1  CONSUMER BEHAVIOUR & TECH
Marketing is the activity, set of institutions, and processes for creating, communicating and delivering
offerings that have value for customers, clients, partners and society.
Consumer behaviour is the study of consumers’ choices during searching, evaluating, purchasing and using
products and services that they believe would satisfy their needs.
1. The Marketing Concept
the premise that marketing consists of satisfying consumers’ needs, creating value, and retaining customers,
and that companies must produce only those goods that they have already determined would satisfy
consumer needs and meet organizational goals.
The core principle of the marketing concept maintains that marketers must satisfy consumer needs
effectively by making only those products that consumers are likely to buy.
Marketing-oriented companies are those that don’t try to persuade consumers to buy what the firm already
produced: instead, they make only products that satisfy consumers’ needs and aim to convert first-time
buyers into long-time customers. The concept emerged in the 1960s and replaced prior business approaches
for
marketing and selling products.
The Production concept (by henry ford) stated that companies must make inexpensive cars, produce
uniformly, and at the lowest possible costs.
Some companies mistakenly assume that satisfying consumers’ needs meant marketing products that offer
the most features- a premise termed the product concept and ignored buyers who would rather buy simpler
and easier-to use products.
Marketing myopia: a focus on the product rather than on the needs it presumes to satisfy. This applies
to companies that ignore consumer needs and look in the mirror rather than through the window.
Before the development of marketing focused on consumers, many companies has followed the selling
concept: a premise that companies should sell what they already made instead of making only those
products they could sell. Sellers assumed that consumers would buy their products only if aggressively
persuaded to do so (hard sell) and didn’t realize that people who were pressured to buy mostly low quality
offerings will not buy them
- dissatisfaction is shared with other customers
- dissuading them from dealing with aggressive salespeople
Marketing segmentation, Targeting & Positioning
Humans have biological needs: such as nourishment, air, water, and shelter, but develop psychological
needs shaped by upbringing, culture, social stratum, financial resources and education.
Market segmentation: the process of dividing a market into subsets of consumers with common needs or
characteristics. Each subset represents a consumer group with shared needs that are different from those
shared by other groups.
Targeting is selecting the segments that the company views as prospective customers and pursuing them
with distinct offerings.
Positioning: the process by which a company creates a distinct image and identity for its products, services
and brands in consumers’ minds. The image differentiates the company’s offering from competition by
communicating to the target audience that the product, service or brand fulfils the target consumers’ needs
better than alternatives.
- most new products fail to capture significant market shares and are discontinues because
consumers perceive them as me too products lacking a unique image or benefit.
Segmentation, targeting and positioning are implemented across the four components of the marketing
mix (4 p’s)
1. Product or service: the features, designs, brands, and packaging, along with post-purchase benefits such
as
warranties and return policies
2. Price: the list price, discounts, allowances, and payment methods
3. Place: the distribution of the product or service through stores and other outlets
4: Promotion: the advertising, sales promotion, public relations, and sales efforts that develop product
awareness and demand.
2. Tech Benefits Consumers & Marketers
Technological innovations have transformed consumer behaviour and marketers’ selection and targeting
of
potential customers. (VB: traditional advertising: one-way process, via mass media ↔ electronic
communication:
two-way interactive exchange  consumers instantly react (clicking on a link, etc..), this way marketers
can
gauge the effectiveness of their promotional messages instantly, instead of relying on delayed feedback.)
They have the following plans to increase brand shares:
1: improve digital sites
2: increase social media activity
3: switch resources from traditional to digital media
The value exchange
click-to-call-ad: top of the list ad on for example google.
Technology creates a value exchange: when people use their phones they provide marketers with detailed
data that enables companies to target them immeasurably more effectively than the pre-internet days.
Marketers provide value to customers by giving them the means to shop more efficiently, become better
informed, buy customized products and have access to entertainment and information. Consumers pay by
revealing themselves and giving the marketer virtually unlimited information about themselves.
Advertisers are offering more and more original content online because viewers are watching programs on
mobiles and tablets, the lines between traditional TV and internet video have become blurred.
Advertisers are also shifting dollars from traditional display advertising to sites such as Facebook. Many
advertisers worry that with so much new content being thrown at the market on so many different
platforms, audiences for individual shows will become even more fragmented and microscopic than they
already are.
Lower prices, more information and customized products
Consumers have been relying on information from websites and purchasing daily use products such as
apparel digitally. Nevertheless, most apparel shoppers buy their clothes in physical stores. Many shoppers
who had ordered online chose to pick up these orders in stores rather than have them delivered: the main
reason? They get a refund right away and looking around the store for replacing the items returned.
Social media have significantly influenced choices, and comparing products online was the primary source
of information in making purchase decisions. Online shoppers are more frugal and fewer buy on impulse.
Also, since consumers can easily track prices on their smartphones and other devices, they know they have
the upper hand over retailers and more likely to haggle over prices.
Technology has enabled forming more refined targeting: marketers can now customize their offerings and
promotional messages, offer more effective pricing and short distribution channels, and build long-term
relationships with customers more easily. They can also identify opportunities for creating new offerings,
improve and extend existing products and gather detailed consumer data by online tracking and combining
it with demographic and lifestyle data gathered online.
Online, consumers can often pay less by bidding on products, bypassing traditional distribution outlets and
middlemen, and shopping around the globe and around the clock.
They can also compare the features of various product models and engage in social networking with other
consumers who share the same interests and provide information and advice about products and services.
Often, while browsing inside stores, people check the price of comparable products in other stores. This
practice forces stores to match the online prices of rival retailers.
Realizing that sooner or later electronic systems will replace cash and credit cards, several retailers have
been developing mobile-payment systems to compete with similar products from google and cell-phone
companies. Many online merchants now offer an “automatic recurring shipment” feature, which appeals
to shoppers who like to order habitually needed products, such as socks or paper goods.
When consumers compare products side by side, they look at the features and attributes of various
models and brands side-by-side. By observing consumers’ comparisons, marketers can identify their direct
competitors and the product attributes that consumers consider the most important.
The internet drastically improved consumers’ access to the information they need when they buy products
for the first time or replace the, and simultaneously has enabled marketers to gather more precise data
about consumers by observing shoppers rather than relying on their responses to post-purchase surveys.
More precise targeting
Online data enable data brokers and marketers to exchange information and allow data aggregators to
track who is interested in what through so called “cookies”. The website can sell that cookie using
exchanges such as eXelate or Bluekai. Other companies can set a criterion in certain interests of people
and the exchanges tell them how many cookies that meets its criterion are for sale.
Marketers can optimize their resources by targeting individual consumers instead of large segments.
Tailored ads are more powerful because they allow advertisers to zero in on users that have already shown
interest in their products.
Advertisers are watching social networks to see what topics are getting the most attention, and putting
together blog posts, tweets and videos that match those themes in order to increase brand awareness and
relevance to customers.
Digital TV allows advertisers to target households and individuals more effectively than analogue TV. You
and your neighbour can watch the same program, but get different ads.
Marketers can also target consumers online at specific moments. (E.g: you look online for moving boxes,
and get ads about energy suppliers because they understand you are moving homes)
The web also enables marketers to improve customer service inexpensively.
Interactive communications
Traditional advertising is a one-way process in which the marketer pays large sums of money to reach large
numbers of potential buyers via mass media. (The company can see if it’s promotional messages were
effective only after the fact by for example looking at sales). Electronic communications enable a two way
interactive exchange in which consumers instantly react to marketers’ messages (by for example clicking
on links within websites or leaving them quickly)
Interactivity enables promotional messages designed by the customers themselves.
Technological Innovations sometimes force marketers to alter long-established marketing strategies. (VB:
embedding promotional messages directly into tv shows)
Cross-screen marketing: a promotional strategy that consists of tracking and targeting users across
their computers, mobile phones and tablets, and sending them personalized ads based on their interests, as
observed by marketers.
3. Customer Value, Satisfaction & Retention
Customer value: the ratio between customers’ perceived benefits (i.e. economic, functional, and
psychological) and the resources they have used to obtain those benefits (i.e. monetary, time, effort,
psychological)
Customer satisfaction: customers’ perceptions of the performance of the product or service in relation to
their expectations.
Customer retention: turning individual customer transactions into long- term customer relationships.
(by making it in the best interest of customers to stay with the company rather than switch to another
firm)
It is more expensive to win new customers than to retain existing ones, for several reasons:
1. Loyal customers not only buy more products but they are also ready-made market for new models of
existing products, and they represent an opportunity for cross-selling. Additionally, long-term customers
often purchase ancillary and high-margin supplemental products
2. Loyal customers are less price-sensitive and pay less attention to competitors’ advertising. They make it
harder for competitors to enter markets
3. Servicing existing customers who are familiar with the firm’s offerings and processes is less expensive
than “training” new customers and getting them acquainted with a seller’s process and policies.
- The cost of acquisition occurs only at the beginning of the relationship, so the longer the
relationship. The lower the amortized cost
-
4. Loyal customers spread positive word-of-mouth and refer other customers
5. Marketing efforts aimed at attracting new customers are expensive: indeed, in saturated markets, it may
be impossible to find new customers. Low customer turnover is correlated with higher profits
6. Increased customer retention and loyalty make the employee’s jobs easier and more satisfying. In turn,
happy employees feed back into higher customer satisfaction by providing good and consistent service
Technology and Customer relationships
Technologies often enhance customer relationships and retention by engaging consumers with brands.
The opportunities for technology-enabled added value are virtually limitless.
The most revolutionary example of technology enabled value added to physical products are Apple’s
iTunes and its large software selection for editing and posting content online.
Researchers have identified two forms of customer engagement:
(1): emotional bonds: represent a customer’s high level of personal commitment and attachment to the
Company
(2): transactional bonds: are the mechanics and structures that facilitate exchanges between consumers
and sellers.
Technology, mostly in the form of social media, has provided innovative tools for engaging customers
emotionally with products and brands.
Social Media: means of interactions among people, in which they create, share, and exchange information
and ideas in virtual communities and networks. Social media depend on mobile and web-based
technologies to create highly interactive platforms through which individuals and communities share, cocreate, discuss, and modify user-generated content
In addition to engaging customers with marketers, social media have transformed market research.
Emotional bonds vs. transaction-based relationships
The objective of discerning customers’ emotional and transactional motives when buying from a company
is to understand the drivers of customer satisfaction, which lead to customer retention and long-term
friendships. As consumers buy more and more online, it has become important to understand what makes
them satisfied during electronic transactions.
Studies have identified the following determinants of customer satisfaction with online websites and
merchants:
1. Adaption: merchant’s purchase recommendations match customer’s needs; personalized things;
makes you feel like a unique and valued customer
2. Interactivity: Ability to view merchandise offerings from different perspectives; search tools;
comparison tools
3. Nurturing: Receives a reminder about making a purchase; provides relevant info for purchases
4. Commitment: delivers goods on time; responds to problems consumers encounter; return policies
5. Network: customer sharing experiences about product purchases.
6. Assortment: Merchant provides one-stop shopping for most online purchases; site satisfies shopping
Needs
7. Transaction ease: merchant’s website can be navigated intuitively; first time buyer can easily make a
Purchase
8. Engagement: Attractive site design; enjoyable shopping at the site; feels that the site is inviting
9. Loyalty: Seldom considers switching to another merchant; likes to navigate site; favourite merchant
10. Inertia: Unless very dissatisfied, changing to a new merchant wouldn’t be worth the bother; finds it
difficult to stop shopping at the site
11. Trust: counts on the merchant to complete purchase transactions successfully; trusts site’s
Performance
Satisfaction and customer loyalty
Customers who are highly satisfied or delighted keep purchasing the same products and brands, engage in
positive word-of-mouth to others and often become customers for life. In addition, highly dissatisfied
customers spread negative and often exaggerated word-of-mouth.
There are several types of customers:
1. The loyalist are completely satisfied customers who keep purchasing
2. The apostles loyal customers whose experiences exceeded their expectation. Engage in positive w-o-m
3. The defectors Feel neutral or merely satisfied with the company and are likely to switch to another
company that offers them a lower price try turn them into loyalists
4. The terrorists Customers who have had negative experiences with the company. Spread negative w-o-m
5. The hostages Unhappy customers that stay with the company because of a monopolistic environment or
low prices.
6. The mercenaries Very satisfied customers who have no real loyalty to the company. May defect because
of lower price elsewhere or on impulse
Customer loyalty and profitability
Sophisticated marketers selectively build relationships with customers according to their profitability by
customer retention by:
1. Monitoring customers’ consumption volume and shopping patterns
2. Creating tiers of customers according to their profitability levels
3. Developing distinct strategies for each group of customers.
Companies should enable customers, across all loyalty levels, to maintain their status actively instead of
simply having to accept the company’s decision.
Measures of customer retention
Companies must develop measures to assess their customer-retention strategies, and researchers have
recommended the following retention measurement methods:
1. Customer valuation: value customers and categorize them according to their financial and strategic
worth, so the company can decide where to invest for deeper relationships
2. Retention rates: calculate the retention rate by examining the percentage of customers at the
beginning of the year that are still customers at the end of the year
3. Analysing defections: Look for the root causes, not mere symptoms; analysis of customers’ complaints
Companies should develop and implement corrective plans stemming from the results of such
measurements.
4. Social Responsibility Traits
Critics are concerned that an in-depth understanding of consumer behaviour can enable unethical
marketers to exploit human vulnerabilities in the marketplace and engage in other unethical marketing
practices to achieve business objects.
All marketing must balance the needs of society with the needs of the individual and the organization.
Social marketing concept: a premise that requires marketers to fulfil the needs of the target audience in
ways that improve, preserve and enhance society’s well-being, while also meeting their business objectives.
The social marketing concept maintains that companies would be better off in a stronger, healthier society
and that marketers that incorporate ethical behaviour and social responsibility attract and maintain loyal
customer support over the long term.
5. Consumer Decision-Making
The following disciplines determine consumer behaviour:
1. Psychology: is the study of the human mind and the mental factors that affect behaviour
2. Sociology: is the study of the development, structure, functioning and problems of human society
3. Anthropology: compares human societies’ cultures and development
4. Communication: the process of imparting or exchanging information. In the context of consumer
behaviour, it is the transmission of messages from senders (the sources) to receivers (the consumers) via
media (the channels of transmission)
Technologies often enhance customer relationships and retention by engaging consumers with brands.
The opportunities for technology-enabled added value are virtually limitless. Companies should enable
customers, across all loyalty levels,
The input into consumer decision-making includes four elements:
1. Segmentation and targeting: implemented through the marketing mix – representing marketers’
initiatives to persuade consumers to buy their products
2. Communications from marketers to consumers: advertising, creating buzz, and social media
3. Sociocultural dimensions: Shape consumers’ decisions – family, social standing, friends, peers, cultural
values, ethnicity, and gender roles
4. Communications among consumers: word of mouth and social media.
The Process stems from psychological factors. The output includes purchase behaviour and post-purchase
evaluation.
6. Employability
Brand management
Brand management is the process of maintaining, improving, and upholding a brand so that it is clearly
differentiated from other offerings in the same product category. Brand management stems from the
marketing concepts stating that marketers must satisfy consumer needs and retaining customers, through
the 4 elements of the marketing mix (4 P’s)
Understanding perception is particularly important because it enables newly hired graduates to
demonstrate they understand how marketers position products in highly competitive markets by forming
an easily and favourably recognizable brand image in consumers’ minds.
Additionally, understanding the concept of stimulus generalization enables proficiency in in designing
and adding items into successful product lines effectively because consumers would believe that a familiar
name delivers satisfaction and quality
Understanding the diffusion of innovations provides strategic insights for designing and launching brand
offerings, and proficiency in comprehending cross-cultures is crucial when U.S. brands introduced abroad
are customized to fit local cultures.
Advertising
Advertising includes writing advertising copy, creating visuals, ensuring that the right messages reach the
right consumers at the right time, and determining in which media to place ads, including when and for
how long.
The knowledge of communication provides students with the abilities to select appeals that are likely to
persuade consumers and to structure messages that would be easily understood, engage consumers, and
remembered.
The knowledge of learning is crucial in designing promotions because it explains how consumers retain
information and how to ensure they will remember it. The most important aspect in persuasion is source
credibility. Understanding the distinction between formal and informal sources, as well as the difference
between impersonal and interpersonal communications is crucial in transmitting advertising messages
that will be recalled and remain impactful and influential.
Space for ads is bought through real-time bidding and personalizing messages based on detailed
knowledge of individual receivers of each message.
Consumer research
Consumer research: the process and tools used to study consumer behaviour.
Consumer research is a form of market research: a process that links the consumer, customer and public
to the marketer through information in order to identify marketing opportunities and problems, evaluate
marketing actions, and judge the performance of marketing strategies.
The research instruments we explain include predictive analytics, projective techniques, measuring
brand loyalty, computing perceptions of products’ attributes and importance weights, measuring the
effectiveness of communications, assessing opinion leadership levels, measuring social class, gauging
cultural values, cross-cultural analysis and an overview of consumer research, including construction
questionnaires, sampling and analysing and evaluating research findings.