Industrial Psychology 224
(Consumer Psychology)
Summaries
Chapters 1-7
1
,CHAPTER 1: CONSUMER BEHAVIOURS: CHALLENGES & CHANGES
The future in SA has never been more uncertain & challenging
Uncertainty is driven by the digital & information revolution; climate change;
demographic & social changes; economic & political instabilities; distribution of wealth
between rich & poor; medical science
These factors are all expected to have a profound effect on environments influence
on business
- Resulting in change from a production-led economy to a consumption-led economy
For SA organisations, to remain competitive & successful it is imperative to
maintain a disciplined business & marketing approach
- Understand changes in the market, changes in consumers & changes in the evolution
of both markets & consumers
- Understanding markets is derived from knowing why individuals adopt certain
behavioural patterns & why and when they purchase the varied types of products &
services they consumer, or why they engage in certain activities
WHAT IS CONSUMER BEHAVIOUR?
Consumer behaviour: The behaviour that consumers display in searching for,
purchasing, using, evaluating, and disposing of products & services that they expect
will satisfy their needs.
Consumer behaviour focuses on how individual consumers & families or households
make decisions to spend their available resources (time, money, effort) on
consumption-related items
Consumer behaviour describes 2 different consuming entities:
1. Personal consumer
Buys goods & services for own use or use of household
Products are bought for final use by end users / ultimate consumers
2. Organisational consumer
Businesses, government agencies & institutions who must buy products to run their
organisations
CONSUMER BEHAVIOUR & THE MARKETING CONCEPT
3 philosophically different business orientations that lead up to the marketing concept:
1. Production orientation
From 1850’s to late 1920’s
Focus on production capabilities to make more products
Demand > Supply
No focus on product variation – focus = production of large quantities
2. Sales orientation
From 1930’s to mid 1950’s
Focus on selling what the manufacturer was able to produce
Supply > Demand
2
, 3. Marketing orientation
1950’s to current
focus attention on customers & their preferences
- put the customer 1st!
- consider what customers want (not what is easiest/cheapest to produce)
WHAT IS THE MARKETING CONCEPT?
Key assumption: in order to be successful, a company needs to determine the needs
& wants of specific target markets and deliver the desired products/services better
that the competition
A satisfactory profit is envisioned as an appropriate reward for satisfying consumers’
needs & not as a right of simply being in business
Marketing concept can be used to effectively remind businesses to keep the
consumers’ needs in mind when contemplating new products & services, crafting
marketing communications or any other strategic issues
The societal marketing concept: consumers may on occasion respond to their
immediate needs/wants while overlooking what is in their own LT best interest, best
interest of community, country or region or planet.
- Thinking of the role of enlightened marketers; management who take it upon
themselves to remind consumers what is in their LT best interest & be a good
corporate citizen
EMBRACING THE MARKETING CONCEPT
Consumer research: the process & tools used to study consumer behaviour
Marketing research studies conducted to identify consumers’ unsatisfied needs,
unrecognised needs; to monitor consumers’ needs & preferences with respect to the
products/services that they currently market or want to develop in the future
Consumer research is NB for the marketing concept, as it provides the groundwork
for the application of consumer behaviour principles to marketing strategy
SEGMENTATION, TARGETING & POSITIONING
Market segmentation: the process of dividing a market into subsets of consumers
with common needs or characteristics
- Companies have few resources, so cannot pursue all the market segments identified
Market targeting: the selection of one or more of the segments identified to pursue
Positioning: development of a distinct image for the product/service in the mind of
the consumer.
- Communicates the benefits of the products (rather than the product’s features)
- Communicates a unique selling proposition (a distinctive benefit or point of
difference)
MARKETING MIX
The marketing mix: consists of a company’s service and/or product offerings to
consumers & the methods & tools it selects to accomplish the change
4 elements – the 4 P’s
1. product (i.e. features, design, brand, packaging, post-purchase benefits)
2. price (also includes discounts, allowances, payment methods)
3
, 3. place (the distribution through stores/outlets)
4. promotion (the advertising, sales promotion, public relations, personal selling
efforts)
CUSTOMER VALUE, SATISFACTION, TRUST & RETENTION
4 drivers of successful relationships between marketers & customers are:
1. customer value
ratio between the customer’s perceived benefits (economical, functional &
psychological) & the resources (monetary, time, effort & psychological) used to
obtain those benefits
perceived value is relative & subjective
developing a value proposition is critical & looking for the impact of emerging mega-
trends
providing value to customers continuously & more effectively than the competition
2. high levels of customer satisfaction
individual’s perception of the performance of the product/service in relation to his
or her expectations
expectations > experience dissatisfaction
experience > expectations satisfaction
3. strong sense of customer trust
establishing & maintaining trust is essential
trust is the foundation for maintaining a LT relationship with customers
- helps increase the chance of loyalty
4. building a structure that ensures customer retention
the objective of providing value is to retain highly satisfied customers
customer retention is cheaper than acquisition
loyal customers are key:
- they buy more products
- they are less price sensitive
- servicing them is cheaper
- they spread positive w-o-m
Customer profitability-focused marketing
sophisticated marketers build selective relationships with customers, based on
where they rank in terms of profitability
customer profitability-focused marketing: tracks costs & revenues of individual
customers & then categorises them into tiers based on consumption behaviour
- an effective way to use the knowledge of consumer behaviour
4
, Platinum - heavy
users; not price
sensitive; willing to
try new offerings
Gold - heavy users; price
sensitive; buy from
several providers
Iron - spending & volume do not merit
special treatement from the company
Lead - customers cost the company money; claim
mroe attention than is merited; spread negative w-
o-m
THE TRADITIONAL MARKETING CONCEPT VALUE- AND RETENTION-FOCUSED
MARKETING
make only what you can sell, instead of Use technology that enables customers to
trying to sell what you make customise what you make
do not focus on the product; focus on the Focus on the product’s perceived value, as
need that is satisfies well as the need that is satisfies
Market products &s services that match Utilise an understanding of customers’
customers’ needs better than competitors’ needs to develop offerings that customers
offerings perceive as more valuable than
competitors’ offerings
Research consumer needs & characteristics Research the levels of profit associated
with various consumer needs &
characteristics
Understand the purchase behaviour Understand consumer behaviour in relation
process & the influences on consumer to the company’ product
behaviour
Realise that each customer transaction is a Make each customer transaction part of an
discrete sale ongoing relationship with the customer
Several types of consumers:
loyalists – keep purchasing
apostles – provide positive word of mouth
defectors – neutral, merely satisfied
terrorists – negative experiences with the company & spread negative w-o-m
hostages – unhappy, have no choice but to stay with the company
mercenaries – satisfied but not loyal to a company
5
(Consumer Psychology)
Summaries
Chapters 1-7
1
,CHAPTER 1: CONSUMER BEHAVIOURS: CHALLENGES & CHANGES
The future in SA has never been more uncertain & challenging
Uncertainty is driven by the digital & information revolution; climate change;
demographic & social changes; economic & political instabilities; distribution of wealth
between rich & poor; medical science
These factors are all expected to have a profound effect on environments influence
on business
- Resulting in change from a production-led economy to a consumption-led economy
For SA organisations, to remain competitive & successful it is imperative to
maintain a disciplined business & marketing approach
- Understand changes in the market, changes in consumers & changes in the evolution
of both markets & consumers
- Understanding markets is derived from knowing why individuals adopt certain
behavioural patterns & why and when they purchase the varied types of products &
services they consumer, or why they engage in certain activities
WHAT IS CONSUMER BEHAVIOUR?
Consumer behaviour: The behaviour that consumers display in searching for,
purchasing, using, evaluating, and disposing of products & services that they expect
will satisfy their needs.
Consumer behaviour focuses on how individual consumers & families or households
make decisions to spend their available resources (time, money, effort) on
consumption-related items
Consumer behaviour describes 2 different consuming entities:
1. Personal consumer
Buys goods & services for own use or use of household
Products are bought for final use by end users / ultimate consumers
2. Organisational consumer
Businesses, government agencies & institutions who must buy products to run their
organisations
CONSUMER BEHAVIOUR & THE MARKETING CONCEPT
3 philosophically different business orientations that lead up to the marketing concept:
1. Production orientation
From 1850’s to late 1920’s
Focus on production capabilities to make more products
Demand > Supply
No focus on product variation – focus = production of large quantities
2. Sales orientation
From 1930’s to mid 1950’s
Focus on selling what the manufacturer was able to produce
Supply > Demand
2
, 3. Marketing orientation
1950’s to current
focus attention on customers & their preferences
- put the customer 1st!
- consider what customers want (not what is easiest/cheapest to produce)
WHAT IS THE MARKETING CONCEPT?
Key assumption: in order to be successful, a company needs to determine the needs
& wants of specific target markets and deliver the desired products/services better
that the competition
A satisfactory profit is envisioned as an appropriate reward for satisfying consumers’
needs & not as a right of simply being in business
Marketing concept can be used to effectively remind businesses to keep the
consumers’ needs in mind when contemplating new products & services, crafting
marketing communications or any other strategic issues
The societal marketing concept: consumers may on occasion respond to their
immediate needs/wants while overlooking what is in their own LT best interest, best
interest of community, country or region or planet.
- Thinking of the role of enlightened marketers; management who take it upon
themselves to remind consumers what is in their LT best interest & be a good
corporate citizen
EMBRACING THE MARKETING CONCEPT
Consumer research: the process & tools used to study consumer behaviour
Marketing research studies conducted to identify consumers’ unsatisfied needs,
unrecognised needs; to monitor consumers’ needs & preferences with respect to the
products/services that they currently market or want to develop in the future
Consumer research is NB for the marketing concept, as it provides the groundwork
for the application of consumer behaviour principles to marketing strategy
SEGMENTATION, TARGETING & POSITIONING
Market segmentation: the process of dividing a market into subsets of consumers
with common needs or characteristics
- Companies have few resources, so cannot pursue all the market segments identified
Market targeting: the selection of one or more of the segments identified to pursue
Positioning: development of a distinct image for the product/service in the mind of
the consumer.
- Communicates the benefits of the products (rather than the product’s features)
- Communicates a unique selling proposition (a distinctive benefit or point of
difference)
MARKETING MIX
The marketing mix: consists of a company’s service and/or product offerings to
consumers & the methods & tools it selects to accomplish the change
4 elements – the 4 P’s
1. product (i.e. features, design, brand, packaging, post-purchase benefits)
2. price (also includes discounts, allowances, payment methods)
3
, 3. place (the distribution through stores/outlets)
4. promotion (the advertising, sales promotion, public relations, personal selling
efforts)
CUSTOMER VALUE, SATISFACTION, TRUST & RETENTION
4 drivers of successful relationships between marketers & customers are:
1. customer value
ratio between the customer’s perceived benefits (economical, functional &
psychological) & the resources (monetary, time, effort & psychological) used to
obtain those benefits
perceived value is relative & subjective
developing a value proposition is critical & looking for the impact of emerging mega-
trends
providing value to customers continuously & more effectively than the competition
2. high levels of customer satisfaction
individual’s perception of the performance of the product/service in relation to his
or her expectations
expectations > experience dissatisfaction
experience > expectations satisfaction
3. strong sense of customer trust
establishing & maintaining trust is essential
trust is the foundation for maintaining a LT relationship with customers
- helps increase the chance of loyalty
4. building a structure that ensures customer retention
the objective of providing value is to retain highly satisfied customers
customer retention is cheaper than acquisition
loyal customers are key:
- they buy more products
- they are less price sensitive
- servicing them is cheaper
- they spread positive w-o-m
Customer profitability-focused marketing
sophisticated marketers build selective relationships with customers, based on
where they rank in terms of profitability
customer profitability-focused marketing: tracks costs & revenues of individual
customers & then categorises them into tiers based on consumption behaviour
- an effective way to use the knowledge of consumer behaviour
4
, Platinum - heavy
users; not price
sensitive; willing to
try new offerings
Gold - heavy users; price
sensitive; buy from
several providers
Iron - spending & volume do not merit
special treatement from the company
Lead - customers cost the company money; claim
mroe attention than is merited; spread negative w-
o-m
THE TRADITIONAL MARKETING CONCEPT VALUE- AND RETENTION-FOCUSED
MARKETING
make only what you can sell, instead of Use technology that enables customers to
trying to sell what you make customise what you make
do not focus on the product; focus on the Focus on the product’s perceived value, as
need that is satisfies well as the need that is satisfies
Market products &s services that match Utilise an understanding of customers’
customers’ needs better than competitors’ needs to develop offerings that customers
offerings perceive as more valuable than
competitors’ offerings
Research consumer needs & characteristics Research the levels of profit associated
with various consumer needs &
characteristics
Understand the purchase behaviour Understand consumer behaviour in relation
process & the influences on consumer to the company’ product
behaviour
Realise that each customer transaction is a Make each customer transaction part of an
discrete sale ongoing relationship with the customer
Several types of consumers:
loyalists – keep purchasing
apostles – provide positive word of mouth
defectors – neutral, merely satisfied
terrorists – negative experiences with the company & spread negative w-o-m
hostages – unhappy, have no choice but to stay with the company
mercenaries – satisfied but not loyal to a company
5
