and particularly in Chapter 6 on Learning, the behavioural and cognitive schools of thought will be emphasised. 

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Behaviourists believe in the principles of reward and punishment of certain behaviours. Marketers reward consumers with samples, price-offs, and even popularity if their products are used. Punishment is used in marketing communication campaigns in particular, with fear campaigns like ‘don’t be caught with your pants down’ or fines for certain types of behaviour like speeding. Cognitive theorists emphasise the role of information processing, thinking and greater involvement in purchase decisions. Marketers often use this school of thought when considering awareness strategies and attitude formation/change. Consider obvious examples here like introducing a new product, objectives for attitude change like regular health checks, major purchases like appliances, cars and houses.

What is marketing? A definition of marketing should be used here, with key concepts highlighted: ‘Marketing involves all those activities a company undertakes in the process of getting its goods and services into the hands of buyers (both consumers and organisational buyers)’ (text, p. 8). A wide range of organisations engage in marketing. These organisations can be marketing products, services or ideas. Businesses, government bodies, sporting organisations and not-for-profits can employ marketing principles. Obviously a key objective of marketing is to make a profit. However, other outcomes can include donations, participation in an event, or changing attitudes toward particular issues. The marketing concept The marketing concept states that the objective of the company should be to find and fill consumer needs while making a profit. But to satisfy needs, marketers must first understand what needs exist. That is why it is important for marketers to understand consumer behaviour. The marketing mix The marketing mix is a group of four critical elements and decision areas that marketers can manipulate to meet consumer needs. These four elements are: 1. Product—includes product design, features, brand, packaging, labelling, product mix—breadth and depth. 2. Price—entry strategy, pricing points for each product line, discounts and allowances, value perception. 3. Placement—logistics of making products available to consumers, including intermediaries to be used, level of distribution and roles of intermediaries. Consumer Behaviour by Karen Webb

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Chapter 1 – Introduction to consumer behavior 4.

Promotion—the combination of marketing communication tools used to persuade an audience to act, including advertising, sales promotion, direct marketing, public relations, sponsorship and personal selling.

The role of marketing in organisations Evolution of the marketing concept Marketing has evolved from a product-driven to a consumer-driven framework for business over the last 70 years. Key stages considered include: 1. Production—This stage was based on the premise that a product will sell itself if it is good enough. Marketing is not needed, because consumers will demand the product anyway. 2. Selling—This stage was very evident post-World War II, with increased prosperity and competition. Selling became necessary to convince consumers to buy a particular brand. The focus was on pressuring people to buy, using ‘pushy’ salesmen and ‘irresistible’ claims. 3. Marketing focus—Television was a key driver for this stage, with companies advertising their wares for a growing audience to see. Growing competition and an emphasis on consumer needs made marketers rethink their position on selling. Other dynamics like the growing Japanese presence and their superior production and research facilities meant that marketers needed to focus more on consumer needs and long-term relationships rather than just transactions to make profit. 4. Societal focus—Through technological advancement and improved education, consumers are more informationsavvy and concerned for the environment and the wider community. Marketers need to act in a socially responsible way, caring for the outcome of their product/service being used, and impacts on the community and the environment. The media play a big role in communicating values and how companies adhere to these values.

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Organisational buying

Most manufacturers have at least two ‘consumers’ to consider—end consumers and business buyers. The business market is defined as ‘all the organisations that buy goods and services to use in the production of other products and services or for the purpose of reselling or renting them to others at a profit.’ 1 Business buyers use different products and services to produce their final products, either as inputs, as part of the production process, or in the running of their business. End s (consumers) are important to consider, because their demand drives demand for business buyers. The influences that act on business demand are different to those of consumers, even though ‘people’ are still making the decisions. The process that is used to make a purchase decision is also different to that of consumers. Business-tobusiness buying (B2B) will be discussed throughout the course, rather than treated as a stand-alone topic. After all, the volume of B2B far outweighs the volume of business to consumer transactions. Importance of marketing research Consumer research that has been undertaken by theorists all over the world is important in developing theories of consumer behaviour which can then be used by marketers. Market research can assist marketers in making strategic marketing decisions. Consumer behaviour research is typically modelled on areas of psychology and sociology. The idea is to understand consumer opinions, factors that influence decisions, the processes used to make different types of decisions, and even the development of models to predict behaviour. The two broad types of research that can be undertaken are quantitative and qualitative. Quantitative research is typically exploratory, uses small samples, and examines the underlying reasons for behaviour. Measures used to collect qualitative research include focus groups, in-depth interviews and projective techniques.

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Chapter 1 – Introduction to consumer behavior Quantitative research provides statistical measures, and uses larger samples with specific responses that can be more readily measured. Tools used to collect quantitative research include surveys, observation, mechanical measures (like supermarket scanners), experiments, and physiological measures like pupil dilation. Companies often use secondary research sources prior to conducting research themselves. Secondary sources include any information that already exists, and was collected for another purpose. It can include previous research studies, reports, and syndicated information purchased from external sources like the Australian Bureau of Statistics.

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Market segmentation

Market segmentation is used by marketers to divide the total potential market into smaller, homogeneous segments. Consumer and organisational markets are segmented using different criteria. Segmentation allows marketers to understand how different groups of consumers are motivated by different needs, and allows them to target those consumers more appropriately. Segmentation bases are dealt with in more detail in Chapter 2. These concepts are critical for students to grasp upfront because consumers can be grouped because of similar characteristics, but each segment has distinct characteristics that impacts on the way those consumers behave with different stimuli. Marketers can then alter their marketing strategy, and different elements of the marketing mix, to meet the segments’ needs better. Positioning is the way in which a company or brand is perceived by consumers. It is important that companies actively position their offerings through manipulation of the different marketing mix elements, rather than positioning happening by accident! The image a consumer holds of a company is not easily changed.

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The impact of technology on buying behaviour and consumption in Australia

Technology is changing the way we live. Our home entertainment options, the way we prepare meals, how we study and work, are all affected by technological advancements. Marketers need to utilise these new technologies, not just to differentiate their offerings, but to survive. Online shopping, the Internet and e-mail are obvious examples of advancements available to the majority of consumers. Relationship building, networking, and partnering with business alliances help make marketing activities more efficient and competitive. All aspects of marketing, from developing marketing strategy and the marketing mix, to market research, service , product development, and actual transactions, are all affected by technology.

DISCUSSION EXERCISES 1.

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Consider the following types of organisations. What products/services or ideas are marketed? Briefly outline the key marketing mix elements used by marketers of these organisations: a) Kellogg’s cornflakes b) World Vision child sponsorship c) The Australian Labor Party d) Breast Cancer Council e) Pizza Hut. You are the manager of a new line of spray-on ‘bandaids’ for everyday scrapes and cuts. Describe how an understanding of consumer behaviour is useful to you in of: a) how the market could be segmented b) the influences on consumers’ purchase decisions c) societal issues. Visit the supermarket and choose a particular product category to ‘research’. Observe consumers and what they look for in purchasing their products. Do they know what brand they are looking for? Do they look at the ingredients? Is price the main determinant? Try to examine at least 25 consumers. Is this qualitative or quantitative data? Why? Discuss the different types of consumers that might be attracted to the following restaurants: a) Chinese restaurant b) fast food restaurant like McDonald’s c) à la carte restaurant in exclusive hotel. Look up any home page for a company. View the type of information and services that are available on the web page. How has technology changed the way this company does business?

Consumer Behaviour by Karen Webb

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Chapter 1 – Introduction to consumer behavior

Consumer Behaviour by Karen Webb

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