Customer Behaviour

A Managerial Perspective
First Canadian Edition

Jagdish N. Sheth
Emory University

Banwari Mittal
Concordia University

Northern Kentucky University

Michel Laroche

2008 by Nelson, a division of Thomson Canada Limited

PART 2: FOUNDATIONS OF CUSTOMER BEHAVIOUR

CHAPTER 4
The Customer as a Perceiver and Learner

2008 by Nelson, a division of Thomson Canada Limited

The Internal Influences on Customer Behaviour

Perception Learning

2008 by Nelson, a division of Thomson Canada Limited

Perception and Learning

Stimulus Characteristics Learning Cognitive learning Classical conditioning Instrumental conditioning Modelling Perception

Buyer

User

Sensation Organization Interpretation

Context Characteristics

Payer

Customer Characteristics

2008 by Nelson, a division of Thomson Canada Limited

The Customer as a Perceiver

The customers perception of a product or a brand is what matters Perception is the process by which an individual selects, organizes, and interprets the information he or she receives from the environment

2008 by Nelson, a division of Thomson Canada Limited

The Process of Perception

Sensation Organization Interpretation

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Factors that Shape Perception

Stimulus characteristics
The nature of information from the environment

Context characteristics
The setting in which the information is received

Customer characteristics
Personal knowledge and experiences
2008 by Nelson, a division of Thomson Canada Limited

Stimulus Characteristics

Sensory
Stimulates any of the five senses

Information content
Moves the perceptual process beyond sensation or stimulus selection towards organization and interpretation

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Context Characteristics

In perceiving a stimulus with a given set of characteristics, customers will also be influenced by the context of the stimulus
Example: blind-taste test studies

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Customer Characteristics
Perceptions are influenced by what customers already know and feel about the stimuli Such prior knowledge and feelings become expectations Expectations influence perceptions in that we often end up seeing what we expect to see

Since customer expectations colour the perception of reality, users, payers, and buyers are also likely to see a product differently
2008 by Nelson, a division of Thomson Canada Limited

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Biases in the Perceptual Process

Customers become selective, thus biasing their perceptions of incoming information through three processes:
Selective exposure Selective attention Selective interpretation

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Perceptual Threshold
The minimum level or magnitude at which a stimulus begins to be sensed The just noticeable difference (j.n.d.).

The magnitude of change necessary for the change to be noticed

Webers law
The magnitude of change needed for it to be noticed depends on the base quantity
2008 by Nelson, a division of Thomson Canada Limited

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Managerial Uses of the Perceptual Process

Three special areas of managerial concern where customer perceptual processes are complex and highly consequential are:
The psychophysics of customer price perceptions Country-of-origin effects Managing the corporate image
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Psychophysics of Price Perceptions

The psychophysics of price refers to how customers psychologically perceive prices

Reference price
The price that customers expect to pay

Assimilation and contrast

This principle states that customers have a latitude of acceptance and rejection

Price as a quality cue

A basis for making inferences about the quality of the product
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Country-of-Origin Effects
Country-of-origin effects refer to the bias in customer perceptions of products due to the country in which these products are made This perception of country-of-origin can vary across cultures and across processing conditions

2008 by Nelson, a division of Thomson Canada Limited

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Perceived Corporate Image

Corporate image refers to the public perception of a corporation as a whole Customer perceptions of corporate image affect everything a firm does Companies are known to be:

Producers of high or low-quality products or healthy products Users of high-pressure tactics or soft-selling approaches Socially conscious or utterly selfish merchants
2008 by Nelson, a division of Thomson Canada Limited

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The Customer as a Learner

Learning is a change in the content of long-term memory Human learning is directed at acquiring a potential for future adaptive behaviour

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Customer Navigation Behaviour

Flow is a cognitive state occurring during network navigation

Experiential activity
When the customer is surfing the net without a purposive goal, flow produces latent learning

Goal-directed activity
When the customer surfs the net to complete a particular task, flow leads to more informed decisions
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Mechanisms of Learning
Cognitive learning Classical conditioning Instrumental conditioning Modelling

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Cognitive Learning

Acquiring new information from written or oral communication

Rote memorization
Information is rehearsed until it gets firmly lodged in long-term memory

Problem solving
Actively processing information

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Classical Conditioning

The process in which a person learns an association between two stimuli due to their constant appearance as a pair (i.e., Pavlovs dog)
Unconditioned stimulus (UCS)
A stimulus toward which a customer already has a preexisting specific response, so the response to it does not have to be conditioned

Conditioned stimulus (CS)

A stimulus to which the customer either does not have a response, or has a pre-existing response that needs modification, so a new response needs to be conditioned
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Instrumental Conditioning

We learn to respond in certain ways because a response is instrumental to obtaining a reward

Behaviourism theory (B.F. Skinner)

Marketers use this learning mechanism most effectively by making the product its own intrinsic reward
Coupons Sweepstakes Rebates Frequent flier programs
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Modelling
We learn by observing others Four classes of people likely to be imitated by others:

Persons superior in age-grade hierarchy Persons superior in social status Persons superior in intelligence ranking system Superior technicians in any field
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The Psychology of Simplification and Complication

PSYCHOLOGY OF SIMPLIFICATION Problem solving Habitual purchasing Desire to limit decision problem

PSYCHOLOGY OF COMPLICATION Boredom Maturation Forced irrelevance of current alternatives

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Customer Acceptance of Change: The Ultimate Learning Experience

Innovation Adoption

Customer response to new products

Customers adopt an extensive process of deliberation, sometimes actively resisting the new product Customers do not rush to purchase these products, no matter how promising they look

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Innovation
A product is an innovation if it is new in some sense Newness has two dimensions:

Uniqueness: How different it is from existing products

what matters more than the absolute newness is whether the customer perceives it as unique

Age: How long it has existed in the marketplace

what matters more than the products chronological age is when the customer was first exposed to it
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2008 by Nelson, a division of Thomson Canada Limited

Categories of Adopters

Some customers are quick to adopt Some customers are very slow to adopt

2 % Innovators

13 % 34 % 34 % Early adopters Early majority Late majority

16 % Laggards

Time of Adoption of Innovations

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Innovators and Opinion Leaders

Innovators

Opinion Leaders

Risk takers Variety seekers Upper socioeconomic status Product interest Less well integrated with other members of the society More individualistic and independent in their thinking

High product involvement Recognized as leaders Socially well integrated More exposed to a variety of media sources, especially news and information media programs Leaders and formal office holders in social, political and community organizations

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Illustrative Measures of Opinion Leadership

Q. Compared to your friends, are you more likely to be asked, less likely to be asked, or about as likely to be asked about ____? Q. During the past six months, how many people have you told about ___? a) Told no one ___. b) Told a number of them. Q. In your discussions with your friends and neighbours about ___, are you more likely to a) give information/receive information? b) be used as a source of advice/not used as a source of advice? Q. My friends and neighbours often ask my advice about ___ (agree/disagree). Q. I influence the types of ___ my friends by (never/sometimes/often). Q. I look to my friends for advice on ___.

2008 by Nelson, a division of Thomson Canada Limited

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Illustrative Measures of Innovativeness

INNOVATIVENESS (YES OR NO?) On a five point agree/disagree scale I like to take a chance I like to try new and different things. When it comes to taking chances, I would rather be safe than sorry. I like to wait until something has been proven before I try it. If people quit wasting their time experimenting, we would get more accomplished. When I see a new brand on the shelf, I usually pass right by. In general, I am the first (last) in my circle of friends to buy a new ___ when it appears. I like to buy new ___ before others do.

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Innovators Among Business Customers

Lead Users
Lead users use the products of today in ways that predict how those products should be modified to meet the needs of tomorrow Lead users use existing products to their maximum capacity with some unmet needs Marketers can study these users and their needs, and implement innovations in those products
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Adoption Process

AIDA
Awareness Interest Desire Action

The customers active mental processing

Exposure Information gathering Evaluation Trial adoption Acceptance or rejection
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Desirable Characteristics of Innovations

Relative Advantage Perceived Risk Complexity Communicability Compatibility Trialability

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Innovation Resistance
RISK
Low
1. NO RESISTANCE INNOVATIONS

High
3. RISK RESISTANCE INNOVATIONS (Discontinuous and replacement innovations)

Weak H A B I T

(New and improved versions of established products; fads and fashions) 2. HABIT RESISTANCE INNOVATIONS

4. DUAL RESISTANCE INNOVATIONS (Social programs)

Strong

(Continuous and replacement innovations)

2008 by Nelson, a division of Thomson Canada Limited

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The Perceptual Process Among the Customer Roles

PROCESS
PERCEPTION PROCESS

USER
Usage experience biased by prior expectations based on brand name, price, or consumption situation. New and improved products must cross the JND barrier. Distance to destinations, wait in service settings, etc., are assimilated or contrasted.

PAYER
The price-value perception depends on brand-name and store contexts.

BUYER
Perceptions of alternative brands biased by price, brand name, store, etc. Store distance perceptions are often biased. Package size reductions below JND are not noticed. Store distances and customer service variations may be assimilated or contrasted.

General Process

Just noticeable difference (JND ) Assimilation and contrast

Price variations below JND are not noticed. Price discrepancies from expected levels may be assimilated (acceptable) or contrasted (not acceptable).

2008 by Nelson, a division of Thomson Canada Limited

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The Learning Process Among the Three Customer Roles

LEARNING PROCESS
Cognitive Learning

USER
User learns about the use of products by reading about them. Food preferences are acquired in early childhood. Users adopt new products and services if they find them beneficial. Users model their clothing and car choices after people they admire.

PAYER
Payer learns about usedcar prices from the NADA used-car price book. Perceived fairness of price levels is classically conditioned. Payers buy cheap at first, then experience shoddy performance and learn to invest more. Budgeting decisions mirror those of admired companies. Payers learn norms for tipping by observing others. Payers adopt financing innovations (e.g, leasing, debit cards).

BUYER
Buyers learn about new stores by word of mouth and about brand ratings from Consumer Reports. Buyers are conditioned through continued patronage of the same vendors. Buyers learn they can get better terms by changing vendors. Buyers may switch preferences to stores and vendors that are trendy.

Classical conditioning

Instrumental conditioning

Modelling

Adoption of innovation

Users adopt product and service feature innovations.

Purchasers adopt purchase procedure innovations (e.g., buying through the Internet).

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