The Applied Psychology of Business Management

Consumer Behavior
The Critical Introduction to Consumer Behavior

About the Lecture Presenter

Name: Daniel M. Zhou Gender: male Zodiac: Gemini Professional Career: project coordinator and translator in local government (19972001); managing loans and financial aids from international funding communities to improve local economy academic staff in Hubei University (2003 present); my teaching and research interests lie in applying psychology to business management, consumer behavior, organizational behavior and the psychology of investing
BA in ESP (Hubei, P.R.China) MSc in Management (Bath, UK)

Hobbies: reading history , watching movies travelling , and photographing .

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Consumer Behavior

Class Policies

You can interrupt me at any time when you think appropriate and at any place where you think appropriate

Listening is as important as reading

Make sure that you arrive punctually

Switch off you mobile phone in class

If you cannot meet the minimal requirement, I will fail you

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Teaching Methods and Students Outcomes

The course is delivered bilingually - The core terms and concepts are given in English, but explained and expounded in Chinese. And only English Presentations Slides are available
You are expected to understand business theories and be able to apply them to the real-world business Scenario Mutual communications, in-class discussions and on-stage presentations are highly encouraged Extensive reading is needed to take good command of CB Independent thought and original ideas are deeply appreciated

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Consumer Behavior

CHAPTER

The Critical Introduction to Consumer Behavior

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Contents
1 2 3 4 5
Daniel M. Zhou

The Underlying Logic of Consumer Behavior

Consumer and Consumer Behavior

Essential Concepts of Consumer Behavior Study

The Relationship between Consumer Behavior and Marketing Strategy The Structure of Consumer Behavior

Consumer Behavior

The Underlying Logic of Consumer Behavior Study

Customers are scarce: Todays major economic problem is overcapacity in most of the worlds industries. Customers are scarce, not products. Demand, not supply, is the problem. Overcapacity leads to hypercompetition, with too many goods chasing too few customers. It is customer satisfaction that determines business survival and profits.

Customers are various: Customers are highly varied from one to another due to their mood, personalities, lifestyles, age, gender, educations, professional careers, social classes, cultural backgrounds, etc.. Without understanding consumers behaviors, success to attract and retain them stands little chance.

Daniel M. Zhou

Consumer Behavior

Consumer and Consumer Behavior

A consumer is generally thought of as a person who identifies a need or desire, makes a purchase, and then disposes of the product during three stages (pre-purchase, purchase, and post-purchase) in the consumption process. The term consumer behavior describes two different kinds of consuming entities: the personal consumer , and the organizational consumer

Daniel M. Zhou

Consumer Behavior

Consumer and Consumer Behavior

The field of consumer behavior is the study of individuals, groups, or organizations and the processes they use to select, secure, use, and dispose of products, services, experiences, or ideas to satisfy needs and the impacts that these processes have on the consumer and society.

The field of consumer behavior covers many grounds. It is the study of the processes involved when individuals or groups select, purchase, use, or dispose of products, services, ideas, or experiences to satisfy needs and desires. The study of consumer behavior focuses on how individuals make decisions to spend their available resources (time, money, effort) on consumption-related items. That includes what they buy, why they buy it, when they buy it, where they buy it, how often they buy and use it, how do they dispose of it after they buy?

Daniel M. Zhou

Consumer Behavior

Consumer and Consumer Behavior

Consumer behavior is the very foundation of the formulation and implementation of any marketing and business programs.

Consumer behavior is both an academic discipline and an applied science.

Consumer behavior has interdisciplinary roots.

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Consumer and Consumer Behavior

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Consumer and Consumer Behavior

Psychology

Economics Consumer Behavior

Management

Anthropology

Sociology

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Essential Concepts - Marketing

Peter Drucker: The aim of marketing is to make selling superfluous.

Barbara Kahn: Modern marketing is defined by a focus on customer value. The best way to convince customers to buy from you is to provide more value. The key to profitability is customer loyalty and customer satisfaction. Philip Kotler: Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others. American Marketing Association: Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.
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Essential Concepts - Marketing

General term:
Marketing is the process of Identifying, meeting and satisfying customer and social needs profitably. Daniel M. Zhou

Strategic perspective:
A process of building and maintaining a strategic network with all the stakeholders in a jointly profitable way. Daniel M. Zhou

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Essential Concepts Needs, Wants and Demands

Need: A human need is a state of felt deprivation of some basic satisfaction. People require food, air, water, clothing and shelter; people also have strong needs for recreation, education, and entertainment.

Want: Wants are desires for specific satisfiers of these deeper needs.

Demand: Demands are wants for specific products backed by an ability and willingness to buy them.
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Essential Concepts Value and Satisfaction

Satisfaction is a persons feelings of pleasure or disappointment resulting from comparing a products perceived performance (or outcome) in relation to his or her expectations.

Perceived value=benefits-costs =(functional benefits + emotional benefits) (monetary cost + time cost + energy cost +Psychic cost)

Perceived value = expectation: satisfied Perceived value expectation: dissatisfied Perceived value expectation: delighted

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Essential Concepts Value and Satisfaction

Build customer loyalty

Achieve customer delight

Develop customer confidence

Satisfy customer unstated needs

Prevent customer complaints

Meet basic customer requirements

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Essential Concepts Marketing Mix

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Essential Concepts Marketing Philosophy Evolution

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Essential Concepts Marketing Philosophy Evolution

Starting point

Focus

Means

Ends

Factory

Existing products

Selling and promotion

Profits through sales volume

Selling concept

Market

Customer needs

Integrated Marketing

Profits through Customer satisfaction

Marketing concept One-to-one Marketing; integration of the value chain

Consumer Behavior

Individual customers

Customer needs and values

Profitable growth through capturing customer share, loyalty and life-time value

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Consumer Behavior and Marketing Strategy

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Consumer Behavior and Marketing Strategy

Step 1. Market Analysis Marketing Strategy begins with an analysis of the market the organization is considering, requiring a detailed analysis of the:
organizations capabilities strengths and weaknesses of competitors

Political, economic, socio-cultural and technological forces

current and potential customers

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Consumer Behavior and Marketing Strategy

Step 2. Market Segmentation
On the basis of the consumer analysis, the organization decide on formulating programs to attract and retain customers
Market segmentation is a process of dividing a market into subsets of consumers with common needs or characteristics Market targeting is selecting one or more of the segments identified for the company to pursue Market positioning is developing a distinct image for the product or service in the mind of the consumer.

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Consumer Behavior and Marketing Strategy

Step 3. Marketing Strategy

Marketing Strategy seeks to provide the customer with more value than the competition, while still producing a profit for the firm. Marketing strategy is formulated in terms of the marketing mix, which involves determining the product features, price, communications, distribution and services that will provide customers with superior value, resulting in the total product.

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Consumer Behavior and Marketing Strategy

Step 4. Consumer Decision Process

The total product is presented to the target market, which is consistently engaged in processing information and making decisions designed to maintain or enhance its lifestyle or performance. Many firms are wrapping experiences around their traditional products and service in order to sell them better. For example, retailers have been moving to lifestyle centers in an effort create a more pleasing shopping experience.

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Consumer Behavior and Marketing Strategy

Step 5. Outcomes
Society the cumulative effect of the marketing process affects economic growth, regulatory policies, and social problems. Firm reaction of the target market to the total product produces an image of the product/brand/organization. Individual the process results in some level of need satisfaction, financial expenditure, attitude development/change, and/or behavioral changes.

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Discussion: Do Marketers Manipulate Consumers?

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The Structure of Consumer Behavior

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The Structure of Consumer Behavior

Consumers as individuals
Sense and perception Need and motivation Learning and memory Attitudes formation and change Personality, self and lifestyle

Consumers in social, cultural and market settings

Reference group, opinion leadership and family influence Social class Culture, subculture and cross culture impacts Consumer behavior and marketing communications

Consumers as decision makers

Consumer decision making process Purchase situation, outlet selections, and online buying behavior

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The Highly Recommended Reference Books

Consumer Behavior (9th edition) Authors: Leon G. Schiffman; Leslie Lazar Kanuk Publishing House: Pearson Education

Consumer Behavior Buliding Marketing Strategy (10th edition) Authors: Del I. Hawkins; David L. Mothersbaugh; Roger J.Best Publishing House: McGraw Hill

Consumer Behavior- Buying, Having and Being (7th edition) Authors: Michael R. Soloman Publishing House: Pearson Education
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The Highly Recommended Reference Books

Psychology and Life (18th edition) Authors: Richard J. Gerrig; Philip G. Zimbardo Publishing House: Pearson Education

Social Psychology (11th edition) Authors: Shelley E. Taylor; Letitia Anne Peplau; David O. Sears Publishing House: Pearson Education

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Consumer Behavior

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