- Importance of consumer behavior - Traditional consumer decision-making process - Consumer postpurchase behavior [SLIDE 1] Consumer product and service preferences are continually changing. In order to create a successful marketing mix, it is critical to understand current preferences and trends, as well as to plan for those changes. Consumer behavior is defined as processes a consumer uses to make purchase decisions, as well as to use and dispose of purchased good or services; it also includes factors that influence purchase decisions and product use. Value is a personal assessment of the net worth one obtains from making a purchase. That net worth can include a belief in social responsibility or other actions that extend past personal use. There are three primary types of value: -Perceived value: what a consumer expects to obtain from a purchase -Utilitarian value: derived from a product or services that helps the consumer solve problems and accomplish tasks. -Hedonic value: acts as an end in itself rather than a means to an end Note that the values are not assigned exclusively to a purchase. Luxury items are an example. The fact that you purchased a vehicle addresses utilitarian value, the ability to get from point A to point B in reasonable time. The decision to get a car with heated seats and expensive add-ons provides hedonic value. [SLIDE 2] Traditional consumer decision making is a five-stage process: -Need recognition -Information search -Evaluation of alternatives -Purchase -Postpurchase behavior Let's look at each state in depth. [SLIDE 3] Needs recognition is simply the result of an imbalance between the consumer’s current state and a desired new state. It is the recognition of that imbalance that drives the purchase process. A want is a recognition of an unfulfilled need and a product or service that will satisfy the need. Notice the marketing description of these terms is different than the economic definitions of need being a necessity and a want being optional. A want can be viewed in terms of four goals: -Economizing: minimize exchange costs (buying a coffee brand on sale at store) -Sustaining: supplies the benefit over time (buys favorite brand for enjoyment of taste over time) -Treating: focused on preference or hedonic value (spending money at a coffee shop) -Rewarding: adding something of hedonic value in response to purchase (buys a fancy coffee and reads a book at a new café) A stimulus is an input that affects on or more of the five senses: sight, smell, taste, touch, and hearing. Internal stimuli are direct experiences such as hunger or thirst. External stimuli are influences from outside personal experience. Youtube videos and Google searches can provide stimuli, as can Consumer Reports, but those are not controlled by the company. Marketing’s job is to address the want gap. That can mean creating the perceived want or creating stimuli that address existing wants by messaging the value of the potential purchase. [SLIDE 4] Once a consumer recognizes a want, the next step it to figure out what products and services might address the want. There are two key ways to address this search. An internal information search is a review of memories and experience about products. You are planning a trip and a memory of a location or a hotel comes to mind. An external information search moves outside of your personal experience in order to find more information. In marketing’s perspective, there are two categories of external search. A nonmarketing-controlled information source is one that is not associated with advertising or promotion, such as personal experiences of contacts and public sources such as review sites. A marketing-controlled information source is a source provided by marketing via advertising or other promotions. The categories are not exclusive. For instance, when a consumer goes to an Amazon product page, there is information provided by the seller (marketing-controlled information) and reviews from previous purchasers (nonmarketing-controlled information). In addition, internal and external stimuli overlap. The extent of an individual’s knowledge about a product affects the amount of external sources used to help in the buying decision. For instance, somebody used to flying at the lowest fares might never check the major airlines’ sites and instead go straight to Southwest Airlines, Spirit Airlines or a web site focused on displaying the lowest fares. How confident a consumer is can define how much external search is needed. Finally, the level of interest in the product will impact how much effort a consumer puts into an information search. [SLIDE 5] The information search will result in a group of alternatives that the consumer prefers. That group is called the evoked set or consideration set. For a fun and weird example of the evoked set changing by external stimuli, take space exploration and candy. When the Pathfinder landed on Mars, it received a lot of publicity. The Mars bar is named after the founder of the Mars candy company (not the planet), but the firm saw an increase in sales of that particular brand of candy. The evoked set must be narrowed to a purchase choice. One way to do that is to pick product attributes and evaluate the set based on those. For instance, looking to purchase a home or rent an apartment would end up with a list comparing properties by attributes such as price, size of kitchen, number of bedrooms, and parking. Some consumers prefer another option to the attributes evaluation when they feel it is too piecemeal. Instead, they will put the members of the set into product categories. While some might view “organic” as an attribute when evaluating a food purchase, others have ideas, both positive and negative, about the category that is organic food. Another food category is “morning beverages”. Coffee is definitely in the category even though some people drink it throughout the day. Meanwhile, sodas are not typically put into that category. A brand extension is when a company takes a successful brand in one category and adds that brand to another category. The final major factor in evaluations is exposure to pricing. There is a difference between walking into a department store with pricing on individual sweaters and walking into a discount store with a sign stating a fixed price for all sweaters. In the first case, the primary decision factor is style while walking to the sale rack puts price above style. Both situations use price and style, but the priority is switched. [SLIDE 6] After, or sometimes before, evaluation comes the point of purchase. The decision is not just which product to buy but whether there should be a purchase. Consumers must decide: 1.-Whether to buy 2.-When to buy 3.-What to buy 4.-Where to buy 5.-How to pay While complex and expensive items are typically purchased only after detailed evaluation, for other items, customers will sometime make partially-planned purchases. The consumer has a general idea of what to buy but waits until getting to the store to make a specific choice from the evoked set. Research has shown that 75% of Americans have made impulse purchases, unplanned exchanges. Psychological ownership is when a consumer feels that ownership without even purchasing the good, service or brand. The feeling is important because that feeling of ownership often means a consumer is willing to pay more for a product in which there is already a feeling of psychological ownership. The announcements and wait lists for the initial Honda Prius and Tesla were great examples of this as people who had not yet purchased the products were willing to pay a high price to be the first people to own them. Research has found that even liking a Facebook post for a product can increase the feeling of ownership. [SLIDE 7] When buying products, consumers have expectations of certain outcomes. Postpurchase behavior is directly impacted by whether or not the product meets the expectations. Cognitive dissonance is the inner tension after recognizing an inconsistency between behavior and values or opinions. In consumer behavior, that can often be described as “buyer’s remorse”. For instance, a consumer decides to spend the extra money on an Apple product because of perceived higher quality. After purchase, the buyer might feel tension because of a concern that the less expensive product might have had enough value. Continued cognitive dissonance can lead to a dissatisfied customer. Word of mouth is a powerful external marketing factor that can help or damage a brand reputation. Marketing can have a direct role in help to minimize cognitive dissonance. Communications with the consumer after purchase is critical to achieving customer satisfaction. Contact centers are often viewed as a cost center, and consumers are typically angry when they have to use the centers. When viewed as a marketing opportunity, contact centers can help with customer retention. Recent research shows that different methods of communicating have varied success: -86% say that speaking to a person on the phone is preferred when solving a product problem -70% say chat is effective -44% say email works -27% say Facebook is a useful support mechanism However, also understand your audience. In each product or service sector, the percentages will differ from the overall numbers.