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# 2006 University of South Africa All rights reserved Printed and published by the University of South Africa Muckleneuk,

Pretoria MND204 ^T/1/2007^2009 97975540 Erica Bus Style 3B2

CONTENTS
AIM OF THE MODULE TOPIC 1: INTRODUCTION TO CUSTOMER BEHAVIOUR
(iv)

Study unit 1: The nature of customer behaviour Study unit 2: Creating market value for customers

2 9

TOPIC 2:

Study unit 3: Market characteristics Study unit 4: Culture and subculture Study unit 5: Reference groups and social class

EXTERNAL FACTORS INFLUENCING CUSTOMER BEHAVIOUR

16 24 30

TOPIC 3:
Study unit 6: Study unit 7: Study unit 8: Study unit 9: Study unit 10:

Personal characteristics Customer perception and learning Customer motivation Customer attitudes Personality and self-concept

INTERNAL FACTORS INFLUENCING CUSTOMER BEHAVIOUR

36 41 46 51 57

TOPIC 4:

Study unit 1 Individual customer decision making 1: Study unit 12: Family decision making Study unit 13: Organisational buying behaviour

CUSTOMER DECISION MAKING

64 72 77

TOPIC 5:
Study unit 14: Study unit 15: Study unit 16: Study unit 17:

Market segmentation Customer loyalty Building relationships with customers The value of e-commerce in customer behaviour

CUSTOMER-FOCUSED MARKETING

84 97 107 1 14

III

AIMOF THE MODULE


The aim of this module is to provide insight into and an understanding of the basic principles of customer behaviour. It is thus necessary to study the nature of customer behaviour, the internal, external, personal and market factors influencing customer behaviour, customer decision making, as well as customer-focused marketing.

MODULE OUTCOMES
Learners can . . . . . . . . . . . . . . . . . explain the nature of customer behaviour explain how market value can be created for the customer illustrate the market characteristics that influence customer behaviour explain the influence of culture and subculture on customer behaviour discuss how reference groups and social class influence customer behaviour illustrate how personal characteristics influence customer behaviour explain and illustrate the influence of customer perception and learning on customer behaviour discuss the implications of motivation for customer behaviour explain how customer attitudes influence customer behaviour discuss the influence of personality and the self-concept on customer behaviour illustrate how a customer progresses through the customer decisionmaking process discuss the role of the family in decision making explain organisational buying behaviour discuss the role of market segmentation in customer behaviour explain the implications of brand and store loyalty in terms of customer behaviour show how to build relationships with customers explain the value of e-commerce in customer behaviour

1 OVERVIEWOF THE MODULE


An organisation communicates with its target market by using various methods of communication.To ensure that the messages reach the target market and are perceived and interpreted as intended by the marketer, it is necessary to study the consumer behaviour of the particular target market. Marketers need to know, for example, what their customers need and want, how they perceive marketing messages such as advertisements and products, how to influence their attitudes, what motivates them and how they make their decisions about buying and using products. It is also

IV

AIM OF THE MODULE

necessary to study the culture of the members of the target market and the groups that influence their behaviour, such as the family, reference groups and social class. Once the consumer behaviour of a target market has been studied and analysed, the marketer can proceed to influence the consumers to become favourable to his or her particular market offering. In this module we address all of the issues involved in consumer behaviour.

2 HOW TO STUDY THIS MODULE


We expect you to master the contents of the study guide and the prescribed books on your own, according to the guidelines provided in the study guide as well as in the tutorial letters. This module on customer behaviour is based on two prescribed books. Please consult Tutorial Letter101MND204-T for the details ofthe prescribed books. To help you keep up to date, we often change the prescribed books. In that case we supply a page reference to the sections in the new prescribed books to be studied, instead of the books upon which this study guide is based.

3 ASSIGNMENTS
We encourage you to submit the assignments set for this module.

4 EXAMINATIONS 4.1 Prescribed material


All of the study material is relevant for the examinations, so we cannot provide any demarcation of the study material. In addition to the theoretical principles provided, we expect you to apply these principles to a practical situation.Y will, however, not be examined on the cases in the ou prescribed case study book; use this for completing assignments and for practical examples in the examinations.

4.2 Format of the examination paper


The duration of the examination is two hours. The format of the examination paper for this module is as follows: . Section A is compulsory and counts 20 marks.This section may consist of short questions or multiple-choice questions. . Section B counts 50 marks.Y will be given three 25-mark questions of ou which you have to answer two. The questions may be essay-type questions and/or may have subsections.The questions may be based on a case study, but will not be taken from Cant and Machado (2005).

AIM OF THE MODULE

4.3 Presentation and allocation of time


Allocate your time carefully owing to the time limitation. Do not waste time with long introductions and summaries; do not include a bibliography; leave spaces between paragraphs; and commence each question on a new page (but write on both sides of the pages).This makes your answers more readable and ensures that nothing is missed by the lecturer: remember, what we cannot read, we cannot mark properly! In the examination, the theoretical background counts about 70% or 80% of the mark, while the practical application counts about 20% to 30%.Y ou should thus not answer the examination questions in exactly the same way as the assignment questions; in the examination you do not have sufficient time to think about the practical application, whereas in the assignments you do. Onthe cover page ofthe examination answer book, please write the numbers ofthe questions answered, in the order you have answered them.

5 KEYCONCEPTS IN ASSIGNMENTS AND EXAMINATIONS


In examination questions you will notice certain key concepts (ie words/ verbs), instructing you what to do. For example, you may be asked in a question to list, describe, illustrate, demonstrate, compare, construct, relate, criticise, recommend or design particular information/aspects/factors/ situations.To assist you to know exactly what these key concepts or verbs mean, so that you will know exactly what is expected of you, we present the following taxonomy by Bloom, explaining the concepts and the level of cognitive thinking to which they refer. . Knowledge This is basically memorisation and recall of information. At its simplest, it involves the recall of specific facts or terminology, such as names, dates and definitions; it can also involve the recall of principles and generalisations, or recall of ways of doing things. Outcomes/instructions written at this level will typically use verbs (these are the instructions in the questions, ie what you have to do) such as: name, list, define, label, select, state, write, describe, identify and recall. . Comprehension This involves making meaning of things, rather than just remembering them. Comprehension usually requires students to translate information into their own words. Outcomes/instructions written at this level will typically use verbs (ie what you have to do) such as: convert, illustrate, distinguish, interpret, rewrite, discuss andgive. . Application This is the ability to use information and ideas in new situations, such as solving problems that have a single or best answer.Outcomes/instructions written at this level will typically use verbs such as: calculate, demonstrate, construct, compute, solve, relate, show use and apply. ,

VI

AIM OF THE MODULE

. Analysis This is the ability to examine information systematically to identify the important ideas, the relative hierarchy of those ideas and the relations between the ideas. Outcomes written at this level will typically use verbs such as: analyse, differentiate, categorise, classify, relate, illustrate, outline, compare, contrast, discriminate, explain and hypothesise. . Synthesis This is the ability to construct something new by combining several pieces of information to make a coherent whole (such as a plan). Outcomes written at this level will typically use verbs such as: plan, adapt, combine, create, compile, compose, construct, model, revise, design, develop, formulate and organise. . Evaluation This is the ability to make judgements about the quality or value of things (either with reference to internal evidence or external criteria).Outcomes written at this level will typically use verbs such as: assess, judge, choose, criticise, rate, argue, justify evaluate, decide, recommend and conclude. , In this module you will be examined on all six levels of the taxonomy. Y ou should make quite sure that you know what is expected of you in each question.

VII

MODULE FRAMEWORK

MODULE FRAMEWORK: CUSTOMER BEHAVIOUR


TOPICS
1 Introduction to customer behaviour

STUDY UNITS
1 The nature of customer behaviour 2 Creating market value for customers

"

External factors influencing customer behaviour

"

3 Market characteristics 4 Culture and subculture 5 Reference groups and social class

Internal factors influencing customer behaviour

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6 Personal characteristics 7 Customer perception and learning 8 Customer motivation 9 Customer attitudes 10 Personality and self-concept

Customer decision making

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11 Individual customer decision making 12 Family decision making 13 Organisational buying behaviour

Customer-focused marketing

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14 Market segmentation 15 Customer loyalty 16 Building relationships with customers 17 The value of e-commerce in customer behaviour

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ICONS

ICONS

Learning outcomes

Assessment

Study

Feedback

Read

Key terms

Activity

Aim

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topic 1

INTRODUCTION TO CUSTOMER BEHAVIOUR


AIM
to help you develop an understanding of the nature of customer behaviour and how to create market value for the customer

LEARNING OUTCOMES
Learners can . demonstrate an understanding of the nature of customer behaviour, as well as how to create market value for the customer

TOPIC CONTENT
Study unit 1 Study unit 2 The nature of customer behaviour Creating market value for customers

study unit 1

THE NATURE OF CUSTOMER BEHAVIOUR


CONTENTS
Key concepts Getting an overview 1.1 1.2 1.3 1.4 The dimensions of customer behaviour The importance of customer behaviour Applications of customer behaviour The role of customer behaviour in marketing strategy

Assessment Summary

KEYCONCEPTS
types of customers mental activities marketing strategy informed individuals roles of customers physical activities social marketing

GETTING ANOVERVIEW
South Africa is a country of multiculturalism and diversity. Its people differ not only in the usual way that is, in terms of age and gender, race and nationality, education and occupation, marital status and living arrangements but also in their activities and interests, preferences and opinions.They have different tastes in music, watch different television shows, hold different political beliefs, and dress differently. One only has to stand on a street corner in Sandton during the afternoon and watch the people, to see the amazing diversity in dress. Women's hemlines may vary from the micro-mini to ankle length or even longer, with every length in-between. Trousers may range from short shorts to tailored slacks, from spandex bicycle pants to flowing baggy (palazzo) pants, from bell-bottoms to jeans. Not to mention the hairdos of men and women alike regardless of age, they may range from the shaved head to the flowing mane, from the clipped bob to the ubiquitous ponytail, from straight glossy hair to curly mops. There is also great diversity among marketers.There are the conventional

Study unit 1: The nature of customer behaviour

retail shops such as Shoprite and Pick 'n Pay, discount stores such as Dion and Game and low-price stores such as Mr Price. Some marketers offer value pricing which emphasises high quality at the lowest possible price, while other marketers are concerned with relationship marketing, designed to develop a close affiliation with the customer. Some customers prefer to shop at stores offering large selections of merchandise and low prices, while others prefer stores where they can enter and exit quickly, and are willing to pay a premium to save time.

In South Africa, we are all free to express our tastes and personalities in any way we wish, and the wonderful news is that we all fit in.With all this diversity surrounding us, the profusion of goods and services offered, and the freedom of choice available, we may wonder how individual marketers actually reach us with their highly specific marketing messages. How do they know which people to target, where to reach them, and what message would be most persuasive for that target audience? To succeed in this dynamic and rapidly evolving industry, marketers need to know everything they can about customers what they want and think, and how they work and play. They need to understand the personal and group influences that affect customer decisions, and how these decisions are made. This is what customer behaviour is all about determining customers' needs and wants, and how they make decisions about buying and using products. By studying these factors, marketers will know how to influence consumers to buy their products or services. In this study unit we will discuss the dimensions of customer behaviour, the applications of customer behaviour as well as the role of customer behaviour in marketing strategy.

1.1 THE DIMENSIONS OF CUSTOMER BEHAVIOUR

STUDY
Study secs 1.1 and 1.2 in your prescribed book.

Y will note that the definition of customer behaviour includes a variety of ou activities and a number of roles that people can fulfil (study fig 1.1 in your prescribed book in this regard). These dimensions of customer behaviour include the following: . Types of customers. Here a distinction is made between household and business customers. . The three roles ofcustomers. For a transaction to take place in the market, at least three customer roles are required, namely that of the buyer, the payer and the user.

Topic 1: INTRODUCTION TO CUSTOMER BEHAVIOUR

. Physical and mental activities.The physical activities include visiting a store and discussing a product with a salesperson, while the mental activities include the customer assessing the compatibility of the product with his/her needs.

ACTIVITY 1.1
Identify the payer, user and buyer in the following paragraph: Tabo has recently been selected to join his school's tennis team. The tennis sneakers he wore to play tennis at home and at the gym are worn through, and he will have to get a new pair if he is to represent his school in the tennis team. His mother feels that buying an expensive pair of sneakers like Nike or Reebok is unnecessary because he is only a teenager. She givesTabo some money to buy the sneakers. His dad takes him shopping and buys him a pair of shoes for R100.

FEEDBACK

Y would have noticed that Tabo will be the user of the tennis sneakers. ou His mom paid for the sneakers (the payer), while his dad actually took him shopping and bought the shoes (the buyer).

1.2 THE IMPORTANCE OF CUSTOMER BEHAVIOUR

READ
Read sec 1.3 in your prescribed book.

Note the reasons why understanding customer behaviour is so important for the success of an organisation.These three reasons include realising the purpose of the business, carrying out the marketing concept and achieving a customer focus (see fig 1.3 in your prescribed book).

Study unit 1: The nature of customer behaviour

The applications of customer behaviour to aspects such as an organisation's marketing strategy and an individual's understanding of his/her environment will be discussed next.

1.3 APPLICATIONS OF CUSTOMER BEHAVIOUR

STUDY
Study sec 1.4 in your prescribed book.

Customer behaviour not only plays a vital role in marketing management, but also helps individuals to better understand themselves and their environments. Factors such as the organisation's marketing strategy, social marketing and informed individuals are important in this regard. . The marketing strategy of an organisation is based on certain beliefs about customer behaviour, such as why they buy the products they do, or how an individual's family may influence their buying behaviour. An organisation that knows more than its competitors about customer behaviour has an advantage over its competitors. . The social marketing strategy of an organisation also requires a sound understanding of customer behaviour. For example, before an organisation can launch a socially responsible campaign, such as sponsoring an underprivileged soccer team, it needs to understand how this will influence customer perception of the organisation. . Informed individuals can develop from a sound knowledge of customer behaviour, and can help to enhance individuals' understanding of themselves and of their environment. In the next section, we discuss the role of customer behaviour in marketing strategy in more detail.

1.4 THE ROLE OF CUSTOMER BEHAVIOUR IN MARKETING STRATEGY

READ
Read sec 1.5 in your prescribed book.

Customers' reaction to an organisation's strategy will determine an orga-

Topic 1: INTRODUCTION TO CUSTOMER BEHAVIOUR

nisation's success.This reaction will also help customers to determine how successful they have been in fulfilling their needs. As can be seen from figure 1.5, a marketing strategy comprises many interrelated components including market analysis components, market segmentation, marketing strategy, customer decisions and outcomes. In the following sections we will highlight the market analysis component as well as the marketing strategy component.

1.4.1 Market analysis components

STUDY
Study sec 1.6 in your prescribed book.

A market analysis requires an in-depth understanding of an organisation's own capabilities, its competitors' capabilities, the behaviour of consumers as well as the environmental conditions that exist in the market in which an organisation operates.These aspects can be summarised as follows: . As far as its customers are concerned, an organisation needs to have an in-depth understanding of their behaviour. An organisation can use marketing research to identify the needs and wants of customers. . The organisation must also understand its own capabilities, such as its managerial skills, reputation in the market and financial capabilities. . The competitors of an organisation must be studied thoroughly in terms of their capabilities and strategies, so that the organisation can meet the needs of its customers better than its competitors. . The environment in which the organisation operates must also be examined, because failure to examine variables such as the economy and the technological environment could lead to the failure of an organisation.

1.4.2 Market segmentation

READ
Read sec 1.7 in your prescribed book.

It is vitally important for an organisation to divide up the total heterogenous market into smaller homogenous segments based on similar char-

Study unit 1: The nature of customer behaviour

acteristics of consumers. This enables organisations to better understand and cater for the diverse needs of consumers. Note the steps in the market segmentation process when you read this section. (Market segmentation is dealt with in more detail in the second-level module, Marketing Management MNM202^Y .)

1.4.3 The marketing strategy


STUDY
Study sec 1.8 in your prescribed book.

The marketing strategy is a``tool'' that an organisation develops to provide superior customer value to its selected target market, in an effort to satisfy the customers' needs better than its competitors. To this end, the organisation must combine the product, price, distribution and communication elements at its disposal to satisfy the needs of the consumers in its target market.The combination of these elements or 4 P's (product, price, place and promotion) is called the marketing mix. These elements can be summarised as follows: (1) The product is a set of tangible (ie we can touch, smell or taste them, such as a product's packaging) and intangible (ie we cannot physically touch, smell or taste them, such as the service delivered in a restaurant) attributes. (2) The marketing communications or promotion element serves to inform, persuade and remind the market about the organisation or its product or service. Marketing communication includes personnel selling, advertising, publicity, sales promotion and public relations. (3) The price is the amount of money needed to acquire a product or service. (4) The role of the distribution element in the mix is to get the product or service to the organisation's target market, because if it is not where the customer requires it to be, the organisation will be unable to satisfy the customer's needs.

1.4.4 Outcomes
READ
Read sec 1.10 in your prescribed book.

Topic 1: INTRODUCTION TO CUSTOMER BEHAVIOUR

When you read this section, note that three types of outcomes are discussed, namely organisational, individual and society outcomes. Figure1.6 in the prescribed book summarises the way in which the theory in this module is organised.

ASSESSMENT
(1) Explain the dimensions of customer behaviour, namely types of customers, customer roles and mental and physical activities. (2) Discuss the applications of customer behaviour in terms of marketing strategy, social marketing and informed individuals. (3) Explain and illustrate the components of a market analysis. (4) Explain how the marketing mix should focus on customer needs.

SUMMARY
In this study unit we discussed the dimensions of customer behaviour as well as the role it plays in marketing strategy.

study unit 2

CREATING MARKET VALUE FOR CUSTOMERS


CONTENTS
Key concepts Getting an overview 2.1 2.2 2.3 2.4 Introduction Value defined Value measurement Marketing implications of the value concept

Assessment Summary

KEYCONCEPTS
pricing value strategic value performance indicators customer acquisition customer satisfaction customer value customer satisfaction index balanced scorecard customer profitability customer retention

GETTING ANOVERVIEW
It is never easy to deliver value because of the changing needs of one's customers. However, the film distributor, Ster Kinekor, has developed a digitally customer-driven approach that knows the company's customers almost better than they know themselves. One of the key aims of the online aspect of the project was to motivate customers to use the Ster Kinekor website over and over again. In so doing, Ster Kinekor was encouraging its customers to use its website (www.sterkinekor.com) by using features such as polls, movie reviews and live chats.Theirs is also a help function in the form of an online character, Hannah, who can respond to a customer's request at a personal level. In other words, she can answer all one's questions individually.The most interesting aspect of the new site is its implicit and explicit personalisation options for users. The implicit personalisation option tracks all the information on the customer and uses it to form a profile of each customer. For example, if a customer has booked tickets for the film ``Spiderman'' via the website, the

Topic 1: INTRODUCTION TO CUSTOMER BEHAVIOUR

site will then ``push'' or send through information and products that correlate with the ``Spiderman'' user profile to the customer. The explicit personalisation option is a more direct approach in which the website is more open about the fact that it knows who a person is. For example, when a person logs on to the site for the first time, it will always welcome her by name by using the greeting, for example,``Hello Claudia''. There is also an SMS/e-mail-based communications programme in operation, which forms part of the Movie Club strategy: members are fed quarterly newsletters, via e-mail, and regular updates on targeted movies that the system knows they would be interested in, based on their user profile (Marketing Mix 2002:5^7).

2.1 INTRODUCTION

STUDY
Study p 1 in the prescribed book.

Customer satisfaction is of crucial importance to all marketers.The buyers of a product, the customers, will only be satisfied if the product performs according to their expectations. If the product's performance exceeds their expectations, the customer will be highly satisfied. A parallel can be drawn between customer satisfaction and market value for the customer.Today's busy and cost-conscious customers focus almost exclusively on value. Customers switch retailers because they are dissatisfied with the store's perceived value relative to competition. Similarly, clients often decide to go to another bank if they are not satisfied with the service rendered. Although customers want the ``most for the least'', satisfied customers are willing to pay more, and happy customers will tell other people about good products and services. Happy customers are the lifeblood of any retail store, and should therefore receive maximum value from the use of a product. In our example, Ster Kinekor has provided extra value to the customer by means of personalisation. Personalisation helps Ster Kinekor to form a profile of each customer and thereby supply each customer with information about the company's products on a continuous basis. In this study unit we will be dealing with the topic of creating value for the customer. Firstly, it is necessary to define the word ``value''. Secondly, it is important to focus on measuring value delivery, and thirdly, the marketing implications of the value concept will come under the spotlight.

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Study unit 2: Creating market value for customers

2.2 VALUE DEFINED

STUDY
Study secs 2.1, 2.2, 2.3 and 2.4 in the prescribed book.

Value is what customers seek in products and services. The worth of any product to the customer is therefore its value, which can be expressed in terms of money.Value is closely related to price which is the value a seller attaches to a product or service, and agreed upon or rejected by a customer or buyer. When we say a product has value, we do not necessarily mean that it is inexpensive. Price is only one part of the formula. Value indicates that a particular product has potential benefits such as product quality, image and purchase convenience which consumers expect from it at a particular price level. For example, Ster Kinekor provides extra benefits by providing customers with quarterly newsletters and regular updates on targeted movies. When studying this section in your prescribed book you will notice that by looking at the term ``value'' in a narrower sense, we must distinguish between three interpretations of it namely: (1) pricing value (2) customer value (3) strategic value The next important point to be discussed is how to measure value.

2.3 VALUE MEASUREMENT

STUDY
Study sec 2.5 in the prescribed book.

Organisations must ensure that they deliver value to their target markets. It is essential to continually research the question of what exactly constitutes value by finding out what customers want. On the basis of these wants, tools for creating value can be selected and used. The entire process should then be measured according to customers' perceptions of how well these values have been delivered.

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Topic 1: INTRODUCTION TO CUSTOMER BEHAVIOUR

The only way to really determine if value was added to the product/service bought by the customer is to measure it. Measuring the value added would imply first determining what value the customer expects from a product or service. As indicated in the prescribed book, the following are the steps involved in determining if value was in fact added: . Determine what value the customer expects from a product or service. This can be done by starting with a customer satisfaction index. . Prepare a strategy to deliver the value to the customer. One way of doing this is to explain to management the importance of customer value management (CVM). . Measure how well these values were delivered, by using a measurement instrument such as the balance scorecard (BSC). . Determine if there are any deviations and if there are, ensure that they are corrected. The marketing implications of the value concept will be highlighted in the following section.

2.4 MARKETING IMPLICATIONS OF THE VALUE CONCEPT

STUDY
Study sec 2.6 in the prescribed book.

Ster Kinekor, in our example, has launched an extensive customer relationship programme in order to deliver a complete picture of the customer at every point of contact in order to know the customer's preferences.Through this ``in-your-face'' approach the company knows the customers almost better than they know themselves, and is therefore able to successfully deliver value and differentiate itself from its competitors. The ultimate aim of implementing value delivery is to make the customer happy. Happy customers are the lifeblood of a retailing operation. Retailers should therefore do everything possible to make and keep their customers happy so happy, that they enjoy doing business with the store. Establishing and nurturing long-lasting relationships with customers is the ultimate goal of customer orientation.

ACTIVITY 2.1
When a BMW dealer sells a BMW sports car to a customer, the dealer

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Study unit 2: Creating market value for customers

aims to simultaneously provide four types of benefits to him or her. Explain the four types of benefits.

FEEDBACK

Y should have discussed the following four types of benefits: ou (1) Functional benefits.The functional benefits of the BMW sports car that the customer buys are transportation and safety. (2) Socialbenefits.This refers to the social benefit the customer believes he or she attains by driving this high-status car. (3) Personal benefits. Some customers experience a personal benefit when they buy a BMW sports car, namely satisfaction. (4) Experientialbenefits.The customer experiences the speed of the sports car and ``sheer driving pleasure.' '

ASSESSMENT
(1) Define customer value with the aid of an equation. (2) Explain the different types of benefits a customer can experience by buying products/services. (3) Describe the different types of costs that the customer pays to obtain a product. (4) What are the differences between pricing value, customer value and strategic value? (5) Discuss the steps in the process of value measurement. (6) Explain how an organisation can use the balanced scorecard to measure value.

SUMMARY
In this study unit we explained the concept of value creation for the customer. Value was defined in a broader and narrower context. For the purpose of the study guide, we used the narrower definition of customer value which states that customer value is the difference between the benefits the customer receives and the cost/sacrifice he or she has to

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Topic 1: INTRODUCTION TO CUSTOMER BEHAVIOUR

make. The steps in measuring value were examined and the concept of customer value measurement explained. We also referred to the use of the balanced scorecard and its use in value measurement. Lastly, we considered the marketing implications of the value concept, and stated that creating value for the customer is the only way an organisation can differentiate itself.We underlined the importance of the organisation being market driven and discussed the linkage with value-based marketing.

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topic 2

EXTERNAL FACTORS INFLUENCING CUSTOMER BEHAVIOUR


AIM
to help you develop an understanding of the external factors influencing customer behaviour. To understand these external factors it is necessary to gain insight into the market characteristics that influence customer behaviour, the culture and subculture that impact on customer behaviour, as well as the influence of reference groups and social class.

LEARNING OUTCOMES
Learners can . demonstrate an understanding of the influence of market characteristics, culture and subculture, reference groups and social class on customer behaviour

TOPIC CONTENT
Study unit 3: Study unit 4: Study unit 5: Market characteristics Culture and subculture Reference groups and social class

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study unit 3

MARKET CHARACTERISTICS
CONTENTS
Key concepts Getting an overview 3.1 3.2 3.3 3.4 Introduction Characteristics of the South African population Developing trends that influence consumer behaviour Marketing implications

Assessment Summary

KEYCONCEPTS
population rural literacy formal sector migrant work climate urban education unemployment informal sector health care economy

GETTING ANOVERVIEW
The African continent is a growth market with enormous potential. Most African countries have vast populations, with little disposable income.Y et, in every African country there are wealthy, affluent people who have yet to be exposed to the kind of lifestyle and choices more developed countries enjoy. For example, the use of cellphones on the African continent was questioned, but it has been proved time and time again that even the poorest of the poor somehow manage to raise the extra money needed to buy their prepaid card. Africans clearly realise the potential of communication tools and other technological advances that can enhance their lives and open doors to exciting new opportunities, and they are ready to embrace them. In this study unit we will examine the South African population, the influence of certain factors (eg climate, the economy, the government and technology) on customer behaviour, secondary sources of information on

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Study unit 3: Market characteristics

the characteristics of the South African population, and unique marketing methods based on the characteristics of the South African market.We will also look at some of the marketing implications of these factors.

3.1 Introduction
Imagine that you are an ice-cream parlour owner in CapeTown during a bitterly cold winter week. Right now, you appreciate all too well the impact of market characteristics such as climate on customer behaviour. You understand how weather affects customer demand for a range or products, shifting it away from products incompatible with the day's weather in favour of products more suited to shelter from or enjoyment of that weather. But climate-induced shifts in customer behaviour are not limited to the ``see-saw'' between ice-cream and hot coffee. They affect customers' needs and wants in all areas of life in food habits, in clothing tastes, in leisure choices, and so on. And these influences are not merely weather bound but also related more broadly to customers' habitat, including the climate that is, the nature-created environment of the place in which people are born and live. As you can see, the climate influences the buying behaviour of people and has to be taken into account by South African marketers.They also have to consider the composition of the population in South Africa, and other factors such as the economy. In this study unit we will look at all these factors, as well as secondary sources of information on the characteristics of the South African population, unique marketing methods based on the characteristics of the South African market, and the marketing implications of some of these influences on customer behaviour.

3.2 CHARACTERISTICS OF THE SOUTH AFRICAN POPULATION


STUDY
Study secs 3.1 and 3.2 in the prescribed book.

South Africa is a developed country amid some of the least developed countries of the world. With political liberalisation in the early 1990s, countries up north braced themselves for the South African invasion. This, indeed, happened. Nowadays, SAB, Standard Bank (Stanbic), Steers, Engen, Group Africa, among other companies, are no strangers up north. In some countries, South African companies were welcomed, in others they were fought. Some stagnated, while others expanded. South Africa is situated at the southern tip of the continent of Africa, contains within its borders the two independent kingdoms of Swaziland and Lesotho, and has

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Topic 2: EXTERNAL FACTORS INFLUENCING CUSTOMER BEHAVIOUR

a population of 44,5 million people (2001), 52 percent of whom live in urban areas. The main languages are English, Afrikaans, Ndebele, Pedi, Sotho, Swazi, Tsonga,Tswana,Venda, Xhosa and Zulu. When you study this section on the population in the prescribed book, note in particular the characteristics of the South African population: age distribution, those living in urban and rural areas, education and literacy, labour market, unemployment, formal and informal sector, migrant work, housing, water, electricity, telephones, health care, sanitation and household income.

3.3 DEVELOPING TRENDS THAT INFLUENCE CONSUMER BEHAVIOUR


STUDY
Study sec 3.3 in the prescribed book.

In this section we look at the four marketing responses to some of the above-mentioned market characteristics, namely green marketing, causerelated marketing, marketing to gay and lesbian consumers and genderbased marketing. The improvement in technology, for example, has had an incredibly positive impact on the business markets in South Africa. Previously the lack of telecommunication links restricted manufacturing potential and caused logistical problems. Another example is increased access to education which has catapulted African women into the economy. More women are entering the formal employment sector, which is delaying marriage and giving rise to a whole new sector of products that was previously not catered for in Africa. The following section will indicate a number of secondary sources of information.

3.4 MARKETING IMPLICATIONS

STUDY
Study sec 3.4 in the prescribed book.

The South African marketer must know the characteristics of its market. After obtaining all the relevant information from the appropriate sources,

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Study unit 3: Market characteristics

the marketer can use this information for marketing planning purposes. If secondary information is not available, the marketer should obtain further information through primary data sources. Let us now consider how some of the market factors influence customer behaviour.

3.4.1 Population
When we look at population, it is necessary to consider the marketing implications of race, gender and age.

3.4.1 Race .1
South Africa has many different race groups, for example whites, blacks, coloureds and Asians. Each group has specific wants and buying habits and the marketers of food, clothing, furniture and other products target specially designed products and promotion strategies to one or more of these groups. At the turn of the century, the population in South Africa was expected to increase to 46 million. White households contributed 54 percent of total household expenditure in 1993, compared with black households' share of 35 percent. Black households have a major share of the market for many individual products and services. For example, in 1993, black households were the source of 92,5 percent of total expenditure on fuel and light, 84,3 percent of the R4,7 billion was spent on support of relatives, and 79,5 percent of the R91 million was spent on dry-cleaning and laundry. In 1 addition, expenditure by black people represented over half of the total expenditure on alcoholic beverages (58,8%), clothing, footwear and accessories (55,7%), cigarettes and tobacco (55,5%) and food (50,6%).

3.4.1 Gender .2
Many products, from perfumes to footwear are targeted at either men or women. Differentiation by gender starts at a very early age nowadays, even nappies are sold in pink versions for girls and blue for boys. Women have traditionally been the main users of products such as hair colourants and cosmetics, and men have been the main users of tools and shaving preparations. However, gender roles have blurred over time and gender is no longer an accurate way of distinguishing consumers in some product categories. For example, women are now buying household repair tools and men have become significant users of skin-care and hair products. Many products are losing their traditional gender typing. Guns, cars, golf equipment and many other masculine products are now designed with women in mind. For example, Gillette, which used to manufacture razors for men, have now also designed the Gillette Sensor for women. The changing role of women has opened up substantial new markets for a wide range of products, from sports bras to special magazines.

19

Topic 2: EXTERNAL FACTORS INFLUENCING CUSTOMER BEHAVIOUR

3.4.1 Age .3
Marketers are practically obsessed with analysing age trends because it is much easier to make highly accurate projections of the future age composition of the population than to project other demographic factors, such as income or occupation.They have to determine how to communicate with members of an age group in their ``own'' language. In America, for example, Sony finally figured out that it had to sponsor events like beach volleyball to attract the attention of young people. When the electronics giant first entered the American car stereo market, it simply hammered on its usual themes of technical powers and quality.The16 - to 24-year-olds, who make up half of the consumers buying these products, found these themes boring, and Sony ranked a pitiful seventh in the market after 10 years. Finally, the company got the message it totally revamped its approach, and by 1997 car stereo revenues had more than doubled. ,

3.4.2 Climate
The climate of the country or region in which the consumer lives greatly influences consumer behaviour. In colder countries, for example, people tend to rely more on animals for food and clothing, while in warmer countries consumers eat more fruit and vegetables and rely more on cotton, silk and other lighter fabrics. Consumers' demands for certain products also differ according to annual climatic changes. For example, they buy warmer clothing during winter and cool clothing during summer. Coffee, tea and other hot beverages are purchased more during winter, and there is a greater demand for colddrinks and ice-cream during summer. Flu and cold remedies are purchased more during the winter months, while garden supplies are bought more during summer. It is therefore important for the marketer or the retailer to take the climate of the country or region in which customers live into consideration when making decisions on what products to stock and when planning the retail marketing strategy.

3.4.3 Economy
The economic environment consists of factors that affect customer purchasing power and sentiment and drive business cycles. Retailers should be aware of the following economic variables which determine customer behaviour; namely the economic growth rate, consumer income, inflation and monetary and fiscal policy. The economic wellbeing of a community is measured by the range and number of products and services produced. During the 30 years after the Second World War, the average real growth of the South African GDP was about 4,7 percent per annum, after which, from1970 to1988, it declined to an average annual rate of 2,8 percent, and thereafter to even lower levels.The GDP for 1996 was

20

Study unit 3: Market characteristics

3,1percent, declined to1,7 percent in1977 and is estimated to be 0 percent , in 1998. Although the economic growth rate has a decisive effect on marketing management, it is the correct gauging of the upswing and downswing phases of the economy that has a significant influence on marketing strategy. If an organisation is expecting a recession, it can benefit by reducing inventory timeously because its stocks could be difficult to sell, by maintaining a state of liquidity to avoid the high cost of interest or by indefinitely postponing any ideas of expansion. In the case of an upswing, a sound strategy would be to build up sufficient inventory in good time and carry out whatever expansion is necessary to meet increased demand.

Another economic variable affecting a business and its market environment is the government's monetary policy. Factors such as the money supply, interest rates and the position of a country's monetary unit relative to other countries' monetary units can cause disturbances in the environment. Fiscal policy affects both the business and the consumer through taxation rates and tax reforms. These economic trends demand constant awareness on the part of marketing management and regular consideration of the business's mission and strategy.

3.4.4 Technology
Technology has given the world wonders such as penicillin, organ transplants and notebook computers. It has also produced horrors such as the nuclear bomb, nerve gas and the machine gun, and mixed blessings such as cars, televisions and credit cards. But technological advances affect customer behaviour in the following four ways: (1) by altering the flow of and access to information on marketplace alternatives (2) by making available newer generations of products and services (3) by automating processes that give customers greater flexibility and control and improve productivity (4) by making customised products economically feasible The marketer or retailer should therefore anticipate technological developments in these areas and the way they will influence the lifestyles and consumption patterns of consumers.

3.4.5 Government
Government affects the business environment and the consumer primarily as a regulatory institution. By promulgating and enforcing legislation, the government creates order by means of political measures, steering agricultural and economic policy in a particular direction. The policy of the South African government is based on maintaining the free-market system, private ownership, freedom of vocation and public condemnation

21

Topic 2: EXTERNAL FACTORS INFLUENCING CUSTOMER BEHAVIOUR

of inequality, while democratisation of the economy and public service is in full swing. Government also expects customers to obey certain rules and regulations relating to purchase, payment, product usage and disposal. It passes laws with penalties for failure to comply with these laws. For example, it requires the use of certain products such as motorcycle helmets by motor cyclists and seat belts by drivers and passengers of motor vehicles. It is evident in the above discussion that the population (ie race, gender and age), the climate, the economy, technology and the government all influence customer behaviour.Make sure that you understand the influence of these market factors on customer behaviour.

ACTIVITY 3.1
Y are the owner of Elegant Clothing, which sells imported men's and ou women's clothing. Explain to John, a salesman in your business, how the economy, government and technology could influence your business.

FEEDBACK

. The economy. Inflation, interest rates, unemployment, the economic growth rate and the incomes of consumers are all economic variables which could influence Elegant Clothing. Explain to John that if there is a decline in the inflation rate, people with jobs will have more disposable income to buy Elegant's clothing. A decrease in interest rates will mean that the consumer's monthly payments on vehicle and mortgage loans will be lower, which will also make more disposable income available to buy Elegant's clothing. An increase in the unemployment figure will mean less disposable income and fewer people with money to buy clothing. . Government.The laws and regulation passed by government can influence Elegant Clothing. An increase in sales tax could, for example, cause customers to postpone clothing purchases. Another example would be a surcharge on imported clothing. This would directly influence the selling price of the imported clothing sold by Elegant Clothing. . Technology. Explain to John that new manufacturing processes and new technology may influence the type and quality of clothing sold by Elegant Clothing. Various new types of material are available, such as

22

Study unit 3: Market characteristics

those combining natural and synthetic fibres to create crease-resistant material. Another major new development which Elegant could use is the Internet. It could use the Internet to promote its clothing and make it possible for customers to shop at home and thus order clothing through the Internet.

ASSESSMENT
(1) Explain the implications of the composition of the South African population, in terms of race, gender and age, for the marketer in the motor industry. (2) What are the implications of climate, the economy, the government and technology, for South African marketers in the wine industry?

SUMMARY
Customer behaviour is influenced by the characteristics of the market. These characteristics refer to the physical characteristics of the surroundings in which customers select, use and pay for products/ services, as well as to the characteristics of the population of a particular country.

23

study unit 4

CULTURE AND SUBCULTURE


CONTENTS
Key concepts Getting an overview 4.1 4.2 4.3 4.4 4.5 4.6 The nature of culture The dynamic nature of culture Subculture Cultural values and society South African core values The measurement of culture

Assessment Summary

KEYCONCEPTS
culture mores core values corporate culture norms beliefs subculture

GETTING ANOVERVIEW
Many people have different beliefs and practices. In most cases this is because of their culture.What are the beliefs and practices in your family, religion or ethnic group? For example, think about the kind of food you eat (or do not eat), the method of health care you choose, the holidays you celebrate, and the amount of time you spend with family members. Can you think of any friends, fellow students, or co-workers whose values and practices differ from yours? Such values and practices also define appropriate behaviour in a business context. For example, businesspeople from different countries have different expectations concerning punctuality, the giving of gifts, and the subject matter of discussions. They also differ on views who they should involve in the purchasing process. In this study unit we will examine culture and subculture as well as corporate culture and the dynamic nature of culture.

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Study unit 4: Culture and subculture

4.1 THE NATURE OF CULTURE

STUDY
Study secs 4.1 and 4.2 [subsecs 4.2.2^ 4.2.4] in your prescribed book.

Culture refers to the complex pattern of behaviour common to members of a society; such behaviour is learned and handed down from one generation to the next and consists of norms, mores, beliefs, values, perceptions, attitudes, symbols and language. A consumer's culture determines his or her overall priorities in respect of different activities and products. It must also mandate the success or failure of specific products and services. A product that provides benefits consistent with those desired by members of a culture has a better chance of being accepted in the market. An individual's customer behaviour therefore functions within the framework of the cultural group to which he or she belongs.The decisions an individual needs to make are largely determined by the norms and behaviour patterns of his or her cultural group. The bounds that the culture sets for behaviour are called norms. Norms are simply rules that specify or prohibit certain types of behaviour in certain situations and are based on or derived from cultural values. Cultural values are widely held beliefs that affirm what is desirable. Violation of cultural norms results in sanctions or penalties ranging from mild social disapproval to banishment from the group. Conformity with norms is usually given explicit and obvious reward only when a child is learning a new culture. In other situations, conformity is expected without reward. In South Africa, for example, people are expected to arrive on time for business and social appointments. We do not compliment them when they do arrive on time, but tend to become angry when are late. Culture exists to satisfy the needs of the people in a society. It offers order, direction and guidance in all phases of human problem solving by providing ``tried-and-true'' methods of satisfying physiological, personal and social needs.For example, culture provides standards and so-called ``rules'' about when to eat (eg, not between meals), where to eat (eg in a busy restaurant because the food is likely to be good), and what is appropriate to eat for breakfast (eg juice and cereal), lunch (eg a sandwich), dinner (eg something hot, good and healthy), and a snack (eg something with instant energy), and what to serve guests at a dinner party (eg a formal sit-down meal), or at a wedding (eg champagne). Similarly, culture also provides insight into suitable dress for specific

25

Topic 2: EXTERNAL FACTORS INFLUENCING CUSTOMER BEHAVIOUR

occasions (eg what to wear around the house, to school, to work, to church, to a fast-food restaurant or to a movie theatre). In view of the heterogeneous structure of the South African population, marketers have to take careful note of the different cultural values embraced by each culture. Black and white culture groups often interpret advertisements differently.For example, flowers have special significance in the white culture, but in many black cultures, gifts in the form of flowers are frowned upon. The well-known five Roses advertisement which said ``And the fifth rose is for you'' was therefore not successful when used in media aimed at black consumers. English- and Afrikaans-speaking South Africans also express different cultural values in their perception of advertising. The model in one specific advertisement, a young boy, with fairly long hair and an untidy appearance, was not well received in the Afrikaans media he had to be tidied up in subsequent advertisements. In the English media, however, he was accepted, and the message was effective. Marketing is increasingly a global activity hence the need to study foreign culture. The following are examples of marketing and advertising mistakes because of ignorance of foreign culture: . Coca-Cola had to withdraw its 2-litre bottle from the Spanish market after discovering that it did not fit into the local refrigerator. . Colgate's Cue toothpaste had problems in France because the word ``cue'' is a crude term for ``butt'' in French. . General Motors' ``body by fisher'' was translated as ``corpse by Fisher'' in Flemish. When you study this section in your prescribed book, note the following in particular: . . . . . The nature of culture (sec 4.2) Custom, beliefs and values (sec 4.2.1) Needs and culture (sec 4.2.2) Learning and culture (sec 4.2.3) Language, symbols and rituals (sec 4.2.4)

Culture does not remain static and change over time. Let us now consider the dynamic nature of culture.

4.2 THE DYNAMIC NATURE OF CULTURE

STUDY
Study sec 4.3 in the prescribed book.

Certain behavioural patterns and cultural values of cultural groups gradually change or become obsolete. The fact that an ever-growing

26

Study unit 4: Culture and subculture

number of mothers are entering the labour market also causes major changes with regard to the role of both women and children in society. Nowadays children more often decide about purchases for themselves and for the household. In many instances, they act as buyers of products for domestic use. The changing role of women has a significant effect on cultural values and the marketer must take cognisance of the marketing implications of these changes.Working women spend less time shopping than their nonworking counterparts.They accomplish this ``time economy'' by shopping less often and by being brand-and store-loyal. Not surprisingly, working women are also likely to shop in the evenings and over weekends.They are also more likely to report role overload. Wives reporting role overload are more likely to serve convenience foods and to own time-saving kitchen and household products. They tend to provide psychological justification for economic expenditure on expensive appliances and household equipment, which may even reduce their roles in important household tasks. With respect to the appropriate message necessary to reach women, research has revealed that homemaker advertisements appealed more to women with no real desire to work, while career advertisements were better received by those with a high desire to work. Consistent with the research, marketers of automobiles, financial services and life insurance have begun aiming their advertising at this group of career-oriented women. The number of elderly consumers is growing rapidly and is expected to double in the next 30 years. While marketers once avoided the market for the elderly, today they are anxious to know more about elderly consumers. They are specifically interested in the very attractive subsegment of the affluent elderly who have more discretionary income than any other adult age segment. When you study this section in your prescribed book, take note of sec 4.3.1. It is important to know the difference between enculturation and acculturation. Let us now look at subculture more closely.

4.3 SUBCULTURE
STUDY
Study sec 4.4 in the prescribed book.

A subculture is a distinctive group of people in a society who share common cultural meanings for effective and cognitive responses (beliefs, values and goals), behaviours and environmental factors. Subcultures include nationalities, language communities (Afrikaans, English, Sotho,

27

Topic 2: EXTERNAL FACTORS INFLUENCING CUSTOMER BEHAVIOUR

Venda, Zulu), religions (various denominations), racial groups (Asians, black, coloured and white) and geographic regions (rural areas, villages, towns and metropolises). Not only people have a specific culture organisations also have a culture, known as a corporate culture.

4.4 CULTURALVALUES AND SOCIETY

STUDY
Study sec 4.5 in the prescribed book.

When studying this section, please note the various social institutions that transmit the element of culture and make the sharing of culture a reality. They are as follows: . . . . Family Educational institutions Houses of worship Mass media

Y should also note the following: ou . Social values (sec 4.5.1) . Personal values (sec 4.5.2) . The value concept in marketing (sec 4.5.3) In a diverse country such as South Africa, it is necessary to look at South African core values.

4.5 SOUTH AFRICAN CORE VALUES

STUDY
Study sec 4.6 in the prescribed book.

South Africa is an extremely diverse country of subcultures, each of which interprets and responds to society's basic beliefs and values in its own specific way. Rapid technological change has occurred in South Africa, and this in itself makes it difficult to monitor changes in cultural values.

28

Study unit 4: Culture and subculture

When you study this section in your prescribed book, note the following:

. Sociomonitor which investigates the values of South African adults on an ongoing basis . The summary of South African core values (table 4.2) . TheY oung and Rubicam's model of behaviour (figs 4.2 and 4.3) Let us now look at the measurement of culture

4.6 THE MEASUREMENTOF CULTURE

STUDY
Study sec 4.7 in the prescribed book.

There are various methods to measure culture, namely: . content analysis . consumer fieldwork . social value measurement

ASSESSMENT
(1) Explain the nature of culture and highlight the relevance of needs, learning, language, symbols, rituals and society. (2) How could a legal firm establish a sound corporate culture? (3) Explain the marketing implications of changing cultural values by referring to the significance of the changing roles of women and the elderly. (4) How does Sociomonitor measure values in South African society? (5) ExplainY oung and Rubicam's model of behaviour and the Reaching Critical Mass investigation.

SUMMARY
In this study unit, we discussed the nature of culture, corporate culture, the dynamic nature of culture and South African core values.

29

study unit 5

REFERENCE GROUPS AND SOCIAL CLASS


CONTENT
Key concepts Getting an overview 5.1 5.2 5.3 Reference groups Social class Changes in South African class structure

Assessment Summary

KEYCONCEPTS
reference groups informal reference group secondary reference group aspirational reference group dissociative reference group social class formal reference group primary reference group membership and nonmembership reference group value-expressive reference group sociocultural trends

GETTING ANOVERVIEW
Zack leads a secret life. During the week, he is a straight-laced stock analyst for a major investment firm. The weekend is another story. Come Friday evening, it's off with the Brooks Brothers suit and on with the black leather, as he trades in his BMW for his treasured Harley-Davidson motorcycle. A dedicated member of HOG (Harley Owners' Group), Zack belongs to the faction of Harley riders known as ``RUBS'' (rich urban bikes). Everyone in his group wears expensive leather vests with Harley insignias and owns customised ``Low Riders''. Just this week, Zack finally got his new Harley belt buckle that his fellow riders had pointed out to him in HogTails magazine now he won't have to take any more ribbing from them about his old ``wimpy belt''. Zack has spent a fortune on his bike and on outfitting himself to be like the rest of the group. But it is worth it. Zack feels a real sense of brotherhood with his fellow RUBS. The group rides together in two-column formation to bike rallies which sometimes attract up to 300 000 cycle enthusiasts.

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Study unit 5: Reference groups and social class

What a sense of power he feels when they're all cruising together it's them against the world! We can say that Zack is part of different reference groups, for example, the work group and the motorcycle group. In this study unit we consider reference groups and social class.

5.1 REFERENCE GROUPS

STUDY
Study sec 5.2 in your prescribed book.

5.1.1 The nature and types of reference groups


Individuals may belong to many types of groups. A group consists of two or more people who interact with one another to accomplish some goal. Examples include families, religious groups, close personal friends, coworkers, members of an organisation, leisure and hobby groups and neighbours. Any of these groups may become reference groups. A reference group involves one or more people that a consumer uses as a basis for comparison or ``point of reference'' in forming responses and performing behaviours. In all reference groups, there are distinctive norms of behaviour and members are expected to conform with these norms in order to avoid sanctions being applied against them. There are several types of reference groups, namely: . Formal and informal groups. Formal groups would comprise the people who work with you or the soccer club you play for, while an informal reference group would be your family and friends. . Primary and secondary reference groups. Primary reference groups would be people in the same class at school, who have contact on a daily basis. A secondary reference group could be a group in another country with whom you do not have face-to-face contact but which still exerts an influence on your buying behaviour. . Membership and nonmembership reference groups. An example of membership would be members of a church, while a nonmembership reference group would mean, say, not being a member of a particular church but still modelling your behaviour on that of the members of the church. . Aspirational reference groups. These are groups that people aspire to belong to, for example, you may aspire to belong to the academics or professors of universities.

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Topic 2: EXTERNAL FACTORS INFLUENCING CUSTOMER BEHAVIOUR

. Dissociative reference groups. These are groups that you avoid or reject. An example could be a group of smokers in South Africa. Customers generally associate with certain reference groups for the following three reasons: (1) Information (informational influence). Customers often accept the opinions of group members as credible, especially when it is difficult to assess product or brand characteristics by observation. (2) Reward and punishment (normative and utilitarian influence).When the customer fulfils group expectations he or she may receive a reward or sanction. Punishment could be meted to a person if he or she transgresses the rules of the reference group. (3) Identification influence (value-expressive reference groups). The consumer buys something because it helps him or her to be like somebody else (a role model)

5.1.2 Determinants of reference group influence


We will now look at some of the determinants of reference group influence. . Group influence is strongest when the use of a product, say, a cellphone, is visible to the group. . Reference group influence is higher the less of a necessity an item is. . The more commitment a person feels to a group, the more he or she will conform to the group norms. . The more relevant a particular activity is to the group's function, the stronger the pressure will be to conform to the group norms concerning that activity. Reference group influence is often used in advertising by using a wellknown person so that people can identify with this person and also use the advertised product. We shall now consider social class and its influence on customer buying behaviour.

5.2 SOCIAL CLASS

STUDY
Study sec 5.3 in your prescribed book.

Social classes are groups that enjoy more or less the same prestige and status in society. Individual consumer behaviour is influenced by social class. The marketer knows that most customers aspire to membership of a

32

Study unit 5: Reference groups and social class

higher social class. His or her marketing message therefore implies that by buying his or her product the consumer may attain membership of a higher class. Every country has a different social class structure. South Africa represents a social structure that is more or less triangular shaped (see fig 5.1in the prescribed book), with a limited number of people in the upper class, more in the middle class but the majority in the lower-class category.

One of the main ways in which social classes are described in South Africa is by means of the Living Standards Measure (LSM). The population of South Africa is currently divided in 10 LSMs with LSM 1 being the lowest and LSM10 the highest. When you study this section in your prescribed book, also note the marketing implications of social class. Let us now look at some trends in customer behaviour.

5.3 CHANGES IN SOUTH AFRICAN CLASS STRUCTURE

STUDY
Study sec 5.4 in your prescribed book.

The BMR did a study on the changes occurring in the social environment of South Africa and reported certain dramatic changes in our social class structure. The changes in the social structure of the South Africa race groups are shown inTable 5.1. Section 5.4.2 examines the social structure changes according to provinces.

ASSESSMENT
(1) Explain the nature and types of reference groups. (2) What are the determinants of reference groups? (3) How would a marketer wishing to advertise a new expensive type of perfume take into account reference groups? (4) Explain the South African social class structure. (5) What are the implications of social class for a South African marketer who wishes to open a new supermarket in an affluent area?

33

Topic 2: EXTERNAL FACTORS INFLUENCING CUSTOMER BEHAVIOUR

SUMMARY
In this study unit, we discussed reference groups and social class, as group factors influencing consumer behaviour. We also discussed trends in customer behaviour.

34

topic 3

INTERNAL FACTORS INFLUENCING CUSTOMER BEHAVIOUR


AIM
to help you develop an understanding of the internal factors influencing customer behaviour. To understand these internal factors, it is necessary to gain insight into factors such as personal characteristics, customer perception and learning, customer motivation, customer attitudes and personality and self-concept.

LEARNING OUTCOMES
Learners can . demonstrate an understanding of how personal characteristics, customer perception and motivation, customer attitude and personality and the self-concept influence customer behaviour.

TOPIC CONTENT
Study unit 6 Study unit 7 Study unit 8 Study unit 9 Study unit 10 Personal characteristics Customer perception and learning Customer motivation Customer attitudes Personality and self-concept

35

study unit 6

PERSONAL CHARACTERISTICS
CONTENTS
Key concepts Getting an overview 6.1 6.2 6.3 Race Gender Age

Assessment Summary

KEYCONCEPTS
race gender roles biological age Living Standard Measure (LSM) chronological age psychological age

GETTING ANOVERVIEW
A wide variety of factors influence a consumer's decision making regarding whether or not to buy a specific product, and if he or she decides to buy it, what particular style and brand.These influencing factors can be grouped together into general factors and product-specific factors. The productspecific factors refer to the unique needs and product requirements that the individual consumer exhibits as well as his or her purchasing and usage behaviour regarding the specific product. In this study unit, however, the general factors influencing consumer behaviour will be discussed. These general or descriptive factors can be classified under demographical, individual and group factors. The demographical factors are inter alia a consumer's income, race, gender, geographic location, age and family structure. The individual factors represent those traits that are unique to the individual, such as his or her perception, learning ability, motivation, attitudes and personality. The group factors, in turn, refer to things such as culture and subculture, reference groups, family structure and social class. Y will notice that the prescribed book classifies the demographic factors ou of race, gender and age under the individual factors influencing customer

36

Study unit 6: Personal characteristics

behaviour and further as personal characteristics. Although these factors help to describe each individual consumer, they are not unique to that person.Most of the other individual factors, however, manifest themselves in a quite unique manner in each individual.

In this study unit we will discuss three personal or demographic factors, namely race, gender and age. It is essential that you grasp the effect that these factors (also called variables) have on the consumer's decision making.

6.1 RACE

STUDY
Study secs 6.1 and 6.2 the prescribed book.

The colour of people's skin per se (whether they are black, white, Asian or coloured) seldom determines the types of products they buy. However, in the prescribed book there are a few examples in which race directly determines product usage, namely the examples of the Easy Waves and Carson products. Other examples are also mentioned, namely cosmetic products such as skin colourants, moisturisers and suntan lotions. In most cases race in itself plays a secondary role because it describes a group of people with specific characteristics in terms of other demographic, individual or group factors. For instance, South Africa's citizens are extremely diverse in terms of language, culture, geographic location, income, etc. Sometimes these characteristics manifest themselves in a particular manner which is also closely related in terms of race or ethnic group. Certain ethnic groups are characterised by geographic location, language, culture and customs and usage of specific products.The categorisation is therefore not so much based on race or ethnic group, but on these other characteristics. Race or ethnic group is merely a common denominator and is used only to describe a particular group or market segment. Although many products are closely related to a specific race or ethnic group, other products traverse these descriptive boundaries. The use of cellphones, for instance, cannot be explained in racial or ethnic terms. In fact, as we move towards becoming a First World nation, these racial and ethnic lines will blur for many a product. For many products, English has become the only marketing language because most South Africans are comfortable with it.The implication here is that language is also becoming less of a distinguishing factor. However, a marketer will have to adapt his or her strategy if it shows that race and ethnicity, in conjunction with other factors, does play a role in the consumption of his or her product. If the factors influencing the usage of

37

Topic 3: INTERNAL FACTORS INFLUENCING CUSTOMER BEHAVIOUR

the organisation's product, such as income, gender, climate, culture and customs, family structure, etc, point to a specific race or ethnic group, this group must be addressed in the firm's marketing strategy. For instance, if a beverage manufacturer develops a drink which closely resembles a traditional drink of a specific ethnic group, it is obvious that the marketing strategy would be adapted to focus specifically on that group. The promotion strategy will be developed in order to communicate optimally with this group in terms of language, media, symbols, message and general approach. (The Living Standards Measure (LSM) has become an important classification of consumers in terms of their wealth or living standards, as measured by a wide array of indicators measuring ownership of foods (wealth), access to different technologies and geographic location. Of particular relevance is the fact that race and income are not used as indicators in this classification technique.)

6.2 GENDER

STUDY
Study sec 6.3 in the prescribed book.

Over and above the fact that women and men consume different products owing to their gender differences, they also perceive things differently.One can speculate that gender differences are probably the most crucial factor or variable impacting on the need patterns and product purchasing and usage of consumers. Consequently, gender has a profound impact on the marketing strategies of most firms.Two perspectives are important here. Firstly, the marketer must ascertain how gender impacts on the marketing of his or her product, and secondly, how the changes taking place in gender roles would impact on the organisation in the future.

6.3 AGE

STUDY
Study sec 6.4 in the prescribed book.

The prescribed book advances three reasons why age is a significant determinant of consumer behaviour. Two of these are particularly relevant to

38

Study unit 6: Personal characteristics

South Africa, namely the age composition of the population and the differences in need patterns between the different age categories. In South Africa, the youth or teenager market is vital to marketers because it represents the biggest market segment by far. This market could be severely affected if the HIV/AIDS pandemic continues. Owing to the size of the youth market, increasingly more products are developed or adapted for this market segment.Vodacom is now advertising a cellphone package aimed at primary schoolchildren! The thrust of the message is that a child also needs a cellphone in times of crisis. Part of the package is a choice between a few cellphones brands, that can be purchased at a much reduced price. Children and teenagers regard cellphones as a status product and a ``must have'' item, and the cellphone service providers (Vodacom, MTN and Cell C) and cellphone manufacturers are therefore all vying for this market segment.Other products such as certain clothing brands are also using the cellphone culture to associate their products with its status image. The teenage market segment is also known as GenerationY Children and . teenagers play a crucial role in family decision making, and not only for the products they themselves consume.The cellphones parents are using, the cars they drive, the clothes they wear and the holidays they enjoy are often strongly influenced by their children. In the prescribed book mention is made of various types of age, namely . chronological, biological and psychological age . perceived age . actual, cognitive and ideal age These are important classifications for the marketer because they impact on the product that is developed and on the way in which it is marketed.

ASSESSMENT
(1) Y are a manufacturer and marketer of swimwear. Explain how the ou personal characteristics of consumers would impact on your business. (2) Similar to the practical situation in question (1) above, explain how race, as a personal characteristic, would impact on the marketing of your product. (3) Explain what the Living Standards Measure (LSM) is. (4) Similar to the practical situation in question (1) above, explain how gender, as a personal characteristic, would impact on the marketing of your product. (5) In what way has the role of men changed in modern society? (6) In what way has the role of women changed in modern society? (7) Similar to the practical situation in question (1), explain the impact of age, as a personal characteristic, on the marketing of your product.

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Topic 3: INTERNAL FACTORS INFLUENCING CUSTOMER BEHAVIOUR

(8) Explain the importance of the youth market for many products. (9) Explain the different types of age with the aid of practical examples.

SUMMARY
In this study unit we discussed the three personal characteristics of race, gender and age and their importance for the marketer. These factors or variables are sometimes incorrectly regarded as having only an indirect impact on the need structure and purchasing behaviour of consumers.We cited a number of examples showing their profound impact on the marketing of products.

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study unit 7

CUSTOMER PERCEPTION AND LEARNING


CONTENTS
Key concepts Getting an overview 7 .1 7 .2 Customer perception Customer learning

Assessment Summary

KEYCONCEPTS
perception selective exposure selective interpretation perceptual defence stimulus reinforcement instrumental conditioning frame of reference selective attention selective recall learning response classical conditioning cognitive learning

GETTING ANOVERVIEW
In the previous study unit we mentioned that the personal characteristics of race, gender and age are also regarded as demographic variables which describe the individual, but are not unique to him or her.The other internal factors which influence customer behaviour are perception, learning, motivation, attitudes, personality and self-concept. These factors or variables are unique to each individual consumer and are also called psychographic variables.Of all the internal and external factors influencing customer behaviour they are the most difficult to research because they represent the consumer's mindset which influences his or her need structure and purchasing and consumption behaviour. In this study unit we will focus on the first two of these internal factors, namely customer perception and customer learning.

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Topic 3: INTERNAL FACTORS INFLUENCING CUSTOMER BEHAVIOUR

7.1 CUSTOMER PERCEPTION

STUDY
Study secs 7 and 7 in the prescribed book. .1 .2

7 The nature and elements of perception .1.1


Perception is the way we see the world.Throughout life we are exposed to trillions of stimuli which in some way or other are internalised and then form the basis of the way we think and act. Bear in mind that it is through the five senses of sight, hearing, smell, touch and taste that we become aware of all stimuli. We then give meaning to these stimuli through our mental processes. Marketers should remember that consumers can be reached through more than the two usual senses of hearing and seeing. A cosmetics firm, for instance, will also rely heavily on the sense of smell to influence its consumers positively. The manufacturers of Sunlight Liquid have attracted thousands of customers not so much on the strength of the product's cleaning abilities, but the fact that it is also soft on the hands. Look around you and assess how many products rely on the senses of smell, touch and taste to attract customers. Influencing the perceptions of consumers is probably the marketer's most difficult task, because most consumers are selective in receiving and attending to all stimuli, are subjective in the manner in which they interpret stimuli, and receive and process stimuli in terms of their individual frame of reference. These three ``laws'' of perception are called the principles or elements of perception. Although it is difficult for the marketer to assess the impact of these principles of perception on the development and promotion of his or her product, this has to be done. For instance, the matter of selectivity can be addressed by ensuring that all potential consumers are exposed to and note the organisation's promotional message. The question of subjectivity is addressed, inter alia, by ensuring that the marketing message is not screened out of the consumer's mental processes, or misinterpreted by him or her. Since each individual has a unique mental, physical and environmental make-up in terms of which he or she views the world (his or her frame of reference), the marketer must ensure that his or her product and promotional effort suit this make-up. The moment the product or marketing message clashes with an element of the individual's personal make-up, the chances of a sale taking place are minimal.

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Study unit 7: Customer perception and learning

7 The perceptual process .1.2

According to the prescribed book, the perceptual process consists of four phases, namely exposure, attention, interpretation and recall or memory. (1) Exposure. Most of the stimuli to which we expose ourselves are selfselected hence we refer to selective exposure as a perceptual defence mechanism. (2) Attention. Attention is determined by the individual, the stimulus and the situation. Note how the marketer could use stimulus factors such as size and intensity, colour, position and isolation to ensure that people attend to the marketing message. (3) Interpretation. Interpretation is also subjective and selective. Note in particular how the marketer can avoid misindexing and distorting the marketing message. (4) Recall or memory. Again, recall is also selective. Note in particular the positive sleeper effect, the boomerang effect and the overcrowded file space of the customer's mind.

7 Perception and marketing .1.3


When you study this section in the prescribed book, you will notice how a knowledge of customer perception enables marketers to formulate, say, a retail strategy, brand image and pricing levels. We shall now examine how exactly customers learn.

7.2 CUSTOMER LEARNING

STUDY
Study sec 7 in the prescribed book. .3

In this section of the study unit we first look at the nature of learning, and then explain the elements and theories of learning.

7 .2.1 The nature of learning


In the prescribed book learning is defined as the acquisition of knowledge and experience in order to enhance the content of long-term memory which, in turn, forms the basis of future-related behaviour. Y may well ou ask: Where exactly does learning fit into the perceptual process? Well, perception as well as the other internal factors (motives, attitudes and personality), are formed through learning. Learning therefore forms the basis for establishing perceptions, motives, attitudes and the personality of the individual.

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Topic 3: INTERNAL FACTORS INFLUENCING CUSTOMER BEHAVIOUR

7 .2.2 The elements of learning


We identify three elements of learning which form the cornerstones of effective learning: (1) Stimulus. A person can be stimulated by physical objects or intangibles. (2) Response. Response is necessary for any learning to take place. (3) Reinforcement. This takes place when the response flowing from a stimuli (if any) is experienced as positive, and will probably lead to repetitive behaviour in future. Repetition and participation are not prerequisites for learning, but their presence enhances reinforcement and eventually leads to the acquisition of knowledge and experience. We shall now take a look at the theories of learning, also known as the mechanisms of learning.

7 .2.3 Theories of learning


The three learning theories of classical conditioning, instrumental conditioning and cognitive learning are mechanisms for or ways in which learning takes place. (1) Classical conditioning refers to the phenomenon whereby a person tends to relate two stimuli to each other if the association between them is shown continuously. Projecting to teenagers that owning a cellphone leads to wide acceptance and praise within the peer group, will over time establish a subconscious association between a cellphone and status. (2) In instrumental conditioning, learning will take place if the consumer is conditioned to believe that a specific response to a stimulus (ie promotional effort) will lead to a positive reward. Returning to our example of the cellphone, instrumental conditioning takes place when teenagers are shown how nice it would be to be held in high esteem by their friends, and then implying that owning a cellphone would contribute to this state of affairs. (3) Cognitive learning is the most straightforward way of learning something by acquiring information (either passively or actively), interpreting and evaluating it, and then taking action on the basis of the acquired knowledge.

ASSESSMENT
(1) Explain customer perception and highlight the elements of perception. (2) Indicate how a customer proceeds through the perceptual process when he or she has been exposed to a marketing stimulus. (3) Explain how a marketer can overcome perceptual defence in his or her advertising message.

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Study unit 7: Customer perception and learning

(4) How can a marketer use his or her knowledge of perception in the retailing environment and in decisions on brand image and pricing? (5) Explain how a retailer, say, a supermarket, can use the elements of learning to ensure positive learning by the customer. (6) Explain how learning takes place in the individual by applying the learning theories to a practical example.

SUMMARY
In this study unit we looked at two psychographic factors which are internal to the individual consumer, namely perception and learning. We also showed how these factors or phenomena are unique to the individual and form the basis of his or her decision making.

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study unit 8

CUSTOMER MOTIVATION
CONTENTS
Key concepts Getting an overview 8.1 8.2 8.3 8.4 The nature of motivation Classification of motives Psychographics Motivational research

Assessment Summary

KEYCONCEPTS
motivation Maslow's hierarchy of needs economic and emotional motives lifestyle need arousal McGuire's psychological motives psychographics motivational research

GETTING ANOVERVIEW
A motive is the driving force within individuals that compels them to satisfy their needs. Consider the following situation: Simon, a 15 year-old boy, is very keen to watch the Bafana Bafana playing against Nigeria at the stadium near Johannesburg. However, he does not have enough money to pay for the ticket. He decides to do some odd jobs at home (cleaning up the garden and washing floors) to earn extra cash. After school he helps his teacher with little tasks like coaching the younger boys soccer (for which he earns a little money). He also delivers the newspaper early every morning to all the neighbours. After three months he manages to save enough money to buy a ticket for the Bafana Bafana/Nigeria soccer match. We can say that Simon was motivated to earn extra money, and his motivation was rewarded when he satisfied his need to watch the soccer match that he had been dreaming of for months. Motivation can therefore be defined as the encouragement of behaviour (earning extra money) directed at a particular goal (watching Bafana Bafana). Motivation is what moves people to action. Motivation starts with

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Study unit 8: Customer motivation

stimulated needs that lead to aroused tensions, and results in goal-directed actions. A basic tenet of psychology is to ``look behind the behaviour''. When retailers examined the buying choices of consumers they found unsatisfied needs.Needs are the basic sources of buyer behaviour, but have to be stimulated before the consumer is driven to action.

In this study unit the motivation process, the different classifications of motives, psychographics and motivational research will be discussed.

8.1 THE NATURE OF MOTIVATION


STUDY
Study secs 8.1 and 8.2 in the prescribed book.

For any given need, there are many different and appropriate goals. Marketers must understand these needs in order to stimulate them, so that consumers will be motivated to achieve the goals. Motivation links needs and behaviour as shown in figure 8.1 of the prescribed book. When you study this section, note the relationship between needs, motives and behaviour and how need arousal occurs.

8.2 CLASSIFICATIONOF MOTIVES


STUDY
Study sec 8.3 in the prescribed book.

In order to understand motivation, it is important to classify motives and their underlying needs.The three most common classifications of motives are Maslow's hierarchy of needs, McGuire's psychological motives and the economic and emotional classification.These three will now be discussed.

8.2.1 Maslow's hierarchy of needs


STUDY
Study sec 8.3.1 in the prescribed book.

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Topic 3: INTERNAL FACTORS INFLUENCING CUSTOMER BEHAVIOUR

Abraham Maslow formulated a hierarchy of five need levels arranged in the order in which people seek to gratify them.

ACTIVITY 8.1
Study figure 8.2 in the prescribed book and identify different needs in your own life that are classified at each of the five levels of Maslow's hierarchy.

FEEDBACK
Did you notice that at some time in your life, each of the levels has played a particularly important role? Maslow recognised that at any given time, most people would be working towards satisfying needs on different levels of the hierarchy and that few needs/levels would ever be completely satisfied.

8.2.2 McGuire's psychological motives


STUDY
Study sec 8.3.2 in the prescribed book.

McGuire developed a classification of motives based on internal nonsocial motives and external social motives. Internal motives are private and personal to the individual, while external motives are similar to Maslow's higher-order needs and pertain to his or her interaction with society.

8.2.3 Economic and emotional classification


STUDY
Study sec 8.3.3 in the prescribed book.

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Study unit 8: Customer motivation

Economic motives are rational and demonstrated by obvious advantages and disadvantages. Emotional motives are not necessarily irrational but tend to be hidden or private. Consumers will seldom admit or even acknowledge to themselves that emotions played a part in their decision making. We will now look at psychographics, a manifestation of a person's underlying motivations.

8.3 PSYCHOGRAPHICS

STUDY
Study sec 8.4 in the prescribed book.

When you study this section in your prescribed book, note the following aspects of psychographics: . . . . psychographics and lifestyle the fact that values determine lifestyle psychographic profiles uses of psychographics

The aim of psychographics is to classify individuals on the basis of psychological dimensions such as personality, motives and lifestyles. It is important to note the relationship between psychographics and lifestyle and psychographics and values. Demographics allows us to describe who buys, while psychographics allows us to understand why they buy. Consider the following example: BO WHONEVER GREW UP YS Consider a very popular Canadian campaign for Molson Export beer that based its commercials on psychographic findings. Research showed that Molson's target customers tended to be like boys who never grew up, who were uncertain about the future, and who were intimidated by women's new-found freedoms. Accordingly, the advertisements featured a group of men,``Fred and the boys'', whose get-togethers emphasise male companionship, protection against change, and that the beer ``keeps on tasting great''. In the next section we consider how reasons for behaviour can be uncovered in motivational research.

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Topic 3: INTERNAL FACTORS INFLUENCING CUSTOMER BEHAVIOUR

8.4 MOTIVATIONAL RESEARCH


STUDY
Study sec 8.5 in the prescribed book.

Marketing research is an ongoing process and understanding motives and motivation requires continuous research. Two techniques, namely depth interviews and projective techniques, are commonly used for motivational research. Depth interviews are designed to reveal hidden, deep-seated motives and are derived from psychology. Projective techniques are derived from psychoanalytic theory and enable marketers to identify motives of which consumers are not yet aware.

ASSESSMENT
(1) Explain the nature of motivation by highlighting need arousal. (2) Identify which level of Maslow's hierarchy the following products appeal to: (a) (b) (c) (d) (e) (f) Volvo motorcars Absa home loans University of South Africa Castle beer Samsung refrigerators Mercedes-Benz motorcars

(3) Explain McGuire's classification of motives, and the economic and emotional classification. (4) Explain how psychographics influences lifestyle, and use practical examples to illustrate the theory. (5) Imagine that you manage a large retailer and want to do research into your consumers' motivations for selecting your store. Explain the various methods of doing motivational research. Be practical in your approach.

SUMMARY
In this study unit we discussed facets of customer motivation to determine why consumers do what they do.We also looked at psychographics to see the importance, to the marketer and the retailer, of how people can be grouped according to similar lifestyles. In the next study unit we will look at customer attitudes.

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study unit 9

CUSTOMER ATTITUDES
CONTENTS
Key concepts Getting an overview 9.1 9.2 9.3 9.4 9.5 The nature of customer attitudes The ABC model of attitude The functions of attitudes Attitude formation Attitude change

Assessment Summary

KEYCONCEPTS
customer attitudes cognitive behavioural classical conditioning cognitive learning theory ABC model of attitude affective functions of attitude instrumental conditioning attitude change

GETTING ANOVERVIEW
As customers, each of us has a vast number of attitudes towards products, services, advertisements, direct mail and retailers. Whenever we are asked whether we like or dislike a product (eg Beck's Nonalcoholic Beer), the service at a restaurant (eg Wimpy Bar) or a dry-cleaner, a particular retailer (eg Shoprite/Checkers, Pick 'n Pay or Superspar) or an advertising theme (eg Cremora's ``It's not inside, it's on top''), we are being asked to express our attitude.

9.1 THE NATURE OF CUSTOMER ATTITUDES

STUDY
Study secs 9.1 and 9.2 in the prescribed book.

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Topic 3: INTERNAL FACTORS INFLUENCING CUSTOMER BEHAVIOUR

A consumer attitude can be defined as a learned predisposition to behave in a consistently favourable or unfavourable way towards market-related objects, events or situations. Thus attitudes are learned and tend to be consistent. It is important to note that a positive attitude towards a product or service will not necessarily mean that the consumer will purchase the product or service.The consumer's positive attitude may be overridden by economic motives or a specific environmental influence.

9.2 THE ABC MODELOF ATTITUDE


STUDY
Study sec 9.3 in the prescribed book.

In order to understand the relationship between attitudes and behaviour, psychologists have attempted to construct various models that capture the underlying dimensions of an attitude. To this end, the focus has been on specifying the composition of an attitude to better explain or predict behaviour. According to the ABC tricomponent attitude model, attitudes consist of three major components: a cognitive component (C), an affective component (A) and a conative (or behavioural) component (B). Each component of the ABC model of attitude will now be discussed.

9.2.1 The cognitive component


STUDY
Study sec 9.3.1 in the prescribed book.

The total configuration of beliefs about a retail store (or any product) represents the cognitive component of the customer's attitude towards that particular store (or product).

9.2.2 The affective component


STUDY
Study sec 9.3.2 in the prescribed book.

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Study unit 9: Customer attitudes

The affective component of an attitude involves a consumer's emotions or feelings about a particular product, brand or retail store.These emotions and feelings are frequently treated by consumer researchers as primarily evaluative in other words, they capture an individual's direct or global assessment of the attitude object (ie the extent to which he or she rates the attitude object as ``favourable'' or ``unfavourable'', or ``good'' or ``bad'').

9.2.3 The behavioural component

STUDY
Study sec 9.3.3 in the prescribed book.

This component represents the outcome of the cognitive and affective components to buy or not to buy a product or patronise a particular store.The strength of the customer's beliefs and feelings about a particular store will determine the degree to which he or she is predisposed to act. Nevertheless, if the customer believes that discount stores offer the best overall value, he or she will tend to patronise such stores unless that belief system is altered. The three components of attitudes, namely the cognitive, affective and behavioural, tend to be consistent.

9.3 THE FUNCTIONS OF ATTITUDES

STUDY
Study sec 9.4 in the prescribed book.

People have certain attitudes (or acquire some of them) because they serve certain functions. For example, attitudes have important functions in helping consumers adjust to difficult situations, express their values, organise their knowledge and defend their egos in threatening situations. Unless the retailer knows the function served by a particular attitude, he or she is in a poor position to understand or influence it. The four major functions that attitudes perform for the person can be grouped according to their motivational basis as follows: (1) Utilitarian function.This function is related to whether the object serves

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Topic 3: INTERNAL FACTORS INFLUENCING CUSTOMER BEHAVIOUR

some purpose. In other words, does it have utility for the person? We develop positive attitudes towards those things that satisfy us. (2) Ego-defence function. This function helps the consumer to deal with inner conflict by protecting the self-image from hostile elements in the environment. Products with symbolic meaning such as clothes, jewellery and motorcars may serve as ego-enhancement products for consumers who feel inadequate and insecure, or have a low self-esteem. (3) Value-expressive function. This function allows the consumer to demonstrate his or her basic values positively. A consumer who always purchases the least expensive product is exercising the value-expressive function. (4) Knowledge function. This function serves to give order and meaning to someone's environment. It thus provides a stable frame of reference against which an individual can evaluate new information. Family brands are supported by the knowledge function since a favourable attitude towards one product in the product range will be transferred to new additions to the range. We will now examine how attitudes are formed.

9.4 ATTITUDE FORMATION

STUDY
Study sec 9.5 in the prescribed book.

How do people, especially young people, form their initial general attitudes towards ``things''? Consider their attitudes towards the clothing they wear, for example, underwear, casual wear and business attire. On a more specific level, how do they form attitudes towards, say, Calvin Klein underwear, or Levi's or Gap casual wear? Also, what are their attitudes to the stores from which such clothing is purchased? Would they buy underwear, casual wear and business clothing at Edgars, Woolworths, Stuttafords, or at a more exclusive store? Attitudes are formed in the following ways: . . . . . . classical conditioning instrumental conditioning cognitive learning theory experience external authorities marketing communications

In the next section we will see that attitudes do change over time.

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Study unit 9: Customer attitudes

9.5 ATTITUDE CHANGE

STUDY
Study sec 9.6 in the prescribed book.

Even though consumer attitudes are relatively stable in the short run, changes do occur. In fact, some consumer attitudes are always changing. It is important for marketers to develop strategies to change attitudes. Marketers must develop strategies to change the . affective component . behavioural component . cognitive component

9.5.1 Factors that influence attitude change


Weak attitudes are more susceptible to change than strong or extreme ones. A weak consumer attitude may be either positive or negative. The weakest attitude is a neutral feeling. People with either strong favourable or unfavourable attitudes undergo the least change in their original position when they perceive new information. People with relatively weak attitudes undergo the greatest change. However, even a strong attitude can be changed if it is systematically attacked. It may be necessary to give strong but sound reasons for the change. Repetition is also effective in changing a strong attitude.The attitude is chipped away a little at a time. The main aid in influencing and changing consumer attitudes is probably marketing communication. Advertising messages in particular affect buying behaviour. The source of the message, the appeals used in it and many other factors help to effect changes in attitude. Consider the following, for example: . Influencing attitudes is easier when the source of the message is viewed as highly credible to the target market. Doctor Khumalo, for example, is a credible source and consumers will believe him if he endorses the use of, say, a specific deodorant in an advertisement. . Celebrity sources may enhance attitude change because they attract more attention to the advertisement. For example, Cindy Crawford endorses Revlon. . The appeal in the advertisement may also be important. For example, fear appeals make use of the threat of negative consequences if attitudes or behaviour are not altered. A headline that reads ``I woke up in hospital. Patti never woke up'', would be a fear appeal to promote the use of seatbelts or in the``Arrive Alive''road safety campaign. Humorous appeals are also extremely effective in influencing attitudes. The most

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Topic 3: INTERNAL FACTORS INFLUENCING CUSTOMER BEHAVIOUR

frequently used appeal is probably emotion. Take, for example, all the advertisements featuring a group of people in the illustration enjoying Coca-Cola.

ASSESSMENT
(1) Define customer attitudes in your own words. (2) Discuss how marketers of ladies' perfumes should take the components of attitude into account when creating aTV advertisement. (3) Distinguish between the various functions of attitudes. (4) Explain the methods of forming attitudes. (5) Indicate how a retailer of motorcar tyres could change the three components of customer attitudes about the quality of his tyres. Be practical in your approach and illustrate how various media could be used. (6) What factors that influence attitude change could a marketer consider?

SUMMARY
In this study unit we discussed customer attitudes and their formation. It is important for marketers to understand customer attitudes and how to change them. In the next study unit we will discuss the customer's personality and self-concept.

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study unit 10

PERSONALITYAND SELF-CONCEPT
CONTENTS
Key concepts Getting an overview 10.1 10.2 10.3 10.4 10.5 10.6 The nature of personality The characteristics of personality Personality theories Personality influences lifestyle The value of personality to marketers The self and the self-concept

Assessment Summary

KEYCONCEPTS
characteristics of personality psychoanalytic theory trait theory lifestyle other-directed self-image personality theories neo-Freudian theory Gestalt theory inner-directed self-concept

GETTING ANOVERVIEW
While motivation is the energising force that makes consumer behaviour purposeful and goal directed, the personality of the consumer guides and directs the behaviour chosen to accomplish goals in different situations. Personality deals with those relatively long-lasting personal qualities that allow us to cope with and respond to the world around us; and behaviour is therefore an outcome of personality. We can easily (although perhaps not always accurately) describe our own personality or the personality of a friend. For example, you might say that one of your friends is ``fairly aggressive, very opinionated, competitive, outgoing and witty''. What you have described are the behaviours your friend has exhibited over time in a variety of situations. These characteristic ways of responding to a wide variety of situations should, of course, also include responses to marketing strategies. It is for this reason that personality has been of interest to marketing managers for many years.

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Topic 3: INTERNAL FACTORS INFLUENCING CUSTOMER BEHAVIOUR

Marketers have shown an interest in segmenting consumers on the basis of personality, in the belief that consumers' purchase decisions in part reflect their unique personalities. Personality-related questions that marketers might ask about current or potential customers could include the following: . Harley Davidson motorcycle: What personality characteristics are likely to distinguish older, affluent, first-time motorcycle purchasers from other cyclists? . Polo Classic motorcar: What personality traits distinguish those car buyers most likely to trade in their old car for a Polo Classic rather than a European luxury car? . BoysTown: What are the personality traits of individuals likely to make repeat donations to BoysTown? In this study unit we look at the nature and characteristics of personality, as well as its influence on lifestyle.We also explain the various personality theories, and conclude by discussing self-concept. Let us first look at the nature of personality.

10.1 THE NATURE OF PERSONALITY


STUDY
Study secs 10.1 and 10.2 in the prescribed book.

For some time there has been controversy in the field of psychology about the exact nature of personality, the value of studying such a broad area, and the problems with measurement. There are so many different views on personality, that it is difficulty to arrive at a single definition. For the sake of simplicity, we shall define personality as ``those inner psychological characteristics that both determine and reflect how a person responds to his or her environment''. Personality characteristics help us to describe and differentiate between people, and are therefore also helpful in structuring successful marketing strategies. We will now look at the characteristics of personality.

10.2 THE CHARACTERISTICS OF PERSONALITY


STUDY
Study sec 10.3 in the prescribed book.

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Study unit 10: Personality and self-concept

1In the study of personality, four distinct properties are of central importance, and therefore worth noting: (1) Personality reflects individual differences. (2) Personality is consistent and enduring. (3) Personality is conceived as a whole actualising itself in an environment. (4) Personality can change. On the basis of these somewhat conflicting characteristics, various personality theories have been developed and subsequently used in

marketing and consumer behaviour research. What follows is a brief description of each of these theories.

10.3 PERSONALITY THEORIES

STUDY
Study sec 10.4 in the prescribed book.

We can distinguish between the following theories of personality: . Freud's psychoanalytic theory. The emphasis in this theory is on unconscious motives and repressed needs, resulting in a nonempirical approach to personality. . Neo-Freudian theory. This theory is based on the premise that social relationships are fundamental to the formation and development of personality. Personality is developed as the individual learns to cope with basic anxieties (compliance, aggressiveness, detachment), stemming from parent-child relationships. . T theory. This theory is a major departure from the qualitative or rait subjective approach to personality measurement. According to it, personality is composed of a set of traits that describes general response predispositions. Because they are simple to use and score and can be self-administered, many researchers prefer to use personality scales to assess consumer personality. . Gestalt theory. In this theory, personality is viewed as the outcome of introducing a person to his or her total environment the two must be considered together as a patterned event. We will now examine the relationship between personality and lifestyle.

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Topic 3: INTERNAL FACTORS INFLUENCING CUSTOMER BEHAVIOUR

10.4 PERSONALITY INFLUENCES LIFESTYLE

STUDY
Study sec 10.5 in your prescribed book.

Lifestyle is an individual's pattern of living expressed through activities, interests and opinions. Lifestyle patterns include the way people spend time, the extent of their interaction with others, and their general outlook on life and living. These patterns are affected by personality as well as demographic factors. This brings us to the question of the value of personality to marketers.

10.5 THE VALUE OF PERSONALITY TO MARKETERS

STUDY
Study sec 10.6 in the prescribed book.

Marketers are convinced that consumers' personalities do influence the types and brands of products purchased.For example, the type of clothing, jewellery or automobile a person buys may reflect one or more personality characteristics. The identification of personality variables (eg dogmatism, social character, category width) which appear to be logically linked to product usage is likely to improve marketers' ability to segment markets.This enables them to design specific products that will appeal to certain personality types, and to formulate promotional strategies that will appeal to the personality characteristics of existing target markets. At times, marketers aim advertising at certain types of personalities (see fig 10.1 in the prescribed book for further clarity). For example, advertisements for certain cigarette brands are directed towards specific types of personalities. Marketers focus on positively valued personality characteristics, such as security consciousness, gregariousness, independence or competitiveness, as opposed to negatively valued ones such as insensitivity or timidity. Consumer images of self-concept are closely linked to personality because a person tends to buy products or visit shops and places that tie in with his

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Study unit 10: Personality and self-concept

or her self-image. This brings us to the self and the self-concept of individuals.

10.6 THE SELF AND THE SELF-CONCEPT

STUDY
Study sec 10.7 in the prescribed book.

A person's self-concept (self-image) is closely linked to his or her personality.The self-concept is a person's view or perception of himself or herself. Individuals develop and alter their self-concept on the basis of the interaction between the psychological and social dimensions. Research shows that a buyer purchases products that reflect and enhance his or her self-concept, and that purchase decisions are important for the development and maintenance of a stable self-concept. A consumer's selfconcept may influence whether he or she buys a product in a specific product category, and may also have an impact on brand solution. The consumer attempts to preserve or enhance that self-image by buying products and brands or shopping at stores believed to be consistent with his or her self-image and by avoiding products and stores that are not. The concept of self-image has strategy implications for markets. For example, marketers can segment their markets on the basis of the relevant consumer self-image, and position their product or stores as symbols of such self-images. Such a strategy is in complete agreement with the classical marketing concept, in that the marketer first determines the needs of a consumer (with respect to both the product category and the appropriate symbol of self-image) and then proceeds to develop and market a product that will meet both criteria. Marketers need to understand how personality and the self-concept, together with other factors, impact on the consumer decision-making process, to enable them to match their efforts to these factors in order to achieve a profitable outcome. When you study this section, you will notice the following important aspects of the self-concept: . . . . one self or multiple selves the make-up of the self-image the extended self altering the self

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Topic 3: INTERNAL FACTORS INFLUENCING CUSTOMER BEHAVIOUR

ASSESSMENT

(1) Discuss the nature and characteristics of personality. (2) Distinguish between personality approaches using the different theories of personality. (3) Explain the relationship between personality and lifestyle. (4) How can marketers benefit from understanding consumers' personalities? (5) Explain the self-concept and its implications for marketers.

SUMMARY
In this study unit, we explained the nature and characteristics of personality, as well as its influences on lifestyle. Several major personality theories, as well as their impact on consumer personality study were described.We concluded by explaining the self-concept and its relationship with personality.

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topic 4

CUSTOMER DECISION MAKING


AIM
to help you develop an understanding of the nature of customer decision making.To understand the nature of customer decision making it is necessary to gain insight into individual customer decision making, family decision making and organisational buying behaviour.

LEARNING OUTCOMES
Learners can . demonstrate an understanding of individual customer decision making, family decision making and organisational buying behaviour

TOPIC CONTENT
Study unit 1 1: Study unit 12: Study unit 13: Individual customer decision making Family decision making Organisational buying behaviour

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study unit 11

INDIVIDUAL CUSTOMER DECISIONMAKING


CONTENTS
Key concepts Getting an overview 1 1.1 1 1.2 1 1.3 1 1.4 Customer analysis The customer decision-making process Buying situations Stages in the decision-making process

Assessment Summary

KEYCONCEPTS
customer analysis problem recognition customer involvement limited decision making postpurchase evaluation cognitive dissonance decision-making process processing information habitual buying extended decision making impulse buying

GETTING ANOVERVIEW
Successful marketing begins with an understanding of why consumers behave as they do. Consider the following examples of the way in which consumer behaviour is shaping marketing programmes: . Knowing that almost 40 percent of grocery purchases are unplanned, innovative supermarkets such as Pie City in South Africa, Dominicks in Chicago, and Kings in New Jersey, now feature electronic kiosks and video shopping carts to alert shoppers to bargains and ``talking shelves'' that invite them to shop and buy items. . Campbell Soup, 7-Eleven and Metropolitan Life Insurance tailor their products, advertising and sales efforts to fit the unique needs and preferences of regional, ethnic and racial subcultures in both South Africa and the USA. Marketers at successful companies, like Metropolitan Life, go to great

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Study unit 11: Individual customer decision making

lengths to understand their customers' needs and to gain a better grasp of their buying behaviour.Marketers attempt to understand buying behaviour for several reasons. Firstly, buyers' reactions to a firm's marketing strategy have a huge impact on the firm's success. Secondly, the marketing concept stresses that a firm should create a marketing mix that satisfies customers. To find out what satisfies buyers, marketers must examine the main influences on what, where, when and how consumers buy. Thirdly, by gaining a better understanding of the factors that affect buying behaviour, marketers are in a better position to predict how consumers will respond to marketing strategies. Bear in mind that individual factors and group factors (dealt with in previous study units) influence a consumer's decision-making process. In this study unit we first look at customer analysis. Next we examine how the consumer's level of involvement affects the type of problem solving employed, and discuss the types of consumer problem-solving processes. We conclude this study unit with an analysis of the major stages of the consumer buying decision process. Let us first look at customer analysis.

11.1 CUSTOMER ANAL YSIS


STUDY
Study sec 12.1 in the prescribed book.

Customer analysis is necessary for marketers to enable them to design effective marketing strategies. This analysis enables them to understand the complex activities in which customers engage. Note that in the analysis, the cognition, behaviour, environment and marketing strategy dimensions are evaluated in order to obtain a profile of the target market.

11.2 THE CUSTOMER DECISION-MAKING PROCESS


STUDY
Study sec 12.2 in the prescribed book.

While studying the definition of this process, consider the impact of needs on customer behaviour. Also, note that decision making is similar to problem solving because a decision or a solution is a course of action that provides a desired state of need. Although this process is a sequential and repetitive range of activities, the stages in the process do not necessarily

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Topic 4: CUSTOMER DECISION MAKING

follow each other in a strict order, and some activities may even be omitted. An individual's decision on whether to save or spend, is influenced by individual or internal variables (needs/motives, personality, attitude, perception, learning and lifestyles) and external or environmental variables (reference groups, culture, social influences, family, economic demand factors, marketing influences and the marketing environment).

11.3 BUYING SITUATIONS

STUDY
Study sec 12.3 in the prescribed book.

Buying situations or situational influences are the result of circumstances, time, and location which affect the consumer buying decision process. For example, buying a tyre after noticing, while washing your car, that one of the tyres is badly worn is a different experience from buying a tyre after you experience a blowout on the highway and this delays the start to your holiday. Situational factors can influence the buyer during any stage of the consumer buying decision process and may cause him or her to shorten, lengthen or terminate the process. Note that in any buying situation, individuals absorb information from their external environment and combine it with their needs, motives, perception and attitudes.They may also be influenced by the past, the act of recalling and personality factors, as well as their surrounding environment. We will now examine the different stages in the decision-making process.

11.4 STAGES IN THE DECISION-MAKING PROCESS

STUDY
Study sec 12.4 in the prescribed book.

The consumer-decision making process consists of five stages, namely problem or need recognition, the information search and processing, the evaluation of alternatives, the buying decision and the postpurchase response (as illustrated in fig 12.2 of the prescribed book). When looking at this process, remember the following points:

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Study unit 11: Individual customer decision making

. The actual act of purchasing is only one stage in a process and usually not the first. . Even though we indicate that a purchase occurs, not all decision processes lead to a purchase; individuals may end the process at any stage. . All consumer decisions do not always include all five stages (depending on whether it is extended, limited or habitual decision making).

ACTIVITY 11.1
Study the consumer decision-making process (sec 12.4 in the prescribed book), then answer the following question. Assume that you are considering buying an expensive or complex product, such as a CD player. How would you progress through the stages in the consumer decisionmaking process?

FEEDBACK
This is how you might have progressed through the stages of the consumer decision-making process. Given the nature of the purchases, it is also worth noting that extended decision making would be more appropriate here.

1 1.4.1 Need or problem recognition


Need or problem recognition occurs when buyers become aware of a difference between a desired or an ideal state and an actual condition. The difference should be big enough to trigger a decision. This can be as simple as realising that your stereo system may not be working properly. Through advertisements or salespeople, marketers can activate the process. For example, an advertisement for a compact disc (CD) player could stimulate problem recognition because it emphasises the sound quality of CD players over that of the conventional stereo system you may currently own. Problem recognition may vary widely, depending on the information stored in memory, individual differences and environmental influences, as well as social influences.Note that problem recognition can take place in all stages of the decision-making process. Also, most customer problems arise as a result of internal and external barriers, as well as from assortment inadequacies, new information, expanded desires and expanded or reduced means.

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Topic 4: CUSTOMER DECISION MAKING

1 1.4.2 The search for and processing of information


After recognising the problem or need, buyers search for information about products to help resolve the problem or satisfy the need. The internal search involves a buyer scanning his or her memory for previous experiences or knowledge, which may be insufficient. Then external sources need to be consulted. This type of search is affected by individual differences (customer resources, motivation and involvement, knowledge, attitudes, personality, lifestyle and demographics), and environmental influences. You would probably tap the following information sources: personal sources (friends or relatives), public sources (a comparative evaluation consumer report, published by a product-testing organisation), and marketer-dominated sources (CD player advertisements) or several stores carrying CD players (for demonstrations). From the information gathered from different sources, you would then narrow down your options to an evoked set or consideration set, for further evaluation. In this stage, the following factors also need to be looked at:

1 .4.2.1 Customer involvement in decision making 1


When customers make purchases in order to solve their problems, they engage in different types of problem-solving processes. The amount of effort, both mental and physical, that buyers expend in these processes, varies considerably. A major determinant of the type of problem-solving process employed, depends on the customer's involvement his or her degree of interest in a product and the importance he or she attaches to it. Note that high involvement is associated with products which are expensive and visible, and could have serious personal consequences or carry high risk and also reflect on one's image. Examples of high-involvement products are cars, health care, stocks and bonds. Low-involvement products, such as many grocery items, on the other hand, tend to be less expensive and carry less social risk. It is also worth noting that an ongoing and long-term interest is referred to as enduring involvement, while a situational involvement, by contrast, is temporary and dynamic and results from a particular set of circumstances. We will now look at the types of consumer problem-solving or decision-making processes.

1 .4.2.2 Types of decision-making processes


Involvement level, as well as other factors, affects a consumer's selection of one of the four types of consumer problem solving. (1) Habitualorroutine decisionmaking.This requires low involvement and has to do with automatic, frequently purchased, low-cost items needing very little search-and-decision effort (eg a brand of cereal). Repeat purchases and brand loyalty are dominant in this type of decision-making process. (2) Limited decision making Buyers use it when they purchase products oc. casionally or need information about an unfamiliar brand in a familiar

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Study unit 11: Individual customer decision making

product or service category, for example, choosing a restaurant for dinner. (3) Extended or real decision making. This type of decision making is employed when unfamiliar, high-involvement, expensive, or infrequently bought products are purchased, for example, a CD player, motor vehicle or house. A consumer goes through all the stages of the decisionmaking process, with an extensive information search (internal and external) and complex evaluation of the evoked set.Cognitive dissonance is likely to occur in this type of decision making. (4) Impulse buying Most consumers occasionally make purchases solely on . impulse, and not on the basis of any of the above decision-making processes. Impulse buying involves no conscious planning but stems from a powerful urge to buy something immediately. Now that we understand the influences and possible types of decisionmaking processes, we can now look at the evaluation of alternatives.

1 1.4.3 Evaluation of alternatives


To evaluate the products in the evoked set, a buyer of a CD player establishes certain criteria by which to compare, rate and rank different products (brands). For example, you may use two criteria (a list price under R5 000 and track-finding speed) to establish the brands in your evoked set.The criteria may result in only four models in your evoked set (Technics, Phillips, JVC and Aiwa). Note that the perceived risk associated with buying a product also impacts on the evaluation process, while the evaluation of alternatives depends on the buyer's personality (or orientation), say, an economic, passive, emotional or cognitive individual. Although the evaluation happens in the mind of a consumer and can therefore not be seen, marketers can try to identify and capitalise on types of evaluation criteria to create the best value for the money sought. Evaluation brings a customer to the point of making a decision on a specific course of action.

1 1.4.4 Response or buying decision


Consumers now select products or brands on the basis of the results of the evaluation stage and other dimensions. Buyers choose the seller from whom they will buy the product, as well as the time to buy.The choice of a seller depends on considerations such as terms of sale, past experience with the seller and the return policy. For an example, you might choose the second most preferred brand (JVC) at a store with liberal credit and return terms (Morkels) versus the most preferred CD player brand (Technics) at a store with more conservative policies (Game). Other decisions include quantity (one), payment method (credit) and time (when the preferred brand is on sale or after payday).

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Topic 4: CUSTOMER DECISION MAKING

1 1.4.5 Postpurchase evaluation response


After the purchase, buyers evaluate the product to determine if its actual performance meets expected levels. The postpurchase evaluation may result in either satisfaction or dissatisfaction, a neutral or indifferent behavioural response or postpurchase dissonance.

1 .4.5.1 Postpurchase satisfaction 1


Satisfaction occurs when the outcome (product, brand or store and the conditions surrounding the purchase) matches the customer's expectations. Note that customers' goals could be choice oriented, value oriented or based on anticipated satisfaction.

1 .4.5.2 Postpurchase dissatisfaction 1


If a consumer is dissatisfied, marketers must determine why and implement corrective actions because this affects consumer value perception and communications satisfied buyers will tell eight other people about the experience, while dissatisfied buyers will complain to 22 people! Dissatisfaction results from the disconfirmation of customers' expectations. Customer responses to a dissatisfying purchase may be verbal or behavioural (complaint behaviour or brand switching).

1 .4.5.3 Neutral or indifferent behaviouralresponse 1


This may include either inertia (ie buying the same brand) or impulse buying (an unplanned purchase).

1 .4.5.4 Postpurchase conflict 1


Y may be faced with two or more highly attractive alternatives, such as a ou Technics or a JVC CD player. If you choose theTechnics, you may wonder if you should not have purchased a JVC instead. This postpurchase psychological tension and doubt or anxiety is called postpurchase or cognitive dissonance. Dissonance occurs because making a relatively permanent commitment to a particular choice of product requires one to give up the attractive features of the unchosen alternatives. You may alleviate it by applauding yourself, asking your friends' opinion of the CD player, or reading advertisements about the brand (Technics), or even seeking negative information of the brand you did not choose ( JVC). Marketers can use follow-up advertisements in the postpurchase stage to try to convince customers that they have made the right decision. For example, the Technics company could launch an advertising campaign with the message: ``A quest for zero-defect world: Aren't you really glad you bought aTechnics?''

By understanding major influences and various participants in the

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Study unit 11: Individual customer decision making

consumer decision-making process, a marketer can develop an effective programme to support an attractive offer to the target market.

ASSESSMENT
(1) How does a consumer's level of involvement affect his or her choice of decision making? (2) Identify categories of buying situation factors and explain how each one of these factors influences buyers' decisions. (3) List and discuss all the sources a consumer can consult during the information search stage. (4) Explain, with the aid of practical examples, the different types of decision making. (5) Explain with examples how individuals can engage in varying degrees of evaluation based on their orientations. (6) Explain with examples the stages in the consumer decision-making process in the case of buying a new motorcar.

SUMMARY
In this study unit we looked at how purchase situation factors and the level of consumer involvement impact on consumer decision making and discussed the types of consumer decision-making processes.We concluded with a close look at the stages in the consumer decision-making process.

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study unit 12

FAMIL DECISIONMAKING Y
CONTENTS
Key concepts Getting an overview 12.1 Definition of the family 12.2 Functions of the family 12.3 Roles in family decision making 12.4 The family life cycle Assessment Summary

KEYCONCEPTS
family unit nuclear family socialisation family life cycle functions of the family extended family roles in family decision making

GETTING ANOVERVIEW
The intricacies of customer buying behaviour are reflected in the fact that customers do not only decide as individuals which products to buy, but in many cases as part of a bigger decision-making unit, namely the household or family. The marketer of products has to determine through research which family member/members plays/play a dominant role when deciding about his or her products, so that his or her marketing strategy can be focused on this person/these people. However, the other members in the family cannot simply be ignored because they too often influence the decision maker's buying decision. In this study unit we will discuss the most pertinent aspects of family decision making, namely the definition of the family, the function of the family, the impact of the roles in family decision making and the family life-cycle concept.

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Study unit 12: Family decision making

12.1 DEFINITIONOF THE FAMIL Y

STUDY
Study secs 13.1 and 13.2 in the prescribed book.

It is difficult to formulate a definition of the term ``family'' in South Africa because of the rapid cultural and environmental changes affecting family composition and structures. The traditional definition is: two or more persons related by blood, marriage or adoption who reside together. In most societies the married couple is the simplest structure (husband and wife). The nuclear family (husband, wife, one or more children) is still predominant although this form is under pressure and has led to many versions of a``family'', such as a single-parent family (one parent and at least one child). In South African society, the predominant structure is the extended family, which is the nuclear family plus other relatives, such as grandparents, uncles and aunts, and parents-in-laws.

12.2 FUNCTIONS OF THE FAMIL Y

STUDY
Study sec 13.3 in the prescribed book.

The family provides many functions for its members which are important for the wellbeing of society and the individuals in the family. These functions include the socialisation of family members, contributing to the economic wellbeing of family members, providing emotional support, and shaping the lifestyles of family members. All of these have implications for marketers in terms of the purchasing behaviour of the family member in the marketplace.

12.3 ROLES INFAMIL DECISION MAKING Y

STUDY
Study sec 13.4 in the prescribed book.

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Topic 4: CUSTOMER DECISION MAKING

The roles that family members fulfil in a purchase decision are complex, and the number and identity of family members who take on these roles will vary from one family to the next and from one product to another. Eight distinct roles have been identified, namely: (1) (2) (3) (4) (5) (6) (7) (8) influencers gatekeepers deciders buyers preparers users maintainers disposers

ACTIVITY 12.1
Take the example of a family of three consisting of a father, a mother, and one young teenage boy of16. Further assume that the family is considering buying a new motorcar.The father and mother both work, and the car will be paid for from the father's car allowance granted to him by his employers. Which roles would family members adopt in terms of this decision for the family?

FEEDBACK

Did you notice the wide variety of roles each member could adopt in this decision to purchase a motorcar.T raditionally, most marketers aimed their marketing messages at the father in terms of the motor-vehicle product category, but this is no longer the case because many motorcars are in fact purchased by women or they tend to have a major say in the choice of vehicle. Who did you identify as the decider? In the case of the purchase of a vehicle joint decision making is often the order of the day in other words, all the family members help to decide.Who did you identify as the maintainer? Many of you would probably have named the father as the maintainer, but again this would depend on the specific family situation and the question of who actually telephones the garage to make a booking for the car to be serviced. Family decision making is certainly a highly complex process.

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Study unit 12: Family decision making

When you study this section in your prescribed book, note husband and wife decision making and their influences on the decision-making process.

12.4 THE FAMIL LIFE CYCLE Y

STUDY
Study sec 13.5 in the prescribed book.

The characteristics of a family do not remain static but gradually change. The family life cycle depicts the stages that the family progresses through over time, and is a composite variable containing subvariables such as marital status, size of family, age of family and employment status of the head of the family. The traditional family life cycle consists of the following five basic stages: (1) (2) (3) (4) (5) bachelorhood young single adult living apart from parents honeymooners young married couple parenthood married couple with at least one child living at home postparenthood older married couple with no children at home dissolution one surviving spouse

Changes in the environment and socioeconomic forces have resulted in a modification of this traditional model to one that better reflects the current realities. The nine stages in the SAARF life-stage groups model are as follows: (1) (2) (3) (4) (5) (6) (7) (8) (9) at-home singles starting-out singles mature singles young couples new parents mature parents single parents golden nests left alones

This is a more realistic model because it recognises family forms such as single-parent families, unmarried mothers and single people who adopt a child. Also note consumption in a nontraditional family.

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Topic 4: CUSTOMER DECISION MAKING

ASSESSMENT

(1) Identify four forms of the family that can be found in South Africa. (2) Discuss the functions of the family and the way in which these could affect marketers. (3) Assume that your family is considering purchasing a new motorcar. Everyone in the family (father, mother, son, daughter, grandfather) is excited about the purchase. Discuss the different roles that could be fulfilled by the family members in this family decision-making process. (4) Explain the traditional evolution of the family life cycle. (5) Discuss the characteristics of the nine life-stage groups in the SAARF life-stage groups model.

SUMMARY
In this study unit we identified the definition of a family and the way socioeconomic forces impact on this definition. We highlighted the different types of family groups commonly found. We also explained the functions of the family and indicated that their impact on the marketer's efforts to market to the family. We highlighted the complexity of family decision making by discussing the different roles which family members could adopt in a family decision-making situation. Lastly, we discussed the traditional family life cycle and explained a new model based on life stages which is a more realistic reflection of the forces affecting the modern family.

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study unit 13

ORGANISATIONAL BUYING BEHAVIOUR


CONTENTS
Key concepts Getting an overview 13.1 13.2 13.3 13.4 T ypes of buying decisions The forces shaping organisational buying behaviour Players in the organisational buying centre Stages in the organisational buying process

Assessment Summary

KEYCONCEPTS

buying decisions buying centre

organisational buying behaviour buying process

GETTING ANOVERVIEW
Perhaps the easiest way to understand the difference between consumer decision making and organisational decision making would be to simply compare the process of buying a video/DVD player for personal use and buying one for training purposes for a work situation. In buying the player for personal use we would simply go through the consumer decisionmaking process and make the purchase. However, to purchase it for a company's training scheme, we would have to ask permission from certain people, check budget allocations, request quotations, obtain requisitions for purchasing, and so on.This shows that organisational buying behaviour is more complex and involves more people than consumer decision making. In this study unit we will discuss the different types of buying decisions for an organisation, the forces that affect organisational buying, the different players involved in the organisational buying centre, and the different stages in the organisational buying process.

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Topic 4: CUSTOMER DECISION MAKING

13.1 TYPES OF BUYING DECISIONS

READ
Read sec 14.1 in the prescribed book.

STUDY
Study sec 14.2 in the prescribed book.

One of the characteristics of organisational buying is that the organisational buyer faces different types of buying situations, which affect the way in which the decision will be made. It is essential for both the buyer and the marketer to understand the following three types of buying decisions: (1) new task buying (2) straight rebuy (3) modified rebuy There are specific marketing implications for each type, and the marketer must be aware of these in order to be effective in the marketing effort.

13.2 THE FORCES SHAPING ORGANISATIONAL BUYING BEHAVIOUR


STUDY
Study sec 14.3 in the prescribed book.

Another reason why organisational behaviour is more complex than consumer buying behaviour is because of the numerous forces that affect it.The major forces include . . . . environmental forces organisational forces group forces in the organisation individual factors

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Study unit 13: Organisational buying behaviour

Each of these has an impact on the organisational buying process or the individuals involved in the process within the organisation.

13.3 PLA YERS IN THE ORGANISATIONAL BUYING CENTRE

STUDY
Study sec 14.4 in the prescribed book.

A buying centre is made up of the people who take part in or are involved in the purchase decision for the organisation.This will vary from purchase to purchase and from one situation to the next.The roles these players can fulfil within the buying centre vary, and include the following: . . . . . users of the product or service influencers of the decision, either directly or indirectly buyers who select suppliers and sign contracts decision makers who approve transactions gatekeepers who control the flow of information in the buying centre or organisation

In order to be effective, marketers must identify the players in the role centre and develop marketing plans that take the specific roles into account. The differences between the buying centres of different organisations should also be noted in order to adjust the marketing actions to the characteristics of each organisation's buying centre.

ACTIVITY 13.1
Identify the specific marketing actions you should take for each of the roles in the buying centre.

FEEDBACK

In order to specify specific marketing actions you need to understand what each role does, and then use that information as a guideline for

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Topic 4: CUSTOMER DECISION MAKING

marketing actions. For example, we know that influencers could influence the decision by, say, helping to draw up the specifications needed. This means that we should provide the influencers with the specific type of information required. All of them should be identified and specific packages of information should be prepared and delivered to them. If they are technical people, such as engineers, then a specific technical person from your organisation should be assigned to deal and communicate with them and answer all their questions. The idea would be to influence them to draw up the specifications that would benefit or match your product. The decision makers are critical for success, and we should identify them and develop profiles of their personal and organisational characteristics and styles. The sales team should arrange to sell to the decision-making group together as a group, so that any misunderstandings can be sorted out and the number of sales visits to individual decision makers reduced. We should also have a technical person in the sales team to ensure that any queries are dealt with on the spot. Did you follow this approach for each of the roles? Note that a person could fulfil many roles, for example, he or she could be a major influencer and a member of the decision-making group. It is also important to understand the role of the buyer in the buying centre. If the buyer is part of the decision-making group, then he or she has a powerful role. If the buyer is not part of the decision-making group, his or her role is still significant in terms of the details of the purchase but not as powerful as in the previous situation, since he or she will only implement the decision taken by the decision-making group. Obviously the purchases of each organisation could differ because of differences in buying centres. Hence marketers cannot adopt a generic marketing approach, but need to take the differences between buying centres into account in their marketing plans.

13.4 STAGES IN THE ORGANISATIONAL BUYING PROCESS

STUDY
Study sec 14.5 in your prescribed book.

The decision-making process is more complex and includes more stages than the consumer decision-making process.These stages are . recognising the problem

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Study unit 13: Organisational buying behaviour

. . . . . .

determining the specifications and quantity searching for and qualifying potential suppliers receiving and analysing proposals evaluating the proposals and selecting suppliers selecting the order routine providing performance feedback and evaluation

If the marketer is to influence the end result favourably for his or her organisation, he or she must understand each stage to be able take the correct marketing actions for each stage.

READ
Read sec 14.6 in the prescribed book.

ASSESSMENT
(1) Differentiate between the different types of organisational buying decisions and indicate the marketing implications of each type of decision. (2) Explain the different forces that influence organisational buying behaviour. (3) Identify the role players in the buying centre and explain their different roles. (4) Discuss the different stages in the organisational buying process and indicate how marketers can influence decision making in each stage.

SUMMARY
We began this study unit by identifying the different types of purchase situations found in organisational buying decisions. We then discussed the different forces that influence organisational buying behaviour, and identified the roles that can be found in an organisational buying centre. Each of these add complexity to the process of marketing to organisations and marketers must take them into account in their marketing actions. Lastly, we identified the stages in the organisational buying process and indicated that marketers must take specific actions during each phase if they are to succeed in their marketing efforts.

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topic 5

CUSTOMER-FOCUSED MARKETING
AIM
to help you develop an understanding of customer-focused marketing. To understand customer-focused marketing it is necessary to gain insight into market segmentation, customer loyalty, relationshipbased buying and the value of e-commerce in customer behaviour.

LEARNING OUTCOMES
Learners can . demonstrate an understanding of market segmentation, customer loyalty, relationship-based buying and the value of e-commerce in customer behaviour

TOPIC CONTENT
Study unit 14 Study unit 15 Study unit 16 Study unit 17 Market segmentation Customer loyalty Building relationships with customers The value of e-commerce in customer behaviour

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study unit 14

MARKET SEGMENTATION
CONTENTS
Key concepts Getting an overview 14.1 14.2 14.3 14.4 14.5 Market segmentation Bases for market segmentation Developing segment profiles Market targeting Product and store positioning

Assessment Summary

KEYCONCEPTS
market segmentation behaviouristic segmentation psychographic segmentation needs/benefits segmentation criteria for market segmentation market targeting repositioning bases for market segmentation demographic segmentation geographic segmentation market-value segmentation segment profiles product/store positioning

GETTING ANOVERVIEW
The world is a complex place. It comprises a growing market of more than six billion unique people each with his or her own distinctive demographics, upbringing, language, education, location, interests, behaviour and needs. Even in South Africa, with a population close to 50 million inhabitants, there are many differences within our population, not least of all language and culture. These many differences make marketing a difficult task. After all, the aim of marketing is to put together a very specific mix of marketing variables, in order to meet the specific needs of customers (ie to meet the customer orientation objective as outlined in the marketing concept). But these needs, we have just said, may differ significantly from customer to customer. So what is the marketer to do? This is where market segmentation comes into play.Y have already come ou

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Study unit 14: Market segmentation

across market segmentation in the second-level module (MNM202^Y or MND203 ^S) and you should be familiar with most of the concepts involved in it. In this study unit we will briefly look at the meaning of market segmentation, the bases for market segmentation, developing segment profiles, market targeting, the criteria for effective market segmentation, and positioning of a product and a store.

14.1 MARKET SEGMENTATION

READ
Read ch 1 in the prescribed book. 1

STUDY
Study this study unit only.

Clearly, trying to shape the organisation's activities to meet each individual need becomes an impossible task. Fortunately for retailers and other organisations, many of their customers have needs and profiles that, while different, have certain common elements. What market segmentation attempts to do is to group together customers from a large heterogeneous market, such as the one we find here in South Africa, into smaller, more accessible segments or groups based on these common factors. Each segment will have similar (common) characteristics based on variables such as age, income, education level, geographic location, behaviour, interests, etc. (There are many variables that one can use for market segmentation and we discuss these later in this section.) Market segmentation makes good business sense because it ensures that the market is more manageable. Each segment will consequently have similar needs and will respond to specific types of products or services and marketing communications. Market segmentation is thus an important component of the marketing process for most companies. Of course, members of a segment are not identical to each other, nor should they be treated as such. But they will be more similar to each other than to members of any other segment. Therefore, a market offering and marketing mix aimed at a specific segment will be more powerful than one aimed at the market in general. The astute marketing manager or retailer

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Topic 5: CUSTOMER-FOCUSED MARKETING

performs the market segmentation exercise to identify market segments and then evaluates each in terms of its ``serviceability''. Bear in mind that market segmentation is but one part of a three-step process commonly referred to as the STP process (segmentation, targeting and positioning). We have already discussed segmentation and will deal with targeting and positioning later in this study unit.

14.2 BASES FOR MARKET SEGMENTATION


The marketer uses the bases for market segmentation to identify consumers who are likely to be interested in his or her product, service or store. Remember that when these bases are applied, the actual marketing research has already been done in the market to, say, determine where potential consumers live, and what their incomes and lifestyles are. The marketing research should reveal what the situation in the market is. There are several categories (or bases) of variables that can be used to segment consumer markets.These categories are . . . . . . behaviouristic (usage) demographic psychographic geographic needs/benefits-oriented market-value-based

When using these bases, it is important to remember the following: . A relationship exists between some of the variables that comprise each of these bases, say, between income, occupation and education within the demographic base. . Needs seldom relate to one segment base only.For example, in the case of a retailer, income (affordable groceries for the family) and lifestyle (single professional requiring single meals that are quick and easy to prepare) are needs from two different bases, namely demographic and psychographic, that the food retailer must strive to meet. . The above-mentioned market segmentation bases are incomplete. There may be many other bases that could be used for segmentation, given the industry in question. For example, the autoglass industry might use the different makes of motor vehicles owned by customers as a segmentation variable, while for the clothing retailer specialising in oversized garments, individual size would be a segmentation variable.

14.2.1 Behaviouristic segmentation


Here segmentation is done on the basis of consumer buying behaviour and the objective is to try and understand the extent to which and the way in which customers will use the product in question. The variables that may be considered, include the following:

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. Purchase occasion.Here the marketer looks at the occasion for which the product is being bought, whether it is for everyday use or for special occasions. An example might be the purchase of a bicycle. For some persons, the bicycle is a sports object (and also, to some extent, a status object), while for others it is an essential means of transport. . Benefits sought. This variable attempts to understand the value a consumer seeks when buying a particular product. The person who buys a bicycle for health reasons, is likely to use it to get fit, while someone who uses it as a means of transport, sees it as an essential element of his or her daily existence. In the latter case, the benefits sought are far more real and essential than in the case of a health tool, which in some instances may be used quite irregularly or hardly ever. . User status. This divides consumers into nonusers, ex-users, potential users, occasional users or regular users. While regular uses may represent the firm's primary income source in the short term, potential users may represent significant opportunities in the longer term. . Usage rate. This variable looks at the frequency of use of a particular product such as heavy versus light users, or frequent versus infrequent users. The sports bicycle is again a good example. Often, the person buying a sports bicycle is extremely enthusiastic in the beginning and uses it a lot, but then becomes lazy and uses the bicycle less and less and may even sell it at a later stage. . Loyalty status. Here the marketer attempts to identify how brand loyal the consumer is to a product. In the sports bicycle sector, there are a number of competing brands and cyclists will often buy a particular brand because of the status attached to it (cycling is a prestige sport and participants are generally overly conscious of the equipment they buy). . Buyer readiness stage.This stage measures whether consumers are ready for a product or whether they first need to be made aware of it, and its benefits. Before cycling became a popular health sport, bicycles were used as a means of transport only. It took some time before the general public became receptive to the bicycle as an alternative means of fitness. . Attitude towards the product. Here the effort is focused on identifying whether consumers are indifferent, negative, hostile, positive or enthusiastic towards a product. Today, there is an extremely positive attitude towards the bicycle and it is even seen as a prestige purchase. Many years ago, however, the bicycle was only viewed as the poor person's means of transport.

14.2.2 Demographic segmentation


This approach assumes that customers differ according to certain variables about themselves, such as age, gender, marital status, race, religion, family life cycle, occupation, income or education. This is especially the case in South Africa, were we have a very heterogenous society, with people from

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every race, gender, income group, educational level and religion. Each of these groups has its own unique profile. Demographic information helps marketers identify a profile of the typical customer to be found in each segment of society, which will guide them in what marketing strategy to use to reach the segment in question. For example, with at least 1 different cultural and language groups in South 1 Africa, it makes sense to segment the population according to these groups in order to ensure that marketing communication is in tune with the underlying culture and language of each group. Because of the large number of demographic variables that exist, it has not always been easy to segment population groups. Fortunately, the South African Advertising Research Foundation (SAARF) publishes a regular Living Standards Measure (LSM) report which serves as one of the most comprehensive surveys of a range of variables that can be used to describe the living standards of people in South Africa. The report is a powerful marketing research tool and divides the population into 10 (previously 8) LSM groups, ranging from LSM1 (the poorest group) to LSM10 (the most well-off [affluent] group). The LSM variables include factors such as residence, products purchased, financial services used, shopping habits, lifestyles and media used. Let us look at the LSM more closely.

14.2.2.1 The SAARF Living Standards Measure (LSM)


The SAARF LSM (Living Standards Measure) has become the most widely used marketing research tool in Southern Africa. It divides the population into10 LSM groups,10 (highest) to1 (lowest). Before 2002, there were only eight LSM groups. The LSM is a unique means of segmenting the South African market. It cuts across race and other outmoded techniques of categorising people, and instead groups people according to their living standards using criteria such as degree of urbanisation and ownership of cars and major appliances. SAARF was awarded the prestigious AAA ``Media Innovator of theY ear'' award in 1993 for its contribution in helping marketers, advertising agencies and media owners to define their target markets more precisely using the LSM groupings. In the late1980s, SAARF set out to compile an index using a combination of variables which would be stronger than any single variable and thus more useful to marketers for market segmentation. In conjunction with ACNielsen Media International, and their statistical consultant, Dr Jacky Galpin, they looked for variables already measured in the SAARF AMPS survey that would be strong discriminators, which could be used to segment the population. After considerable testing of an initial list of 71 characteristics or variables (from which the population group and media usage were deliberately excluded), 13 were finally selected for their combined power in differentiating between respondents. Not only did they differentiate well, but they

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did so consistently when tested on a second set of SAARF AMPS results. This kind of stability was a key requirement, on the one hand, but also needed to be sensitive to changes in the marketplace, on the other. The LSMs have already proved in the early years to have this characteristic. In an attempt to improve this measure, an exercise was undertaken to force income and education into the index variables. However, it was found that neither of these two variables contributed sufficiently to warrant inclusion. Once the cluster of indicator variables had been chosen, the term ``Living Standards Measure'' was coined to describe the scale they created. The LSMs were included for the first time in the SAARF AMPS 1989/90 reports. The original 13 variables that were used were the following : 1. 2. 3. 4. 5. 6. 7 . Polisher/Vacuum cleaner Fridge/Freezer TV set Water/Electricity Washing machine No car in household Hi-Fi/Music Centre 8. Sewing machine 9. Non-supermarket shopper 10. Rural dweller (Outside PWV & W Cape) 1 No domestic worker 1. 12. No VCR set 13. No tumble drier

From AMPS 89/90 to AMPS 92, LSM-weights were adjusted and the variables changed, where necessary, to provide the best fit to the data. This meant that the results were not comparable year on year and trending was impossible.

14.2.2.2 1993 SAARF LMS


From AMPS 93 onwards, it became clear that it was not advisable to adjust the variables annually to overcome the above problems, unless large changes were required. In 1993 the variables looked something like this: *1. Fridge/freezer *2. Water or Electricity *3. Polisher/vacuum cleaner *4. Non-Supermarket shopper *5. No Car in household *6. TV set *7 Microwave oven . 8. Rural dweller (outside PWV & W Cape) 9. Hi-fi/music centre 10. No domestic worker 1 Washing machine 1. 12. Sewing machine 13. Metropolitan dweller

Each variable carried a different weight, some positive, others negative, and the respondent's position on the SAARF LSM scale was calculated by adding together the weights of the variables that he or she possesses. A constant was also added to the total score to remove negative total scores.

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14.2.2.3 Subsequent developments ofthe LSM concept


In the mid-1990s, the feeling gained ground that the SAARF LSM concept could be improved by increasing the number and range of the variables that went into it. Some users were concerned that there seemed to be too much reliance on the ownership of certain durables, and too little attention focused on other variables that looked, subjectively, as though they ought to be significant reflections or manifestations of a person's ``living standard''. A further 39 variables were ``added to the pot'' of original characteristics, some of them based on new questions added to the SAARF AMPS questionnaire specifically for this purpose. Analysis of this expanded set of data generated a new list of (this time) 20 indicator variables. Interestingly,1 of 1 the original 13 variables reappeared in this new list striking evidence of the original measure's fundamental strength and stability. The extended list was applied for the first time to the 1995 SAARF AMPS survey results. A recheck each year from 1996 to 1999 confirmed its continuing validity. The next market-driven development was to extract more detail at the important ``top end'' of the market. SAARF LSM segments 7 and 8 were each divided into an upper and lower stratum.These subdivisions (7L & 7H, and 8L & 8H) were first employed in the late-1997 reports (``L'' stands for ``low'' and ``H'' for ``high''). As customary, the variables analysed for the SAARF LSM were reviewed for the SAARF AMPS 2000A survey. In addition, a number of new variables were included to assist with top-end differentiation. The result of this exercise is that the SAARF LSM has changed with 16 variables remaining the same and four being replaced by new ones.The following table lists the 200 SAARF LSM variables which have been created on the 2000A SAARF AMPS database: 2000 SAARF LSM 1. Built-in kitchen sink 2. No car in household 3. FlushToilet 4. Supermarket shopper (Personal) 5. Microwave oven 6. Credit facility including retail card 7 Fridge/Freezer . 8. Washing Machine 9. No financial services used 10. Hut 1 Stove/Hotplate (Electric) 1. 12. Polisher/Vacuum cleaner 13. No insurance policy 14. Hi-fi/music centre 15. Video cassette recorder 16. No domestic worker 17 TV Set . 18. Car/Sedan/Beach buggy/ Hatchback/2 Seater coupe 19. Hot running water 20. Home telephone Four new variables included for the first time in the 2000 SAARF LSM.

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14.2.3 Psychographic segmentation

Psychographic variables refer to the inner or intrinsic qualities of individual consumers. Using this base, marketers are able to segment markets according to variables impacting on the psyche of consumers such as lifestyle, personality and social class. In the process of segmenting a market using this base, the marketer would normally make use of information about consumers' attitudes, interests and opinions (AIO) and values and lifestyles (VALS). Using a statistical technique known as factor analysis, the information gathered is used to identify subgroups of consumers. In South Africa, the AC Nielsen MRA Sociomonitor Value Groups survey is a standard for psychographic profiling in the country and results in the identification of the following value groups. . Conformists. This group conforms to group value systems and would generally like to see harmony between the different races in the country. They accept and understand others' emotions and tend to be more conservative. Traditional family values are important to this group.They represent about 20 percent of the adult population. . T ransitionalists. This value group is characterised by traditional values with some focus on personal achievement. They represent about 21 percent of the adult population. . Progressives. This is a modernised value group whose primary needs are self-development. They are proudly focused on self-improvement and development of every aspect of their personal lives.Their looks, health and home are important to them. They represent about 19 percent of the adult population. . Nonconformists. This group rejects group-oriented, civil or traditional values in favour of individualism.They are tolerant of others, but uphold the right of individual choice. They represent about 17 percent of the adult population. . ``Today-ers''. This value group has a tough ``don't care'' attitude to the world. They tend to live on the edge and are action oriented. They represent about 23 percent of the adult population. Some of these value groups are explained in study unit 4.

14.2.4 Geographic segmentation


The geographic segmentation approach assumes that customers within a particular geographic location, be it a country, region, city or even suburb, can be targeted with the same product offering and marketing mix.One or more locations would then be targeted by the organisation. This is a vital variable in the retailing sector because retail outlets usually serve a specific geographic location. For a manufacturer supplying the whole country, their location may be of no significance whatsoever. This approach on its own does not define a marketing strategy, but does define the product or service required, or the promotional stance to adopt. It can, however, play a role in segmentation by providing further

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help in identifying how to reach customers found in particular segments. The logic is that people who live in the same area share certain similar needs and wants which differ from those of people living in other areas. In South Africa, marketers might consider segmenting the total market into rural and urban geographic regions, or perhaps into the nine provinces in South Africa.

14.2.5 Needs/benefits segmentation


This segmentation variable examines the specific benefits customers look for in a product.They are then placed in groups according to the similarity of the benefits customers seek. For example, all health-oriented consumers can be grouped together. They are likely to buy sporting equipment, health foods and generally have a similar health-oriented, outdoor lifestyle.

14.2.6 Market-value-based segmentation


This kind of segmentation is similar to needs/benefits segmentation, except that instead of specific benefits, it uses market value as a variable which looks at the market in terms of the personal or universal value a product provides. In this instance, the marketer may decide to segment the market into high potential value (ie those customers likely to buy or spend a lot) and low potential value (ie those customers likely to buy or spend very little). Of course, there may be more than just these two segments (eg high-value, average-value and low-value segments).Targeting high-value segments may involve locating a store in a prestige area, offering high-value products for sale, status advertising and high mark-ups. Once the marketer has researched the market according to the above bases, he or she can develop segment profiles.

14.3 DEVELOPING SEGMENT PROFILES


This can be seen as the outcome of a market segmentation exercise.Once the segmentation process has been completed, the marketer can describe each of the segments that has been identified by the organisation, in terms of the segmentation variables discussed above (demographic, psychographic, behavioural, etc). From these profiles, the marketer can select one or more profiles (corresponding to a particular market segment) on which to focus the organisation's market offering. These profiles serve as a``reference point'' for the marketer from which he or she can work, in the process of developing products and communication messages that will best ``fit'' the customer profile of the selected segment(s).

14.4 MARKET TARGETING


Once a market has been segmented into similar groups with common needs and profiles, the organisation must decide on which of these

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segments it intends focusing. If the market is huge, it may be possible to divide it into many different segments. The organisation's products and services may fit in well with some of these segments and not at all with others, or relate better to some segments compared with others. It therefore makes sense for the organisation to focus only on the most appropriate market segments, rather than attempting to meet the needs of all segments this is referred to as market targeting.

14.4.1 Criteria for effective market segmentation


Furthermore, in the process of market segmentation, other criteria need to be met to ensure that the process has indeed been effective. These criteria for effective market segmentation state that any segments identified must have the following characteristics: . They must be measurable in the sense that the marketer should have clear criteria for describing segments within the market. Some segments may be extremely difficult to identify, such as trying to identify the market for bungee jumpers. How would one describe a bungee jumper? . They must be substantial or large enough and profitable enough to warrant marketing effort on the part of the company (ie the size of the segment is important).Take a specialist Japanese food retailer. While it might be feasible to segment the market for Japanese food in a city such as Johannesburg, such segmentation would probably not be worthwhile in, say, Poffadder. . They must be stable in other words, each segment must remain constant in terms of its profile. Some activities are seen as fads, with a short lifespan. To warrant the effort involved in segmenting a market, the researcher will want to know that the segment will be around for some time (consider the Yo-Yo fad that comes and goes on a regular basis it would be difficult to determine the Y o user segment in o-Y the market and the segment is likely to change from time to time, depending on whether or not theY o is in fashion again). o-Y . They must be accessible.The marketer must be able to reach the market segment with a product or service and marketing communication. For example, it is extremely difficult to target rural groups in South Africa using television or the Internet because they do not have access to these channels. . They must elicit action. In other words, the organisation must be able to create something to which the segment can respond (ie develop a specific market offering for the market segment). Smaller firms, for example, may not be able to target several different segments even though they may know that such segments exist. In deciding which segments to target, the marketer would consider the following:

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. the target market size and growth possibilities . the attractiveness and potential profitability of each segment . the resources and skills of the organisation and its ability to serve a particular segment . the compatibility of the target segment with the organisation's objectives . the cost of reaching the target market in question If, for example, a company has segmented the market according to geographic factors (say, according to the nine provinces), then deciding to serve (or target) only Gauteng, would be an example of market targeting.

14.5 PRODUCTAND STORE POSITIONING

STUDY
Study sec 1 in the prescribed book. 1.5

Once the most suitable market segments have been targeted, the next step is to ensure that the organisation decides on how best to compete within the segment(s) selected. This is referred to as product positioning (and in the case of a retail outlet, as store positioning) and requires the organisation to identify its unique competitive advantage within the segment in question. In the process of positioning a product, the organisation will attempt to determine a firm's existing ``perceptual position'' in the minds of customers and to influence this perception position (often referred to as a positioning map) positively. A positioning exercise comprises three primary activities: Firstly, determining which characteristics of the retailer or organisation and its competitors influence consumers' perceptions. These characteristics are called determinant variables or ``attributes''. Secondly, once these factors have been determined the organisation can establish, through market research, how it is doing in terms of these variables in the eyes of consumers.Thirdly, given the findings of the positioning analysis, the organisation can then decide whether it wants to change this perceptual position it holds in the minds of customers, or it may be satisfied with its present image and merely aim to strengthen this position in future. For example, Woolworths' Foodstores are positioned as high-price, highquality food retailers. Quality is expressed in terms of features such as freshness, consistency, presentation, taste and ease of preparation. Other food retailers targeting the mass market face the tricky positioning task of retaining the image of low price while at the same time communicating a

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quality message. There is always a risk that the quality message will blunt the basic ``low-price'' position.

14.5.1 Repositioning a product or a store


The perceptual position of a product can usually be improved, even if its current position is merely strengthened. The organisation must therefore decide what position it wishes to hold on the positioning map, and then start working on those characteristics of its product offering which must realise the new perceptual position. For example, if a retailer of meat products wishes to improve the perception of quality of its product range, he or she must look at those factors that influence quality. The price can be raised to project a perception of better quality, or the packaging of the product can be made more durable. Alternatively, presentation and store cleanliness could be factors that he or she might improve upon in order to reflect quality.

ACTIVITY 14.1
You own a small ``8 -till-late'' store located in the heart of a residential suburb. About two kilometres away is a fairly large Shoprite store. Make a list of the determinants (differentiation) variables that you think play a role in the consumers' perceptions of these two competing stores.

FEEDBACK

You should have considered, among other things, the following determinant variables: . . . . . . . . convenient location opening times range of products available prices quality of the merchandise mix in-store service and after-sales service general store appearance image of customer orientation

The perception consumers have of a specific product or store largely

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determines its success.Toyota sells more vehicles than Nissan because, for a long time, it has projected an image of products with a good quality/price ratio. Pick 'n Pay does better than Shoprite/Checkers on those things the consumer regards as important when it comes to supermarkets.The store also continually improves its product assortment and store characteristics and informs current and potential consumers about this by means of marketing communication. Smaller stores, such as an ``8 -till-late'' can compete on the basis of location, opening times and customer service

ASSESSMENT
(1) Describe the nature and importance of market segmentation. (2) Is market segmentation more important only in the retail sector, or is it equally important for manufacturing and wholesaling organisations? Make a choice and discuss your reasoning. (3) If you were a manager for Pick'n Pay, explain how you would go about segmenting the grocery shopping marketing. (4) Discuss five bases to use in segmenting consumer markets. (5) Identify the variables that one could use in demographic segmentation. (6) Explain living standards measures and value groups. (7) Discuss the criteria for effective market segmentation. (8) Explain what is meant by market targeting and product/store positioning and their role in market segmentation

SUMMARY
In this study unit we discussed the role of market segmentation, as well as some of the segmentation bases and variables that an organisation could consider for segmenting markets. In particular, we looked at behaviouristic, demographic, psychographic, needs/benefits, market-value and geographic segmentation, as well as the need to develop segment profiles. This was followed by a brief discussion of the criteria for effective market segmentation. We ended the study unit by explaining what is meant by market targeting and product/store positioning and we also looked at how a retailer might consider repositioning his or her store(s) in the minds of customers.

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study unit 15

CUSTOMER LO ALTY Y
CONTENTS
Key concepts Getting an overview 15.1 Brand loyalty 15.2 Store loyalty Assessment Summary

KEYCONCEPTS
brand loyalty brand names brand image brand vulnerability brand loyalty correlates store loyalty branding brand preference repeat purchases brand segmentation brand type store image

GETTING ANOVERVIEW
Customer loyalty, either to a product, store or organisation, can be a powerful competitive advantage for the organisation concerned. Loyalty means that the customer actively seeks out the brand, store or organisation and such customers often travel out of their way to reach a particular store.They may become active promoters of the brand or store in question to their friends and colleagues, and may even defend the product or organisation when being criticised by others. Every loyal customer is, in fact, another salesperson actively working for and promoting the organisation. The benefit in building customer loyalty is obvious. But what exactly is loyalty, and how does an organisation go about building it? In this study unit we will first look at brand loyalty and then store loyalty.

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15.1 BRAND LO ALTY Y 15.1.1 Introduction

STUDY
Study secs 15.1 and 15.2 up to 15.2.1 in the prescribed book.

Brand loyalty is more than just repeat purchasing. There are many customers who regularly buy a product, but are not truly committed to the brand in question it is more about habit purchasing. Brand loyalty exists only when the customer has some level of psychological (or active) commitment to the brand. For brand loyalty to exist, there must be a brand or identity to which the customer can commit or with which he or she can identify. Consequently, the first step in establishing brand loyalty is building a brand identify referred to as ``branding''. A brand is a name, term, sign or symbol or design or combination of these characteristics intended to identify the goods or services of one seller or groups of sellers and to differentiate them from those of competitors.

15.1.2 Brand names and product preferences

STUDY
Study sec 15.2.1 in the prescribed book.

Brands represent important ``markers'' for customers. Firstly, they afford customers shopping convenience because they do not have to shop around, consider alternatives or make any decisions; they simply purchase the brand they like. Secondly, brands represent certain guaranteed levels of quality. Because of the customers' familiarity with the brand they know what quality to expect and are generally satisfied with the quality levels a particular brand delivers.What is more, a branded product reduces the risk of purchasing a defective product, because the customer knows that the organisation will make the situation right either by repairing or replacing the product. Similarly, brands represent a given level of service and the customer knows

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that there is always someone they can turn to if things go wrong or if they need assistance of any kind.

In many instances, prestige brands (such as a Mont Blanc pen or a BMW motorcar) are purchased in order to enhance a customer's self-concept. Besides meeting the customer's fundamental expectations as far as the functioning and quality are concerned, a branded product also meets some of the customer's other needs, namely those relating to affiliation, nurturance and the desire for dominance.

15.1.3 Brand image

STUDY
Study sec 15.2.2 in the prescribed book.

Brand image can be said to be sum total of a customer's attitudes and knowledge about a particular brand or product. A brand's image provides a product with a unique character and appeal and often represents a symbol of various social relationships.The Panasonic brand may represent ``reliability'' (``zero defect''), in contrast to the Samsung brand which may be seen to represent ``innovativeness'' while the Sony brand represents ``quality''.

15.1.4 Brand preference versus brand loyalty

STUDY
Study sec 15.2.3 in the prescribed book.

Brand preference is a predisposition of a customer to select a particular brand from a set of known and similar brands. Thus, as a beer drinker, if you were presented with the choice of drinking Castle, Hansa or Black Label, you would select one brand in preference to the others. Customers generally express a preference for one brand over others. Brand loyalty is more than brand preference. Brand loyalty has to do with the proactive quest and purchase of a particular brand. In the case of brand loyalty, the customer becomes an advocate of the brand and the preference for a brand is substantial. Brand preference is closely associated with the knowledge-attitude-

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behaviour model of customer behaviour. This model is influenced by two major factors: (1) One brand offers better value than the others (from the customer's perspective). (2) Brand preference facilitates product choice and speeds up the shopping process this leads to habitual purchasing based on a positive past experience. Brand preferences may change over time as either the product's marketing mix changes or the customer's needs change. This may lead to brand switching as customers move to another brand that better meets their needs.

15.1.5 Becoming brand loyal

STUDY
Study sec 15.2.4 in the prescribed book.

Customers become brand loyal in different ways. While some customers may try out various brands over time, learning about each brand as they go along, others are influenced by the information they receive from various sources, including their friends, family and other reference groups, marketing literature and/or because of a favourable experience they have had with a particular brand. Brand loyalty is said to be lower when . . . . there are more brands from which to choose the number of purchases made increases it is a price-competitive market customers use a number of brands concurrently

15.1.6 Brand loyalty and repeat purchases

STUDY
Study sec 15.2.5 in the prescribed book.

Repeat purchases may not necessarily reflect brand loyalty or brand preference for that matter. Repeat purchases may occur because it is the

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only brand available at a specific time or location (ie a convenience purchase), because it is the cheapest available, or because of habit. Nevertheless, if the customer's experience of the brand is not negative or is perhaps even positive, then this type of repeat purchase can grow into brand preference or brand loyalty. Repeat purchases are therefore a first step for a marketer or retailer in building brand loyalty.

15.1.7 Complex decision making and brand loyalty


STUDY
Study sec 15.2.6 in the prescribed book.

Brand loyalty is seen as a reflection of the degree of involvement the customer has in purchasing a product. If there is low involvement on the part of a customer (say, buying bread), then brand loyalty may not be possible, while in the case of high involvement purchases such as buying a car, brand loyalty may be easier to achieve on the part of a retailer or marketer.

15.1.8 Brand loyalty and vulnerability


STUDY
Study sec 15.2.7 in the prescribed book.

Brand vulnerability has to do with the extent of brand loyalty amongst customers. Customers who are committed to a brand are not nearly as vulnerable as customers who will buy a brand regularly.

15.1.9 Stages of brand loyalty


STUDY
Study sec 15.2.8 in the prescribed book.

The stages that customers progress through in the process of becoming brand loyal are as follows:

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. Brand awareness. The customer becomes aware that the product or brand exists as a result of the promotional efforts of the organisation concerned. . Brand trial. The next step is for the customer to try out the product. Perhaps the organisation will offer free samples or a discount in order to persuade customers to try the product. . Brand preference. The customer now becomes familiar enough with a particular brand to select it from a set of known available brands. . Brand habit.The customer purchases the brand habitually. . Brand loyalty. The customer is committed to the brand and becomes a brand advocate.

15.1.10 Brand loyalty and brand segmentation


STUDY
Study secs 15.2.9 and 15.2.10 in the prescribed book.

Because it is possible to measure brand loyalty, organisations often use this information to segment markets. Customers can thus be segmented into groups according to their degree of brand loyalty. An organisation's marketing communications efforts will differ from segment to segment. Brand loyalty amongst customers can be segmented on the basis of the following: . The behaviouralapproachto brandloyalty.Brand loyalty is seen as a function of past behaviour, but does not take into consideration brand commitment or brand vulnerability. . The cognitive approachto brandloyalty.The cognitive view takes customers' attitudes into consideration, where favourable attitudes are said to drive repeat purchasing behaviour. . The combined behavioural and attitudinal approach. This approach takes both attitudinal and behavioural aspects into consideration.

15.1.1 Brand loyalty correlates 1


STUDY
Study sec 15.2.1 in the prescribed book. 1

Studies based on behavioural and attitudinal measures have identified rela-

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tionships between brand loyalty and customer purchasing habits, shopping pattern characteristics and market-structure characteristics.

15.1.12 Models of brand loyalty

STUDY
Study sec 15.2.12 in the prescribed book.

A number of models exist to explain brand loyalty. Deterministic models attempt to explain the processes through which buyers make their brand choices and attempt to predict behaviour in exact terms. Stochastic models, on the other hand, allow for other, nonmeasurable variables to be included in the model.

15.1.13 Customer behaviour and brand type

STUDY
Study sec 15.2.13 in the prescribed book.

Branding is a crucial part of marketing because it attaches an identity to a product or store.There are various types of brands such as the following: . Manufacturers' brands. Also known as national brands in instances where they are widely or nationally marketed, these brands are associated with a specific manufacturer.The brand is developed and owned by the producer, who is also involved in the product's marketing efforts. Examples of manufacturer brands include Safari, Chanel No 5 and Y ardley in the perfume sector. . Store brands. Also known as private brands these refer to brands whose distribution and promotion are controlled by a particular store (eg the Red Label brand owned by Edgars). Store brands are often cheaper than manufacturers' brands (except perhaps for those sold through exclusive stores). It is quite common to find retailers making use of both manufacturers' brands and store brands in the same retail outlet. . Genericbrands.These represent a marketing strategy used by retailers to create``no-name'' brands that can be presented to customers at a lower price and without the traditional marketing frills.Generic brands usually have no branding and are recognised by the product category.They fall into, say, coffee and toilet paper such as Pick 'n Pay's ``no-name'' brands.

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Although originally intended to be a generic brand, this brand has become so well known, that it is more an example of a store brand rather than a generic brand.

15.2 STORE LO ALTY Y

STUDY
Study sec 15.3 in the prescribed book.

Story loyalty, which is closely associated with brand loyalty, has to do with the commitment that a customer has to shop at a particular store. This loyalty may be based on numerous factors, including location, service, credit available, convenience, range of goods on offer, price and store ambience. Retailers need to concern themselves with establishing a positive shopping experience, which is achieved by focusing on the factors mentioned above. Price, product range, service and store atmosphere are all factors that can be positively affected by the store owner and that will contribute to store image and store loyalty. A positive store loyalty also impacts upon brand loyalty, depending on the brands stocked by the store in question.

STUDY
Figure 15.9 in chapter 15 of your prescribed book outlines a useful model of store loyalty and outlines those factors that impact upon store loyalty. Study this figure carefully.

ACTIVITY 15.1
Discuss the advantages of using store brands over manufacturer's brands for a retailer such as Woolworths.

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Study unit 15: Customer loyalty

FEEDBACK

Y should have considered, among other things, the following factors: ou Woolworths is a retailer that currently makes extensive use of store brands. The Woolworths brand is quite well known and the quality and appeal of its store brand has contributed to the success of its retailing operations. The advantages of store brands over manufacturers' brands are the following: . Customers are not as loyal to manufacturers' brands as before. . Store brands usually offer better value for money. . There is growing similarity of brands within a given merchandising category (eg foodstuffs) and this makes it possible for a retailer to market its own store brands more successfully compared with the many other similar manufacturers' brands. . Customers know that the store brand is often just a repackaged version of a manufacturer's brand, often at a cheaper price in the case of Woolworths, its quality is generally better than many manufacturers' brands, albeit a little more expensive. . Woolworths, for example, strives for convenience with its storebranded products (nicely presented meals for one). . Some retailers such as Woolworths are willing to stand by their brands, by offering product quality guarantees, thereby reducing the purchasing risk in the minds of customers. Notwithstanding the above, it is interesting to note that Woolworths has recently started carrying manufacturers' brands when it comes to items such as cola and chocolates.They found that while customers were happy with the Woolworths brand when it comes to fresh produce, in the case of chocolates and cola, the Cadbury's and Coca-Cola brands were preferred to the Woolworths brands. In other words, in some instances the manufacturer's brand is so powerful, that it simply does not pay to try and replace it with a store-branded equivalent.

ASSESSMENT
(1) Explain the nature of brand loyalty. (2) Explain the importance of developing a brand for Pick 'n Pay to differentiate it from other grocery stores. (3) In what way does brand loyalty differ from brand preference?

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(4) Discuss the five stages of brand loyalty. (5) Discuss the models of brand loyalty using the example of a customer shopping at Woolworths. (6) Discuss market segmentation on the basis of brand loyalty. (7) Why are store brands so popular? (8) Discuss, with the aid of practical examples, the differences between manufacturers' brands, store brands and generic brands. (9) Discuss the various factors that impact upon store loyalty, which a new store selling groceries and clothes needs to consider.

SUMMARY
In this study unit, we began our discussion by examining brand loyalty, and then went on to explain brand names, product preferences, brand image and brand preference. Brand preference, we said, is not brand loyalty brand loyalty refers to a higher level of commitment to a brand than brand preference.We looked at how customers progress along the path of brand loyalty. Brand loyalty was the next topic of discussion, and we said that a brandvulnerable customer is someone who can easily change brands. We also saw that organisations can use brand behaviour and attitude as a way of segmenting consumer markets. We identified three brand types, namely manufacturers' brands, store brands and generic brands and we explained that customers react differently to these different brand types. Finally, we argued that store loyalty is closely correlated to brand loyalty and has to do with a customer's disposition to purchase from a particular store. Store loyalty clearly impacts positively on the brands stocked by the store in question.

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study unit 16

BUILDING RELATIONSHIPS WITH CUSTOMERS


CONTENTS
Key concepts Getting an overview 16.1 16.2 16.3 16.4 16.5 16.6 16.7 16.8 16.9 T raditional marketing approach Relationship management Prerequisites for implementing CRM Technology: The facilitator of CRM Relationship loyalty Limitations on implementing CRM The individual customer approach Developing CRM strategies Relationships with all the stakeholders

Assessment Summary

KEYCONCEPTS
Relationship marketing The 4 P's Marketing communication Customer service Customer loyalty T ransaction marketing Customer relationship marketing Process management Customer care Customer retention

GETTING ANOVERVIEW
A business that adapts the marketing concept strives to sell what the customer wants. Companies that listen to customer needs not only have satisfied customers but also develop strong relationships that lead to customer loyalty. These relationships can be seen as resulting in relationship-based buying. Making a sale is impor tant of greater importance, however, is whether customers are satisfied after the sale and whether they will return to a particular business and become loyal customers. If they are satisfied, they are also more likely to spread favourable word-of-mouth publicity about the business.

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In this study unit we focus on relationship marketing.We also focus on the process that companies could follow to build relationships with their customers and with all the stakeholders.

16.1 TRADITIONAL MARKETING APPROACH

STUDY
Study secs 16.1 and 16.2 in the prescribed book.

When you study this section (secs 16.2.1 ^ 16.2.3) in the textbook, note in particular the following: . T raditional marketing framework T raditional marketing comprises the marketing mix (which is made up of the 4 P's), market forces and a matching process which is the strategic managerial process of ensuring that the marketing mix and internal policies are appropriate to the market forces. . The marketing concept In this section we learn that the marketing concept, as it has been practised, has failed. Although marketers know that the marketing concept advocates a customer focus, the attitudes of management do not clearly reflect this principle. . Marketing in crisis It was once suggested that the marketing mix and other aspects of traditional marketing were dying. Some authors went so far as to propose that `marketing is dead because the old rules of identifying customer demand no longer apply'.

16.2 RELATIONSHIP MANAGEMENT

STUDY
Study sec 16.3 in the prescribed book.

As mentioned earlier, the marketing concept as practised and understood by marketers has failed because it was not implemented correctly. The relationship marketing concept, with its focus on building and maintaining customer relationships, has been hailed as the saviour of marketing, in

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Study unit 16: Building relationships with customers

effect taking marketing back to its roots. It has become a new way of approaching marketing, although it builds on the traditional marketing concept. When you study this section in the prescribed book, note in particular the following: . The definition of relationship marketing, the various dimensions of this definition and how this definition changes the whole focus of marketing as practised in the past . The difference between traditional and relationship marketing Let us now look at the prerequisites for implementing customer relationship marketing.

16.3 PREREQUISITES FOR IMPLEMENTING CRM

STUDY
Study sec 16.4 in the prescribed book.

Before CRM can be implemented in any organisation, the organisation needs to be transformed entirely. When you study this section, note in particular the following important prerequisites: . . . . Teamwork and processes (sec 16.4.1) Support at executive level (sec 16.4.2) Excellent customer service (sec 16.4.3) Technology to gain knowledge and insight (sec 16.4.4)

We are now going to look at technology as the facilitator of customer relationship management.

16.4 TECHNOLOGY:THE FACILITATOR OF CRM

STUDY
Study sec 16.5 in the prescribed book.

Y may wonder why some companies persist in thinking that technology ou only improves customer service if it helps to solve customers' problems. Study the following in your prescribed book:

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. Crucial role for technology (sec 16.5.1) . Technology for building relationships (sec 16.5.2) . Developments in technology (sec 16.5.3)

ACTIVITY 16.1
Discuss the advantages of using store brands over manufacturer's brands for a retailer such as Woolworths.

FEEDBACK

Y should have considered, among other things, the following ways: ou . Enhancing customer care and service for example, using the Internet to make reservations in hotels . Identifying the best customers customers' information is easily accessible on computer, so it could be used by marketers to determine the best people with whom to do business . Establishing the best product/service . Enhancing capabilities eg providing computing and data warehousing . Managing cost value of relationship . Performing a control function eg helping in tactical and strategic control . Customising products eg helping the customer to make an input in the design of the product . Customising communication and interaction the Internet makes interaction between the marketers and the customers easy

16.5 RELATIONSHIP LO ALTY Y

STUDY
Study sec 16.6 in the prescribed book.

In this section you will be introduced to the following core aspects of customer relationship management:

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Study unit 16: Building relationships with customers

. Customer loyalty means that customers are committed to a specific organisation. . Customer retention is the result of satisfied customers. . The lifetime value of customers refers to the value of customers over their purchasing lifetimes.

Let us now look at some of the specific limitations on implementing relationship marketing.

16.6 LIMITATIONOF IMPLEMENTING CRM


STUDY
Study sec 16.7 in the prescribed book.

Some companies may find it difficult to implement the principles of relationship marketing for various reasons, namely: . . . . little value to be created insufficient lifetime value large investments in product design and development no capability for relationship marketing

16.7 THE INDIVIDUAL CUSTOMER APPROACH


STUDY
Study sec 16.8 in the prescribed book.

As we have seen, traditional marketing advocates that the marketer focus on a specific segment or a few segments of the market. According to the philosophy of relationship marketing, the focus has changed to recognising the importance of establishing relationships with individual customers. Three important changes have occurred that render segment-based marketing not only inappropriate, but also potentially damaging for a business: . Customers have become more sophisticated and knowledgeable. . Technology has made dramatic advances. . Competing suppliers and products are cluttering up the market.

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16.8 DEVELOPING CRM STRATEGIES

STUDY
Study sec 16.9 in the prescribed book.

After analysing the customers' lifetime value (LTV) or future profitability, and the projected duration of their relationship, the organisation can place the customers into one of four categories (see fig 16.2 in the prescribed book): . . . . Butterflies Strangers T friends rue Barnacles

We will now look at the relationship with all the stakeholders.

16.9 RELATIONSHIP WITH ALLTHE STAKEHOLDERS

STUDY
Study sec 16.10 in the prescribed book.

The organisation needs to build relationships with not only the customers, but with all the stakeholders.The stakeholders include: . . . . . . employees suppliers intermediaries co-venture partners and strategic alliances investors the community

Building relationships with the employees is probably the most important factor in the CRM process (study sections 16.10.1 ^ 16.10.4).

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Study unit 16: Building relationships with customers

ASSESSMENT
(1) Explain the nature of CRM and how it evolved from the marketing concept. (2) Compare the traditional marketing approach and the relationship marketing approach. (3) Explain and illustrate the prerequisites for implementing CRM. (4) Explain the limitations on implementing CRM. (5) Explain how relationships with the employees can be enhanced and maintained.

SUMMARY
In this study unit we discussed the traditional marketing approach, relationship marketing, the prerequisites for implementing CRM, technology as the facilitator of CRM, relationship loyalty, limitations on implementing CRM, the individual customer approach, developing CRM strategies and building relationships with all stakeholders.

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study unit 17

THE VALUE OF E-COMMERCE IN CUSTOMER BEHAVIOUR


CONTENTS
Key concepts Getting an overview 17 Introduction to the Internet .1 17 The Internet and customer behaviour .2 17 Online customer behaviour .3 Assessment Summary

KEYCONCEPTS
the Internet e-commerce the World Wide Web online customer behaviour

GETTING ANOVERVIEW
For the marketer, the most useful feature of the Internet is that it brings him or her in touch with Internet users. Marketers can utilise the Internet to access new markets and segments nationally. The Internet also affords companies the opportunity to reach their customers and personalise their market offering. However, one should always bear in mind that customer behaviour online differs from customer behaviour in the traditional marketplace. In this study unit we will define and explain the Internet and the World Wide Web. We will consider the advantages the Web offers in facilitating decision making and conclude the section with a discussion on the various features that make online customer behaviour different.

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Study unit 17: The value of e-commerce in customer behaviour

17.1 INTRODUCTION TOTHE INTERNET

READ
Read secs 17 and 17 in the prescribed book. .1 .2

In terms of customer behaviour, technology is the dimension of market context that consists of the applications of new technology to the development, distribution and consumption of products and services that increase the quality of life of all customers. A significant development in technology is the Internet which has had a significant impact on market behaviours and customer expectations. The Internet is most commonly defined as a world-wide interconnected network of computer networks. It makes possible the transfer of messages and transactions between connected computers worldwide. The Internet is the physical network that links computers across the globe. It is a vast and global web of computers with no central management or ownership. As mentioned before, the World Wide Web (or Web) is a way of looking at and organising the information on the Internet. The Web is made up of pages that are linked to one another using hyperlinks. Several web pages that are linked together (and have a common subject area) are referred to as a web site.The first page of a web site is called the home page. The Internet and World Wide Web can be useful instruments for companies to reach their target markets. These tools can also be applied to help customers in the decision-making process. The advantages to companies applying the Web to facilitate customers' decision making are discussed in detail in section 17 of your prescribed book. .3.1 Now that we have considered what the Internet and World Wide Web are, let us examine the role they play in customer behaviour.

17.2 THE INTERNETAND CUSTOMER BEHAVIOUR

STUDY
Study secs 17 .4.1,17 and 17 in your prescribed .3,17 .4.2 .4.3 book.

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The Internet can help organisations to build and maintain relationships with customers because it is able to target markets more effectively, increase the depth, breadth and nature of relationships with customers and lower costs. By utilising the Internet, organisations can build relationships with customers. Companies should, however, familiarise themselves with the nature and functioning of the Internet and deal with e-commerce paradigm shifts. Some of the paradigm shifts that companies need to deal with are the following (see sec 17 in the textbook): .4.2 . . . . . . . disintermediation and reintermediation personalisation and customisation shopping on demand customers as co-producers blurring between consumer and business markets power shift to customers automation of consumption

As mentioned above, there are certain advantages attached to using the Internet to facilitate customers' decision-making process. Figure 17 in the .4 prescribed book illustrates how the Internet facilitates customer decision making while section 17 discusses the process in detail. .4.3 Since the online world differs from the physical world, we need to focus more on online customer behaviour.This is our next topic of discussion.

17.3 ONLINE CUSTOMER BEHAVIOUR

STUDY
Study sec 17 in the prescribed book. .5

It has been said that online customer behaviour is different from customer behaviour in the traditional marketplace. A number of unique features affect online customer behaviour.These include the following: . . . . . . online shopping, isolation and integration abbreviated attention span instant gratification monitors shopping agents information availability

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Study unit 17: The value of e-commerce in customer behaviour

ASSESSMENT
(1) Explain the concepts ``Internet'' and ``World Wide Web''. (2) Discuss the advantages of using the Web to facilitate marketing decision making. (3) Discuss the paradigm shifts that companies need to deal with in order to use the Internet. (4) Discuss the factors affecting online customer behaviour that marketers should keep in mind.

SUMMARY
In this study unit we focused on how the Internet facilitates customer decision making. We looked at a number of key concepts, and discussed the advantages of using the Internet to facilitate decision making. We also examined paradigm shifts that companies need to deal with in order to use the Internet, and concluded the study unit with a brief look at the various features that affect online customer behaviour.

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