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Summary Consumer Behavior book resume (Schiffman & Wisenblit)

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Chapters 1tm9 and 14 and 15, summarized.

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  • November 9, 2017
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  • 2017/2018
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Consumer behavior Book Resume
Chapter 1: Technology-driven Consumer Behavior
Marketing: the activity, set of institutions, and processes for creating, communicating, delivering and exchanging
offerings that have value for customers, clients, partners and society.

Consumer behavior: the study of consumer’s actions during searching for, purchasing, using, evaluating, and
disposing of products and services that they expect will satisfy their needs. It explains how individuals make
decisions to spend their available resources (money, time, effort).

1.1 The marketing concept
Marketing concept: the essence of marketing consists of satisfying consumers’ needs, creating value and retaining
customers.
Production concept: maintains that consumers are mostly interested in product availability at low prices.
Marketing objectives are: cheap, efficient production and intensive distribution.
Product concept: assumes that customers will buy the product that offers them the highest quality, the best
performance and the most features. This could lead to marketing myopia: a focus on the product rather than on
the needs it presumes to satisfy.
Selling concept: marketers’ primary focus is selling the products that they have decided to produce. Aggressive
persuasion, ‘’hard-sell’’ approach.

Consumer research: the process and tools used to study consumer behavior. It’s 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 action and judge the performance of marketing
strategies.

Market segmentation: the process of dividing a market into subsets of consumers with common needs and
characteristics.
Targeting: selecting segments that the company views as prospective customers and pursuing them.
Positioning: the process by which a company creates a distinct image and identity for its products, services and
brands in consumers’ minds (communicate the distinct benefits of the product).

Marketing Mix (4 P’s):
1. Product or service: features, designs, brands, packaging, warranties etc.
2. Price: including discounts and payment methods;
3. Place: distribution through stores;
4. Promotion: advertising, sales promotion, PR and sales efforts.

The societal marketing concept: requires marketers to fulfill the needs of the target audience in ways that improve,
preserve and enhance society’s wellbeing while also meeting their business objectives. Marketers that incorporate
ethical behavior and social responsibility attract and maintain loyal customer support over the long term.

1.2 Technology enriches the exchange between consumers and marketers
Consumers have embraced technology not only young consumers, but all kind of age groups own technological
gadgets.

Traditional advertising: one-way process in which the marketer pays large sums of money to reach large numbers
of potential buyers, and after that can have a look after sales growth.
Electronic communications: a two-way interactive exchange in which consumers instantly react to marketers’
messages by clicking on links or leaving them quickly.

Cross-screen marketing: tracking and targeting users across their computers, mobile phones and tablets. Figuring
out when a mobile user is the same person as a desktop user.

,Customizing products and promotional messages: for example Nike customizing your own shoes. Promotional
messages can be customized by showing a buyer a particular display on the website depending on their past
purchases.

Better prices and distribution: the internet allows consumer to compare prices more effectively. Distribution
strategies are also improving (no failed package delivery anymore with online sales).

1.3 Customer value, satisfaction and retention
Customer value: the ratio between customers’ perceived benefits (economic, functional, psychological) and the
resources (time, money, effort, psychological) they use to obtain those benefits.
Customer satisfaction: customers’ perceptions of the performance of the product/service in relation to their
expectations.

Customer retention: turning individual consumer transactions into long-term customer relationships by making it
in the best interests of the 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, because:
1. Loyal customers buy more products and react better to new products and represent an opportunity for cross-
selling;
2. They are an important asset when new products/services are developed and tested;
3. They are less price-sensitive and pay less attention to competitor’s advertising;
4. It is cheaper to servicing existing customers, because the cost of acquisition only occurs at the beginning of a
relationship;
5. They spread positive word-of-mouth;
6. Marketing efforts aimed at attracting new customers are expensive;
7. Increased customer retention and loyalty make the employees’ jobs easier and more satisfying, and in turn
this feed back into higher satisfaction by providing good service.

Technology and customer relationships
Emotional bonds: a customer’s high level of personal commitment and attachment to the company.
Transactional bonds: the mechanics and structures that facilitate exchanges between consumers and sellers.
Social media: means of interaction among people in which they create, share and exchange information and ideas
in virtual communities and networks.

Determinants of customer satisfaction with online websites and merchants:
1. Adaptation: the merchant’s purchase recommendations match one’s needs (tailor-made products,
personalized ads, feeling unique);
2. Interactivity: ability to view merchandise offerings from different perspectives;
3. Nurturing: receiving reminders about making purchases, providing relevant info for purchases;
4. Commitment: delivering goods on time, responding to problems, return policies;
5. Network: customers sharing experiences;
6. Assortment: one-stop shopping, site satisfies shopping needs;
7. Transaction ease: able to make purchases without much help, user-friendly;
8. Engagement: site design is attractive, inviting, comfortable;
9. Loyalty: seldom consider switching, one’s favorite merchant to do business with;
10. Inertia: changing to a new merchant would not be worth the bother (or costs too much time/effort/money);
11. Trust: reliable and honest merchant.
 some of these determinants are driven primarily by emotions (engagement ), whereas others are stemming
from the mechanics of the transaction (assortment and transaction ease).

Customer loyalty and satisfaction:
 Loyalists: completely satisfied customers who keep purchasing and providing positive WOM;
 Defectors: feel neutral or merely satisfied and are likely to switch to another company that offers them a
lower price;
 Terrorists: they had negative experiences with the company and spread negative WOM;
 Hostages: unhappy customers who stay with the company because of a monopoly or low prices. They are
difficult and costly to deal with because of their frequent complaints;

, Mercenaries: very satisfied customers who have no real loyalty to the company and may defect because of a
lower price elsewhere or on impulse.

Customer loyalty and profitability:
 Platinum tier: heavy users who are not price-sensitive and willing to try new offerings;
 Gold tier: heavy users but more price-sensitive, ask for more discounts and are likely to buy from several
providers;
 Iron tier: whose spending volume and profitability do not merit special treatment from the company;
 Lead tier: who actually cost the company money because they claim more attention than they actually spend
(negative WOM).

Measures of customer retention:
1. Customer valuation: value customers and categorize them according to their financial and strategic worth, so
that the company can decide where to invest for deeper relations;
2. Retention rates: % of customers at the beginning of the year who are still customers by the end of the year.
Companies can use this ratio to make comparisons between products, between market segments and over
time;
3. Analyzing defections: look for root causes. Talking to former customers, analysis of the complaints, and
benchmarking against competitors’ defection rates.

Internal marketing: marketing the organization to its personnel. Employees will try harder to retain customers if
they are treated like valued ‘internal customers’ by their employees. This personnel will create ‘magic moments’
(Disney for example) that turn satisfied customers into real fans and truly loyal ones. Because the customers did
not expect this, they can become loyal and trusting customers.

1.4 Consumer behavior is interdisciplinary
Consumer behavior stems from four disciplines:
Psychology: the study of the human mind and the mental factors that affect behavior.
Sociology: study of the development, structure, functioning and problems of human society.
Anthropology: compares human societies’ culture and development.
Communication: the process of imparting/exchanging information personally throughout media channels and
using persuasive strategies.




Consumer decision making:

Input: the firm’s marketing efforts and sociocultural
influences.

Process: how consumers make decisions.

, Chapter 2: Segmentation, targeting and positioning
Segmentation = the process of dividing a market into subsets of consumers with common needs or characteristics.
Each segment represents a consumer group with shared needs that are different from those shared by other
groups. Marketers use segmentation research to identify the most appropriate media in which to place
advertisements.
Targeting = select the segments that the company views as prospective consumers and pursue them.
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 the competition by
communicating to the target audience that its better than alternatives.
 Segmentation, targeting and positioning are interrelated and implemented sequentially.

2.1 Market Segmentation and Effective Targeting
To be an effective target, a market segment must be:
1. Identifiable: Some segmentation factors, such as demographics, are easy to identify, but some others can
only be determined through questioning.
2. Sizeable: the segment must consist of enough consumers to make targeting profitable.
3. Stable and growing: relatively stable segments in terms of lifestyles and consumption patterns are
preferred.
4. Reachable: the target must be accessible (= able to communicate with).
5. Congruent with the marketer’s objectives and resources.

2.2 Bases for segmentation
A segmentation strategy begins by dividing the market for a product into groups that are relatively homogeneous
and share characteristics that are different from those of other groups. Generally, such characteristics can be
classified into 2 types:
1. Behavioral data = evidence based; it can be determined from direct questioning or observation. It
consists of consumer-intrinsic factors such as a person’s age, gender, income etc., and consumption-
based factors such as the quantity of products purchased, frequency of buying a given product etc.
2. Cognitive data = abstract; can only be determined through psychological and attitudinal questioning. It
consists of consumer-intrinsic factors such as personality traits, cultural values, attitudes towards social
issues etc., and consumption-specific attitudes and preferences, such as the benefits sought in products
and attitudes regarding shopping.

Demographic segmentation: All segmentation plans includes demographic data because it is the easiest and most
logical way to classify people, it offers the most cost-effective way to locate and reach specific segments, it
determine many consumption behaviors/attitudes/media patterns. Demographic segmentation divides
consumers according to:
1. Age: product needs often vary with consumer’s age and age is a key factor in marketing.
2. Gender: many products and services are inherently designed for either males or females, but sex roles
have blurred and gender is no longer an accurate way to distinguish.
3. Ethnicity: members of the same culture tend to share the same values, beliefs and customs.
4. Income and wealth: income is an important variable because it indicates an ability or inability to pay for
a product model or brand. It is often combined with other demographic variables to define target markets
more accurately.
5. Occupation
6. Marital status
7. Household type and size: the family life cycle is a classification of the phases that most families go though.
Each stage represents an important targets segments. Social class: a hierarchy in which individuals in the
same class generate the same degree of status. Consumers in different social classes vary in terms of
values, product preferences and buying habits.
8. Geographical location: where a person lives determines some aspects of consumption behavior (for
example the climate determines the types of clothes). The most popular use of geography in strategic
targeting is geodemographic = a hybrid segmentation scheme based on the premise that people who live
close to one another are likely to have similar financial means, tastes, preferences, lifestyles and
consumption habits. The primary application to do this is PRIZM, in which marketers can locate each of
PRIZMS’s 66 segments according to their postal ZIP codes.

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