Chapter 1

Introduction

Diversity among cultures

Diversity

Diversity between marketers

Diversity between advertisers

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Despite the diversity, explosion of goods and services, and freedom of choice, how do individual marketers actually reach us with highly specific marketing messages?

Questions
How do they know which people to target, where and how to locate them and what messages would be most effective?
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Methodology used consumer behavior

to

study

Consumer Research

By recognizing the high degree of diversity in us, consumer researchers seek to identify the many similarities or constants This constitutes a MARKET SEGMENT
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Market Segmentation

The process of dividing a potential market into distinct subsets of consumers and selecting one or more segments as a target market to be reached with a distinct marketing mix.

Personal Consumer

The individual who buys goods and services for his or her own use, for household use, for the use of a family member, or for a friend. (Also referred to as the Ultimate Consumer or End User.)
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Organizational Consumer

A business, government agency, or other institution (profit or nonprofit) that buys the goods, services, and/or equipment necessary for the organization to function.

Consumer Behavior as an Academic Discipline and an Applied Science

Factors that contributed to the growing interest in consumer behavior: accelerated rate of new product development consumer movement public policy concerns environmental concerns the opening of national markets throughout the world
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Consumer Behavior

The behavior that consumers display in searching for, purchasing, using, evaluating, and disposing of products, services, and ideas.

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The Marketing Concept

To be successful, a company must determine the needs and wants of specific target markets and deliver the desired satisfactions better than the competition.

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Marketing Concept

A consumer - oriented philosophy that suggests that satisfaction of consumer needs provides the focus for product development and marketing strategy to enable the firm to meet its own organizational goals.
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The Scope of Consumer Behavior

How do individuals make decisions to spend their resources (time, money, effort)? Includes: what they buy, why they buy it, when they buy it, where they buy it, how often they buy it, and how often they use it. How do individuals dispose of their once-new purchases? Includes: do they store it, throw it or give it away, sell it, rent it, or lend it out? An important question as marketers need to match their production to the frequency with which consumers buy replacements
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Consumer Behaviors Interdisciplinary Roots

Consumer Behavior borrows from psychology, sociology, social psychology, anthropology, economics. All factors combine to form a comprehensive model that reflects both the cognitive and emotional aspects of consumer decision making.

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Various Disciplines having influence on Consumer Behavior

Economics : Demand / Supply / Income / Purchasing Power Psychology : eeds & Motivation / Personality / Perception / Learning / Attitudes Sociology : Society / Social Class / Power / Esteem / Status Social Psychology : Group Behavior / Conformity to Group orms / Group Influences / Role Leader Cultural Anthropology : Attitudes towards Wealth / Joint Family System
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A Simplified Model of Consumer Decision Making

The decision-making process can be viewed as three interlocking stages:
The input stage:
marketing efforts sociological influences

The process stage:

psychological factors

The output stage:

purchase behavior postpurchase evaluation
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External Influence

Input

Firms Marketing Efforts 1. Product 2. Promotion 3. Price 4. Channels of distribution

Sociocultural Environment 1. Family 2. Informal sources 3. Other noncommercial sources 4. Social class 5. Subculture and culture

eed Recognition Process Prepurchase Search Evaluation of Alternatives

Psychological Field 1. Motivation 2. Perception 3. Learning 4. Personality 5. Attitudes Experience

Output

Purchase 1. Trial 2. Repeat purchase Postpurchase Evaluation

Figure 1-1 A Simple Model of Consumer Decision Making

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Ethics in Marketing
Unethical practices occur at every level of the marketing mix:
in the design of the products, in packaging, in pricing, in advertising, and in distribution

There are two different types of theories:

no universal accepted definition for ETHICS teleological theories and deontological theories
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Table Unethical Marketing Behavior

TYPES OF U ETHICAL MARKETI G BEHAVIOR EXAMPLES PRODUCT Safety Shoddy goods Inadequate warranties Environmental pollution Mislabeled products Development Manufacturing Brand knock-offs PRICE Excessive markups Price differentiation Price discrimination PACKAGI G Deceptive quantities Manufacture of flammable stuffed animals Products that cannot withstand ordinary wear and tear Warranties with insufficient time or parts coverage Dumping hazardous wastes Flavored sugar water sold as apple juice for babies Bribery of FDA officials to secure agency approval of generic pharmaceuticals Unauthorized substitutions in generic drugs after FDA approval Counterfeit branded goods sold as genuine brands High prices used by retailers to connote quality Yield-management pricing of airline tickets, resulting in day- to-day differential pricing of adjacent seats Favored pricing to preferred racial or ethnic groups Some marketers use packaging-to-price tactics that mask a decrease in product quantity while maintaining the same price and traditional product size 19

Table (contd.)
PROMOTIO Exaggerated claims Tasteless advertising Inappropriate targeting Deceptive advertising Persuasive role models for inappropriate products Nave audiences Razor blade manufacture advertises that its razors offered the closest shave known to man Sexual innuendoes and gender disparagement Inner-city billboards for luxury products Ads for cereal claiming it prevents heart disease Celebrity spokespersons in beer, liquor, or cigarette ads targeted to youths Billboards for cigarettes and alcohol in poor urban neighborhoods, where many people are dying from related causes Ads on childrens TV for nutritionally unsound products Mandatory viewing of TV commercials by students in schools subscribing to closed channel newscasts Offers of fabulous prizes in return for credit-card purchases of touted goods Phony markdowns based on kited retail list prices Luring consumers with ads for low-priced merchandise and switching them to higher-priced models Deceptive, misleading product size and performance claims
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Captive audiences Telemarketing DISTRIBUTIO Fraudulent sales Bait-and-switch tactics Direct marketing

Table Unethical Consumer Practices

Shoplifting Switching price tags Returning clothing that has been worn Abusing products and returning them as damaged goods Redeeming coupons without the requisite purchase Redeeming coupons that have expired Returning products bought at sale and demanding the full-price refund Sealing belts from store clothing Cutting buttons off store merchandise Returning partially used products for full store credit Abusing warranty or unconditional guarantee privileges Damaging merchandise in a store and then demanding a sales discount Duplicating copyrighted materials without permission
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An ethical philosophy which considers the moral worth of a behavior as determined by its consequences. Teleology Ethical decision is one that is based on what is best for everyone involved

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A teleological theory summarized best by the idea of the greatest good for the greatest number. Utilitarianism
If more people are benefited than harmed it is ethical

e.g. Narmada Dam case

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Deontology

An ethical philosophy that places greater weight on personal and social values than on economic values e.g. opening a bar within a college campus is unethical
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Conclusion

For the marketing process to work beneficially for all of society, marketers and consumers alike must understand and practice ethical behavior

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Ethics and Social Responsibility

Corporate Codes of Ethics Trade Associations Codes of Ethics Mission-Based Social Goals

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Example of a Company Policy Statement Stressing Social Responsibility

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Example of BOSCH Highlighting its Social Responsibility

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The Societal Marketing Concept

All companies prosper when society prospers. Companies as well as individuals, would be better off it social responsibility was an integral component of every marketing decision. Requires all marketers adhere to principles of social responsibility in marketing of their goods and services.
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Societal Marketing Concept

A revision of the traditional marketing concept that suggests that marketers adhere to principles of social responsibility in the marketing of their goods and services; that is, they must endeavor to satisfy the needs and wants of their target markets in ways that preserve and enhance the well-being of consumers and society as a whole.
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Consumer Market: All the individuals and households that buy goods and services for personal consumption

Consumer Behavior: Definitions

All psychological, social, and physical behavior of all potential consumers as they become aware of, evaluate, purchase, consume and tell others about products and services
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