CONSUMER BEHAVIOUR AND MARKETING STRATEGY
J. Paul Peter & Jerry C. Olson
Irwin McGrawhill Companies
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.
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.
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.
Approaches to the study of Consumer Behavior
Understand consumption and its meanings
Explain consumer decision making and behavior
Predict consumer choice and behavior
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.
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.
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.
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.
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.
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.
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
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
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.
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