CONSUMER
BEHAVIOUR AND MARKETING STRATEGY
by
J.
Paul Peter & Jerry C. Olson
Fifth
Edition
Irwin
McGrawhill Companies
Copyright
1999
United
States
CHAPTER
I: INTRODUCTION TO CONSUMER BEHAVIOR AND MARKETING STRATEGY
Cybershoppers and
Cyberconsumers
Although sales of
products from the internet account for only a small percentage of total retail
sales, millions of consumers shop and buy on the Internet. They’re drawn by the
chance to browse among millions of options and maybe pick up a bargain or two in
the process. Marketers on the internet, eager to find consumers they might not
ordinarily reach with traditional communication and distribution channels, are
venturing online and setting up their own website or store fronts in
cybermalls. In the world of electronic commerce where store doors never close,
consumer buying is expected to grow from $520 million in 1996 to $6.5 billion
after the turn of the century, according to Forrester Research. The number of
U.S. homes shopping online is expected to grow from 10 million to 33 million.
Popular products purchased
on the Internet include computers, CDs, travel services, and flowers. Dell
Computers has more than $1 million in Internet Revenue daily. CD now, one of
the most popular and fastest-growing CD businesses online, had sales triple to
$ 6 million in a single year and hoped to triple that the figure the following
year. 800-Flowers had $30 million in sales recent years.
A survey by USA Today
found that many consumers turned to the web for hard to find items such as
collectibles, musical instruments, rare coins, and rare books. For example,
Jennifer Hutsko, 23, of Ypsilanti, Michigan, searched bookstores for 11 years
to find a copy of The Tachyon Web by Christopher Pike. As a last Resort, Hutsko
gave the Web a try and was delighted to find that Amazon.com had the book.
Many cybershoppers use
the web for convince and book their own airline tickets and hotel reservation
to avoid hassles. “If I want to buy an airline ticket at 3 AM, I don’t have to
wait until a representative comes to work, “said Linda Teal of Rose Hill,
Kansas. Teal used Expedia to plan a trip to Munich and locate a hotel in the
heart of city.
Others use the Web for
the vast selection of products and services available. Looking for unusual
plants and landscaping, including miniature Alpine plants from Oregon or 40
varieties of cacti grown from seedlings collected from the Grand Canyon? If so,
contact The Garden Center & Nursery in Winterstown, Pennsylvania, at www.gdnetr.com.
Looking for high-end mountain bike components and accessories, the kind you
can’t find in local shops? If so, contract Aardvark Cycles in Provo, Utah, at www.aardvarkeycles.com.
Looking to bid on collectibles, such as an early ‘60s Barbie or a Lionel train
set from the 1950s? If so, contact Savers, a thrift store in Phoenix, Arizona
at http://fp.sedona.net/savers.
Looking for the caffeine but don’t like coffee? If so, contact www.toastedravilioli.com
for XTZ a citrus flavored tea made with nine blends of herbs and mixed with
black and green tea. Looking for a new horse? If so, contact Equisearch which
lists 700 horses that sell for an average of $10,000 each at www.equisearch.com.
Overall however
Internet sales have grown more slowly than expected. Part of the reason is that
many consumers are concerned about the security of payment information.
Although systems are available, such as Microsoft wallet, that encrypt debit
and credit card members, some consumer still fear that their card members will
be ripped off. Another reason is that for many products, consumers like to see
touch and experience them before purchase. Although the Internet can provide
pictures and information, this isn’t enough for consumers. Finally, not everyone
has computer or access to one and the skill to use it efficiently. Two thirds
of U.S households with income greater than $100,000 own computers, but 60
percent of households don’t have one and the percentages are much smaller in
many other countries. Sources: Christina Valdez Diaz, “Buyers, Sellers Connect
On Line, “USA Today, June 17, 1997, pp.9E, 10 E; Andy Pargh, “Competition Boots
Up in Home Computer Market,”USA Today, July 17, 1997,p.4E.
How can consumer
behavior research help internet marketers increase their chance of success?
Marketers have long argued that marketing concept is the appropriate philosophy
for conducting business. Simply stated, the marketing concept suggests an
organization should satisfy consumer needs and wants in order to make profits
and stay close to them to provide products and services that consumers will
purchase and use appropriately.
For many years, the
marketing concept was not fully understood or implemented properly by U.S.
firms. Often, even firms that accepted the marketing concept in principle did
not recognize that the marketing concept required the organization to change
its existing practices dramatically. In general, these firms viewed
implementing the marketing concept in principle didn’t recognize that the
marketing concept as a marketing task rather than something in which the entire
organization had to be involved. Although these companies did marketing and
consumer research, this research was seldom used as for designing not just the
marketing strategy but also the entire organizational strategy.
Today, many of the most
successful companies in the world have become so by designing their entire
organizations to serve consumers and stay close to them. These companies are
committed to developing quality products and services and selling them at a
price that gives consumers high value. In these companies, the marketing
department as well as design, engineering, production, human resources,
finance, and other department are focused on doing their jobs in ways that
enhance the value of products to consumers. Some firms have found they can
actually increase product quality and reduce the costs at the same time, and
they encourage employees throughout the company seek ways to do so. Other firms
first determine what consumers want and how much they are willing to pay for a
product and then design, produce and market the best quality product they can
for the price consumers are willing to pay.
Companies are making
changes to serve consumer better for three major reasons. First, the dramatic
success of Japanese companies, such as Toyota and Sony that focus on providing
consumers value-laden products has spurred other companies to follow suit.
During 1960s and 1970s, many U.S companies could sell almost anything they were
able to produce. Consumers accepted the level of quality of goods and services
produced by U.S. companies as being as could be expected. However, as American
consumers discovered the superior quality and lower prices of many Japanese
products, they began to realize that many American products offered inferior
value, and they shifted to purchasing foreign made goods. Several U.S.
companies had to redesign their organizations to serve consumers in order to
survive and compete not only in the United States but also in world markets.
Many have done so and are now world leaders in their industries.
The second major reason
for the shift to focusing on consumers is the dramatic increase the quality of
consumer and marketing research. In the past, companies often did not have
detailed information on the actual purchasers and users of their products.
Although they did research to investigate new product concepts and try to
understand consumers, often this research was not continuous and did not
identity the firm’s actual costumers. Today, computer technology and scanner
and other data sources have made it possible for companies to know personally
who their customers are and the effects on them of marketing strategy and
changes in it. Both manufacturers and retailers can now carefully track
consumer reactions to new products and services and evaluate marketing
strategies better than ever before. Thus, companies are now better able to
actually implement the marketing concept. Highlight 1.1 offers several examples
of databases that companies have developed.
A third reason for the
increased emphasis on consumers is the development of consumer behavior
research. Both the number and sophistication of theories, concepts, and models
to describe and understand consumer behavior have grown dramatically in recent
years. Although there is no consensus on which theories or approaches are best,
marketers do have a greater variety of useful ideas to help them understand
consumers than they did in the past.
In sum, many successful
companies have recognized the importance of consumers and have sophisticated
approaches and detailed data from which to develop organizational and marketing
strategies. All of this should convince you that the consumer behavior course
you are about to take is an important part of your business education. In the
reminder of this chapter, we will discuss the nature of consumer behavior and
the parties involved in studying and analyzing it. We will also investigate
some relationships between consumer behavior and marketing strategy and the
value of this course for a successful career. Although this text focuses on
consumer behavior and marketing strategy, it should not be forgotten that
employees in every business function should be involved in serving consumers.
Highlight 1.2 discusses a method used by retailers to understand consumer
shopping patterns.
Highlight 1.1
Consumer Databases
Many companies have in
house databases that allow them to target individual consumers. Consumers them
this information for the prospect of free gifts or bonus points for things like
airline mileage or free groceries. Here are some of the large databases that
companies have put together.
Burger King has
amassed a database of 5 million kids between the age of 2 and 8 who are members
of the Burger King Kids. The company
shares this information with franchises that can target customers by everything
from age to name to ZIP code
GM Master Card has
a database of nearly 13 million members. GM matches the name with Polk’s
national list or car ownership, based on car registration records available in
much of the country. It then markets its cars specifically to consumer
preference.
American Airlines which
has a database of nearly 28 million names, shares them with major banks
and mortgage companies as well as other travel related companies.
Reader’s Digest has
amassed one of the nation’s largest consumer databases, with 100 million names
and addresses. Subscribers to the magazine are sent detailed questionnaires
about demographic and personal interests and the information is used for target
marketing.
Talbots the
woman’s has a database of 7 million customers who have ordered from its
catalogs. The companies rent this information to other companies.
American Express keeps
a three year running tab on its entire card member purchases. It also keeps a
database history on how they responded to any promotions the company sent out.
It can target customers specifically by such criteria as whether they live in
New York City and purchased Broadway tickets and $100 Manhattan dinners in the
past year.
Lands’ End, the
catalog retailer, keeps a 10 year purchase history of its estimated 7 million
customers, it exchanges lists with several other retailers.
Norwegian Cruise Line has
a database of nearly 1 million passengers who have cruised with the line since
the mid 1980s. The cruise line has a deal with Travelers Bank in Delaware to
offer special visa cards to Norwegian Cruise customers that give them points
for free cruises based on credit card purchases.
Nordstorm the
department store chain doesn’t keep a computer database on the purchasing
habits of all its customers. Instead sales people keep “personal books” that
detail the sizes, favorite colors, favorite designers, and birthdays of their
best customers.
Although these databases
can be used to target and serve customers efficiently, critics are concerned
that companies have far too much information about consumers. Critics are also
concerned when companies rent or sell these lists to other companies without
consumer approval. Do you think this is an ethical problem for marketers or
not?
What is Consumer
Behavior?
The American Marketing
Association defines consumer behavior as the dynamic interaction of affect and
cognition, behavior and environment by which human being conduct the exchange
aspects of their lives.”In other words, consumer behavior involves the thoughts
and feelings people experience and the actions they perform in consumption
processes. It also includes all things in the environment that influence these
thoughts, feelings, and actions. These include comments from other consumers,
advertisements, price information, packaging, product appearance, and many
others. It is important to recognize from this definition that consumer
behavior is dynamic, involves interactions and involves exchanges.
Consumer Behavior is
Dynamic
Consumer behavior is
dynamic because the thinking, feelings and actions of individual consumers,
targeted consumer groups and society at large are constantly changing. For
example, the development of the Internet has changed the way people search for
information about products and services. The fact that consumers and their
environments are constantly changing highlights the importance of ongoing
consumer research and analysis by marketers to keep abreast of important
trends.
The dynamic nature of
consumer behavior makes development of marketing strategies an exciting yet
difficult task. Strategies that work at one time or in one market may fail
miserably at other times or in other markets. Because product life cycles are
shorter than ever before, many companies have to constantly innovate in order
to create supervisor value for customers and stay profitable. This involves
creation of new products, new versions of existing products, new brands and new
strategies for them. For Example, Mercedes Benz has developed a more complete
line of vehicles, including a sport utility vehicle, the ML 320, to try to
reach more consumers. Compaq developed the Presario 2100 and 2120 computers to
reach consumers who wanted a computer for less than $1,000 and other
manufacturers followed suit. However, one survey showed that the reasons 60
percent of U.S. households don’t have a computer is that they say don’t need
one. This highlights the fact that needs and wants change at different times
for different consumer groups.
Consumer Behavior
Involves Interactions
Consumer behavior
involves interactions among people’s thinking, feelings and actions and the
environment. Thus marketers need to understand what products and brands mean to
consumers, what consumers must do to purchase and use them, and what influences
shopping, purchase and consumption. The more marketers know about how these
interactions influence individual consumers, target markets of similar
consumers and society at large, the better they can satisfy consumer needs and
wants and create value for them. For example, one of the major changes in
society is that the number of middle income consumers is shrinking and low and
high income groups are increasing. How this change affects consumers thoughts,
feelings, and actions has important implications for marketing strategy. Some
companies are changing their offerings to appeal the growing markets and thus
put less emphasis on the middle income group. Gap Inc. expanded its upscale
Banana Republic chain and its lower end Old Navy stores to tap these two
markets while keeping growth of middle market Gap stores more limited. It is
likely that many consumers who buy clothes from Banana Republic versus Old Navy
have different thoughts and feelings about their purchases and may have
purchased them for different reasons and different occasions.
Highlight 1.2
Snooping on Shoppers to
Increase Sales
Hundreds of companies
nationwide are turning to electronic and surveillance equipment to snoop
on shoppers in their stores. Some even conduct old fashioned stakeouts. Complete
with walkie-talkies, from cat walks in the stores. These companies are not
trying to spot shoplifters. Rather they are learning about shopper’s traffic
patterns in order to change consumer buying habits.
Take Bashas’s Market,
Inc., in chandler, Arizona. A study showed that only 18 percent of the grocery
store’s customers ever went down the aisle with greeting cards, which are high
profit item. So George Fiscus, the store layout manager, moved the section,
sandwiching it between the floral department and an aisle with peanut butter,
jelly and health foods that regularly drew 62 percent of the store’s traffic.
Nestled in their new home, the greeting cards showed a second quarter sales
jump of 40 percent.
Tracking consumers
every move is giving marketers both revealing statistical detail and new
insight. The research efforts have also turned up some surprises:
·
By peering from the catwalks at 1,600
shoppers, researchers for Marsh Supermarkets unearthed a troubling trend.
People heavily shopped periphery of the store the produce, dairy and meet
sections but frequently circumvented the core dry goods section that takes up
the bulk of store space. The Indiana store chain’s inner aisle drew only 13 to
30 percent of traffic while the periphery accounted for as much as 80 percent.
·
VideOcart, Inc., a Chicago company that
uses infrared sensors in store ceilings to track shopping carts, has spotted a
lot of “dippers.” These shoppers park their carts at the ends of aisles and
then walk down, filling their arms with items from the shelves as they go.
Marketers figure such shoppers probably buy less because they are limited by
what they can carry.
·
Certain departments draw huge numbers of
people, but that doesn’t guarantee proportionate sales, according to a study by
the Food Marketing Institute trade group. By retracing the steps of 2,400
shoppers and checking what ended up in their grocery carts, the institute
learned, for instance that 77 percent of people walked through the bakery
department, but only a third actually bought anything there.
·
A study a Procter & Gamble products
in Kmart stores found that sales rose sharply when items like coffee and
toothpaste were placed outside their normal aisles on display racks. With no
coupons or price cuts, sales of the newly located tooth paste rose as much as
119 percent over a three week test period, whereas coffee sales soared more
than 500 percent.
Although
primarily a tool for retailers, traffic analysis is being used by consumer
product companies as well. One traffic study showed that shoppers often zip
through the snack aisle, spending only 42.7 seconds there, whereas they spend
more than twice that in the coffee aisle. At a Kroger store in Atlanta, PepsiCo
Inc’s Frito-Lay unit tried to raise its sales by advertising its chips in the
coffee aisle. Over jars of Nestea and Maxwell House, a red sign flashes,
“America, Your Chip Has Come In,” and suggests that shoppers pick up a bag of
Doritos.
Source: Michael
J. McCarthy, “James Bond Hits the Supermarket: Stores Snoop on Shoppers ‘Habits
to Boost Sales,” The Wall Street Journal, August 25, 1993, pp. B1, B5.
Reprinted by permission of The Wall Street Journal, ©1993 Dow Jones &
Company, Inc. All Rights Reserved Worldwide.
Consumer Behavior Involves Exchanges
Consumer behavior involves exchanges between human
beings. In other words, people give up something of value to other and receive
something in return. Much of consumer behavior involves people giving up money
and other things to obtain products and services, that is, exchanges between
buyers (consumer) and sellers (marketers). In fact, the role of marketing in
society is to help create exchanges by formulating and implementing marketing
strategies.
Approaches to Consumer Behavior research
Consumer behavior is a complex phenomenon and
eclectic field. The majority of published research is done by marketing
academics that vary greatly in their training objectives and methods. As shown
in Exhibit 1.1, there are three major approaches to studying consumer behavior.
The interpretive approach is relatively new in the
field and has become quite influential. It is based on theories and methods
from cultural anthropology. This approach seeks to develop a deep understanding
of consumption and its meanings. Studies involves long interviews and focus
groups used to understand such things as what products and services mean to
consumers and what consumers experience in purchasing and using them. Other
studies might concern how advertising depicts woman, how art and films reflect
consumption meaning, or how possessions influence self images although these
studies typically are not designed to help marketers develop success full
strategies, implications for strategy development can be inferred from them.
The traditional approach is based on theories and
methods from cognitive, social and behavioral psychology, as well as sociology.
It seeks to develop theories and methods to explain consumer decision making
and behavior. Studies involve experiments and surveys to test theories and
develop insights into such things as consumer information processing, decision
processes, and social influences on consumer behavior. This approach has had a
profound impact on marketing thought with some researches focusing on theory
testing and others on investing the impact of marketing strategies on
consumers.
Exhibit 1.1
Approaches to the study of Consumer
Behavior
Approaches
|
Core
Disciplines
|
Primary
Objectives
|
Primary
Methods
|
Interpretive
|
Cultural
anthropology
|
Understand
consumption and its meanings
|
Long
interviews
Focus groups
|
Traditional
|
Psychology
Sociology
|
Explain
consumer decision making and behavior
|
Experiment
Surveys
|
Marketing
Science
|
Economics
Statistics
|
Predict
consumer choice and behavior
|
Math modeling
Simulation
|
The marketing science approach is based on theories
and methods from economics and statistics. It commonly involves developing and
testing mathematical models to predict the impact of marketing strategies on
consumer choice and behavior. This approach has become a mainstay in the
consumer packaged goods industry because it handles large scanner data sets in
an efficient manner to help solve marketing problems.
All three approaches have value and provide insights
into consumer behavior and marketing strategy in different ways and at
different levels of analysis. Insights from all three are integrated in this
text, although the core of the book is based on the traditional approach.
It should also be noted that marketing practitioners
spend millions of dollars each year to study consumers. These companies do
their own research or hire marketing research firms, ad agencies, consulting
firms and academics to help them develop better marketing strategies to serve
consumers. These companies may use any of the three approaches depending on the
nature of the marketing problem or decision.
Uses of Consumer Behavior Research
As shown in Exhibit 1.2 there are three groups that
use knowledge about consumer behavior and consumer behavior research. These
including marketing organizations, government, political organization and
consumers. Each of these is interested in consumer behavior as it influences
the consumer’s interactions and exchanges with the other groups.
The first of these is marketing organizations, which
include not only business attempting to sell products, but also hospital,
museums, parks, law firms, universities and other organizations that seek
exchanges with consumers. Although the primary emphasis in this text is on
exchanges between business and consumers, the ideas presented can also be used
by other marketing organizations, such as the American Cancer Society,
Yellowstone Park, or your college or university.
Exhibit 1.2
Relationships among Action-Oriented
Groups Interested in Consumer Behavior
The
second group in Exhibit 1.2 comprises various government and political
organizations. These include government agencies such as the Federal Trade
Commission and the Food and Drug Administration. The major concern of these
organizations is monitoring and regulating exchanges between marketing
organizations and consumers. Political organizations include consumer activists
such as Student against Drunk Driving and various industry and trade
organizations such as the American Marketing Association. These groups exert
pressure on marketing organizations and consumers to behave in certain ways.
For example, Highlight 1.3 shows the Code of Ethics for the American Marketing
Association.
The
third group interested in consumer behavior includes both consumers and
organizational buyers who exchange resources for various goods and services. Their
interest is in making exchanges that help them achieve their goals and in
understanding their own behavior. Although the major concern of this text is
with ultimate consumers, the logic presented here can also be applied in
organizational markets and some examples of organizational buyer behavior are
included later in the text.
Consumer
Behavior’s Role in Marketing Strategy
A
marketing strategy is the design, implementation, and control of a plan to
influence exchanges to achieve organizational objectives. In consumer markets,
marketing strategies are typically designed to increase the chances that
consumer will have favorable thoughts and feelings about particular products,
services and brands will try them repeat retailers, the internet and other
direct marketers to increase the purchasing from them and will actually do so.
In addition, credit card companies, ATM companies, banks and other organization
that make funds available for purchases develop strategies to increase the
chances that consumers will use their services. Marketing strategies involve
developing and presenting marketing stimuli directed at selected target markets
to influence what they think, how they feel and what they do.
Of
course, organizations develop strategies at many levels from planning the
future of large, multinational, multi business corporations like General
Electric and Phillip Morris down to planning a change in the strategy for a
single brand/model or a single store. Although consumer behavior research is useful
for all levels of strategic analysis, it is most commonly studied and applied
at the brand and store levels. Also, published consumer behavior research is
most commonly focused on North American Markets. Although this book attempts to
reflect the state of the art in terms of knowledge about consumer behavior, it
will also go beyond these boundaries when possible.
Exhibit
1.3 lists some marketing strategy questions that knowledge of consumer behavior
and consumer behavior research can help answer. They can be addressed in formal
consumer research, informal discussions with consumers, intuition and thinking
based on a sound understanding of consumer behavior principles.
Highlight
1.3
Code
of Ethics of the American Marketing Association
Members
of the American Association (AMA) are committed to ethical professional
conduct. They have joined in subscribing in this code of ethics embracing the
following topics:
Responsibilities
of the Marketer:
Marketer
must accept responsibility for the consequences of their activities and make
every effort to ensure that their decisions, recommendations and actions
function to identity, serve and satisfy all relevant publics: customers,
organizations and society. Marketers professional conduct must be guided by:
1.
The basic rule of professional ethics: not knowingly to do harm;
2.
The adherence to all applicable laws and regulation;
3.
The accurate representation of their education, training and experience;
4.
The active support, practice and promotion of this code of ethics.
Honesty
and Fairness
Marketers
shall uphold and advance the integrity, honor and dignity of the marketing
profession by:
1.
Being honest in serving consumers,
clients, employees, suppliers, distributors and the public;
2.
Not knowingly participating in conflict
of interest without prior notice to all parties involved; and
3.
Establishing equitable fee schedules
including the payment or receipt of usual, customary, and/or legal compensation
or marketing exchanges.
Right and Duties or
Parties in the Marketing Exchange Process
Participant in the marketing
exchange process should be able to expect that:
1.
Products and services offered are safe
and fit for their intended uses;
2.
Communications about offered products
and services are not deceptive;
3.
All parties intend to discharge their
obligation, financial and otherwise, in good faith; and
4.
Appropriate internet methods exist for
equitable adjustment and/or redress of grievances concerning purchases.
It is understood that the above
would include, but is not limited to, the following responsibilities of the
marketer.
In the area of product
development and management
·
Disclosure of all substantial risks
associated with product or service usage;
·
Identification of any product component
substitution that might materially change the product or impact the buyer’s
purchase decision;
·
Identification of extra-cost added
features.
In the area of
promotions
·
Avoidance of false and misleading
advertising;
·
Rejection of high pressure manipulation
or misleading sales tactics;
·
Avoidance of sales promotions that use
deception or manipulation.
In the area of
distribution
·
Not manipulating the availability of a
product for purpose of exploitation;
·
Not using coercion in the marketing
channel;
·
Not exerting undue influence over the resellers’
choice to handle the product.
In the area of pricing
·
Not engaging in price fixing;
·
Not practicing predatory pricing;
·
Disclosing the full price associated
with any purchase.
In the area of
marketing research
·
Prohibiting selling or fund raising
under the guise of conducting research;
·
Maintaining research integrity by
avoiding misrepresentation and omission of pertinent research data;
·
Treating outside clients and suppliers
fairly.
Organizational
Relationship
Marketers should be aware of how
their behavior may influence or impact the behavior of others in organizational
relationships. They should not demand, encourage, or apply coercion to obtain
unethical behavior in their relationships with others, such as employees,
suppliers, or customers.
1.
Apply confidentiality and anonymity in
professional relationships with regard to privileged information;
2.
Meet their obligations and
responsibilities in contracts and mutual agreements in timely manner;
3.
Avoid taking the work of others, in
whole, or in part and representing this work as their own or directly
benefiting from it without compensation or consent of the originator or owner:
4.
Avoid manipulation to take advantage of
situations to maximize personal welfare in a way that unfairly deprives or
damages the organization or others.
Any AMA member found to be in
violation of any provision of ethics Code of Ethics may have his or her
Association membership suspended or revoked.
Exhibit 1.3
Some Marketing Strategy
Questions Consumer Behavior Research Can Help Answer
1.
Which consumers are likely to buy this
product and our brands, what are they like, how are they different from
consumers, who don’t buy and how do we reach them?
2.
What criteria are consumers likely to
use to decide which products and brands to purchase?
3.
Is brand image, convenience, price,
particular product attributes, or other criteria most important to consumers of
this product?
4.
What strategies should be used to
encourage consumers to purchase our brand and not purchase those of
competitors?
5.
How do consumers process information
about products and how can this process be influenced to increase the chances
that consumers will have a favorable impression of our brand?
6.
What do consumers think and feel about
our brands versus competitive brands? What can be done to improve their opinion
of our brands?
7.
How can we increase the chances that
consumers will process information about our brand and come up with a favorable
impression?
8.
What behaviors do consumers have to
perform to purchase and use this product and our brand? How can we increase the
frequency of consumers performing these behaviors? Are there opportunities to
change the way consumers purchase and this product that could give us a
competitive advantage?
9.
In what situations are consumers likely to
purchase and use this product and our brand? How can the number of these
situations be increased? What environmental factors influence purchase and use?
10. What
price are consumers willing to pay for our product and still believe that they
are getting good value? Should sales promotion be used and if so which ones and
how should they be timed?
11. What
can we do to satisfy and even delight consumers with our brand so that they
become loyal customers?
12. How
can we delight consumers of our brand and also meet the needs of owners,
employees, suppliers, channel members, society and other stakeholders?
It should be clear from Exhibit 1.3 that understanding
consumers is a critical element in developing successful marketing strategies.
Marketers have to analyze and understand not only consumers of their products
and brands but also consumers of competitive offerings and the reasons why they
purchase competitive products. Understanding markets, developing and
implementing superior strategies to attract and hold them profitably is the
essence of marketing strategy.
Finally, it should be clear that
marketing strategies, particularly as developed and implemented by successful
companies, have a powerful force on consumers and society at large. We believe
that marketing strategies not only adapt to consumer needs and wants but also
change what consumers think and feel about themselves, about various marketing
offerings and about reasons, situation purchase and use. This does not mean
that marketing is unethical or an inappropriate activity. However the power of
marketing and the ability research and analysis to gain insight into consumer
behavior should not be discontinued or misused. Even though most marketers are
ethical and use consumer research appropriately, ethical questions arise in
some situations and industries. Highlight 1.4 lists some current ethical issues
that have been raised. We will discuss ethical issues in marketing and consumer
behavior throughout the text.
Highlight 1.4
Some Current Ethical
Questions about Marketing and Consumer Behavior
1.
Are some tobacco and liquor ads targeted
to children and do they influence children to use these products?
2.
Are some consumers manipulated by used
car salespeople into buying poor quality cars?
3.
Does the availability of easy credit
lead some consumers to overspend and go into debt?
4.
Should sex be used in advertising to
sell products?
5.
Are some poor consumers taken advantage
of by being charged higher interest rates?
6.
Are automobile airbags a safe product
for children?
7.
Do some advertisements mislead
consumers, especially children, into believing that products are better than
they really are?
8.
Should consumer research data be sold to
any company that wants them?
9.
Are lives saving drugs priced so high
that some consumers cannot afford them?
10. Do
store displays mislead consumers into believing products are on sale?
Cybershoppers and Cyber
consumers
Many marketers on the Internet
likely have not carefully studied consumer behavior in general or carefully
thought about the advantages and disadvantages of this mode of purchase from
the consumer’s point view. Rather, many small companies are attracted to the
Internet because it is a convenient and low cost way for them to start or
extend their businesses. Many of the large companies on the internet are there
adopting a wait and see attitude. Surely, some are successful because their
hunches and intuitions about consumers are good. However, systematic study of
consumers could help many of these companies increase their chances of success.
A first question an Internet
marketer might research is whether people who want or need a product are also
people who want or need a product are also people who are Internet users. In
other words, does the target market have access to computers and a willingness
and ability to shop and purchase through them? If not, and the likely growth of
Internet use in the target market is small, other modes of distribution would
seem more promising.
A second question an Internet
marketer might research is the size of the target market for the product or
service and its geographic dispersion. If the market is small and widely dispersed,
marketing on the Internet may products available that consumers could not
easily obtain otherwise.
A third question an internet
marketer might research is whether buying the product or service through the
internet provides value to potential consumers. Surely, making airline
reservations at any time of day or night is a convenience that many consumers
value. Because internet reservations save commissions that airlines would have
to pay travel agents, airlines can offer even greater value by cutting the
price of fares purchased on the internet. Because many airline travelers are
highly educated and regular computer users, this services matches the market
well. Similarly a company like Peapod which accepts orders and delivers
groceries for a fee to busy households in its trading areas, provides value to
its customers.
A fourth question an Internet
marketer might research is why consumers should buy through the Internet rather
than more traditional models of distribution. Although it can be a convenience,
internet marketers have disadvantages because consumers cannot experience
products firsthand as they can in retail stores, many consumers are fearful of
giving out credit card information over the internet and many consumers do not
trust companies and products they do not know well. Internet marketers also
have a disadvantage to stores, catalogs and some other modes of purchase
because consumers usually must seek them out rather than been contacted by the
company. Unless the internet marketer provides value through confidence,
information or the ability to obtain otherwise difficult to find items, the
chances of success are limited. Consumer research can help internet marketers
understand their customers, satisfy their needs and wants and create value for
them.
Summary
In this chapter we argued that
consumer behavior is an important topic in business education
Because achieving marketing
objectives depends on knowing, serving and influencing consumers. We discussed
the nature of consumer behavior and the various groups interested in the topic.
We also discussed the relationships between consumer behavior and marketing
strategy. We hope that after reading this chapter you can now appreciate the
relevance and importance of a consumer behavior course for your business
education. We also hope you will learn something about yourself by considering
how the framework and information in our text apply to you as a potential
marketing manager, a consumer and a human being.
Key Terms and Concepts
Consumer behavior
Marketing concept
Marketing strategy
Review and Discussion
Questions
1.
Why is consumer behavior an important
course in business education?
2.
Do you think marketing is a powerful
force in society? Why or why not?
3.
What is the role of consumer analysis in
developing marketing strategies?
4.
Offer three examples of situations in
which a marketing strategy influenced your purchase behavior. Why did each
succeed over competitive strategies?
5.
Using Exhibit 1.3 as a takeoff point,
discuss other questions and decisions in marketing strategy that could be
affected by your study of consumer behavior/?
6.
Select a market segment of which you are
not a member and with other students in the class, discuss the kinds of
information you would need in order to develop a strategy aimed at that
segment?
7.
Using a campus organization of interest
(i.e., student government, professional fraternity, political interest group),
discuss how a better understanding of the consumer behavior of students could
help the organization improve its influence strategies.
Marketing Strategy in
Action
Toyota
Of all the slogan kicked around
Toyota, the key one is kaizen, which means “continues improvement” in Japanese.
While many other companies strive for dramatic breakthrough, Toyota keeps doing
lots of little things better and better. In fact, it was named one of the
world’s most admired companies by Forbes magazine in 1997.
One consultant calls Toyota’s
strategy “rapid inch-up”: Take enough tiny steps and soon you outdistance the
competition. By introducing six-all new vehicles within 14 months, Toyota
grabbed a crushing 43 percent share of car sales in Japan. In the United States
it is pressing to move up from its No. 4 position in the market; it is the No.3
automaker in the world market. The company has the highest operating margins in
the world auto industry and is so rich it makes more money on financial
investments than it does on operations. It has over $22 billion in cash and
could buy both Ford Motor Co. and Chrysler Corp. with nearly $5 billion to
spare.
The company simply is tops in
quality, production and efficiency. From its factories pour a wide range of
cars, built with unequaled precision. Toyota turns out luxury sedans with
Mercedes-Benz like quality using one sixth the labor Mercedes does. The company
originated just in time production and remains its leading practitioner. It has
close relationships with its suppliers and rigid engineering specifications for
the products it purchases.
Toyota pioneered quality circles,
which involve worker in discussions of ways to improve their tasks and avoid
what it calls the three D’s: the dangerous, dirty and demanding aspects of
factory work. The company is investing $770 million to improve worker housing,
add dining halls and build new recreational facilities. On the assembly line,
quality is not defined as zero defects but as another Toyota slogan has it,
building the vary best and giving the customer she/he wants. “Because each
worker serves as the customer for the process just before hers, she becomes a
quality control inspector. If a piece isn’t installed properly when it reaches
her, she won’t accept it.
Toyota’s engineering system allows
it to take a new car design from concept to showroom in less than four years
versus more than five years for U.S. companies and seven years for Mercedes.
This cuts costs, allows quicker correction of mistakes and keeps Toyota better
abreast of market trends. Gains from speed feed on themselves. Toyota can get
its advanced engineering and design done sooner because as one manager puts it,
we are closer to the customer and thus have a shorter concept time. “New
products are appointed to a chief engineer who has complete responsibility and
authority for the product from design and manufacturing through marketing and
has direct contacts with both dealers and consumers. New model bosses for U.S.
companies seldom have such control and almost never have direct contact with
dealers or consumers.
In Toyota’s manufacturing system,
parts and cars don’t get built until orders come from dealers requesting them
in placing orders; dealers essentially reserve a portion of factory capacity.
The system is so effective that rather than wait several months for a new car,
the customer can get a built to order car in a week to 10 days.
Toyota is the best carmaker in the
world because it stays close to its customers. “We have learned that universal
mass production is not enough, “said the head of Toyota’s Tokyo Design Center.
“In the 21 st century, you personalize things more to make them more reflective
of individual needs. “The winners will be those who target narrow customer
niches most successfully with specific models.
Discussion Questions
1.
In what ways is Toyota’s new product
development system designed to serve consumers?
2.
In what ways is Toyota’s manufacturing
system designed to serve customers?
3.
How does Toyota personalize its cars and
trucks to meet individual consumer needs?
4.
In its price rangers, how do you think
Toyota cars stack up against the competition? You can check out all of its
models at http://www.toyota.com
Source: Alex
Taylor III, “Why Toyota Keeps Getting Better and Better and Better, “Fortune,
November 19, 1990, pp 66-77. Also see William Spindle, Larry Armstrong and
James B. Treece, “Toyota Retooled, Business Week, April 4, 1994, pp.54-57;
Edith Hill Updike, Keith Naughton and Larry Armstrong, “I Think They Were Just
Lying Low, “Business Week, December 18, 1995, pp. 50-51; http://www.toyota.com
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