MND 204-T: CUSTOMER BEHAVIOUR

1. MND 204-T:CUSTOMER BEHAVIOUR May 2008

2. GENERAL ASPECTS OF THE MODULE • This presentation is available on the web at http://my.unisa.ac.za under the official material for MND204-T. It is marked as a 000 tutorial letter. • Due to the time limitation of discussion classes, this presentation does not cover all aspects important for study purposes. Students need to study all sections marked ‘study’ in the study guide and relevant sections in the textbook. • Students can not use the 2002 edition of the textbook. Students need to use the 2006 edition for study purposes. • There was a problem with one of the assignment questions. A 102 letter has been issued to all and is available on the web for reference. • Examination format: • 10 MCQ’s x 2 marks = total 20 marks • Case study and 3 essay questions (any two need to be done) = total 50 marks • Questions are split into two parts: 1) theory 2) application of theory to the given case study.

3. CUSTOMER BEHAVIOUR Topic 1: Introduction to customer behaviour Topic 2: External factors influencing customer behaviour Topic 3: Internal factors influencing customer behaviour Topic 4: Customer decision-making Topic 5: Customer focused marketing

4. TOPIC 1 INTRODUCTION

5. INTRODUCTION Definitions: Study of individuals, groups or organisations and the processes they use to select, secure, use and dispose of products, services, experiences, or ideas to satisfy needs The mental and physical activities undertaken by household and business customers that result in decisions and action to pay for, purchase, and use products and services

6. MENTAL AND PHYSICAL ACTIVITIES • Mental activities - includes feelings about a product, previous experience with the brand • Physical activities - include visiting a store, comparing different products, buying products/services

7. Types of customers: • Households • Business markets Roles of customers: • Selectors • Users • Payers

8. IMPORTANCE OF CUSTOMER BEHAVIOUR Customer satisfaction The marketing concept Customer focus Customer retention Focus on needs Serve needs of society Long-term survival

9. MARKETING STRATEGY & CUSTOMER BEHAVIOUR Outcomes Individual Organisation Society Customer decision Marketing strategy Market segmentation Market analysis Organisation Competitors Environment Customers

10. The definition of value Market value: Universal value Market value Personal value (group specific)

11. How to measure value? • Determine expected value [Benchmarking] • Use a Customer Satisfaction Index • Determine value as perceived by customers • Prepare strategy • Convince staff of Customer Value Management • Devise an action plan • Measure how well value was delivered • Use a Balanced scorecard • Determine market share, customer acquisition, retention, and customer satisfaction and customer profitibility • Investigate and adapt • Investigate deviations and adapt the strategy

12. MARKET SEGMENTATION • Bases of market segmentation: • Geographic • Demographic • Psychographic • Behaviouristic • Needs/benefit

13. OVERALL MODEL OF CUSTOMER BEHAVIOUR External influences Culture Subculture Reference group Social class Family Marketing activities Market characteristics Climate Economy Government Technology Decision-making Individual Organisational Family Customer Internal influences Perception Learning Motivation Lifestyle Attitudes Personality Self-concept Personal characteristics Race Gender Age

14. TOPIC 2 EXTERNAL FACTORS INFLUENCING CUSTOMER BEHAVIOUR

15. CULTURE AND SUBCULTURE The meaning of Culture “…the sum total of learned beliefs, values, and customs that serve to direct the consumer behaviour of members of a particular society.” Subculture “… a distinct cultural group that exists as an identifiable segment within a larger, more complex society” Subcultures include nationalities, religions, racial groups, and geographic regions

16. Culture is learnt through: • Formal Learning • adults and older siblings teach a young family member "how to behave.“. • Informal learning • a child learns primarily by imitating the behaviour of selected others. • Technical learning • teachers instruct the child in an educational environment as to what, how, and why it should be done.

17. Language • Symbols • Ritual

18. Social institutions • Family--the primary agent for enculturation teaches consumer-related values and skills. • Educational institutions--charged with imparting basic learning skills, history, patriotism, citizenship, and technical training. • Houses of worship--provide religious consciousness, spiritual guidance, and moral training. • Mass media--disseminates information about products, ideas, and causes.

19. The dynamic nature of culture • Enculturation – learning about your own culture • Acculturation – learning a new/foreign culture

20. Measurement of culture • Content analysis • Consumer fieldwork • Social value measurement

21. Marketing implications of cultures Cultural relevance. • Understanding a sub-culture’s values, customs, and aspirationsand presenting products andpromotions in light of theseunique characteristics. • Avoiding symbols, icons, andheroes that are meaninglessto a sub-culture.

22. REFERENCE GROUPS Any person or group that serves as a point of comparison/reference for an individual customer in forming certain values, attitudes and behaviour patterns

23. Types of Reference Groups • Formal and informal • Primary and secondary • Membership and non-membership • Aspirational reference group • Dissociative reference group

24. The reasons to use reference groups • Information • Reward and punishment • Identification influence

25. TOPIC 3 INTERNAL FACTORS INFLUENCING CUSTOMER BEHAVIOUR

26. PERSONAL CHARACTERISTICS • Race • Gender • Age Pay special attention to the changing roles of women!

27. CUSTOMER PERCEPTION AND LEARNING The Nature of Perception • Perception is the way buyers interpret the world surrounding them • Perception is selective • Perception is subjective • Perception is based on an individual's frame of mind

28. Perceptual process • Exposure to stimulus - Only small number of stimuli noticed • Paying attention to it - Stimuli often not processed objectively • Interpreting its meaning to respond - Meaning of stimulus in terms of needs and experiences • Memory/recall

29. LEARNING • Learning is a process by which individuals acquire buying and consumption knowledge and experience which they apply to future-related behaviour Elements of learning • Stimulus • Products, size, quality stimulate consumer • Must be motivated to seek object • The stronger motivation, the quicker one learns

30. LEARNING…cont • Response Is any action as result of stimulus • Cues provide direction • Marketer should provide consistent cues • Reinforcement • Satisfaction from successful behaviour • Causes person to repeat behaviour • Factors in reinforcement • Repetition • Participation

31. Theories of Learning • Classical conditioning- association between two stimuli because of constantly seen as pair – reward connects the ideas. (Reminder advertising) • Instrumental conditioning – learn to perform behaviour that produces positive outcomes, avoid those that produce negative ones. • Shaping • Frequency marketing • Cognitive theory – behaviour results from thinking and problem solving • Iconic rote learning • Vicarious learning or modelling • Reasoning

32. MOTIVATION • Motivation links needs and objectives • Needs – refer to something body needs • Motivation – driving force that impels us to action • Need arousal • There are different types of arousal: • Physiological • Emotional • Cognitive • Environmental

33. MOTIVATION – cont Maslow’s hierarchy of needs

34. CUSTOMER ATTITUDES • Attitude is a learned predisposition to behave in a consistently favourable or unfavourable way toward market-related objects • It is the way we think feel and act toward stimuli • Important facets of attitude: • Attitudes are learned • Attitudes tend to be consistent • Functions of attitudes (Very NB) • Utilitarian • Ego-defensive • Value-expressive • Knowledge

35. Sources of influence on attitude formation • Direct experience • Influence of family and friends • Exposure to mass media

36. Components of Attitudes • Cognitive component Consists of customer’s beliefs about object • Also customer’s knowledge about object • There are two types of beliefs: • - Informational beliefs – associated with product attributes • - Evaluative beliefs – associated with product benefits • Affective component Involves our feelings and emotions toward object May also be result of several evaluations of performance Products are evaluated in context of specific situation

37. Components of Attitudes…cont. • Behavioural component This component represents outcome of cognitive and affective components Does customer buy or not? • Component consistency Three components tend to be consistent Change in one components affects others

38. Functions of Attitudes • Utilitarian • Ego-defensive • Value-expressive • Knowledge

39. Changing Customer Attitudes • Changing the affective component • Classical conditioning • Positive effect • Mere exposure • Changing the behavioural component □ Use promotions to reward trial □ Avoid stock-outs □ Build behavioural brand loyalty, attitudinal brand loyalty • Changing the cognitive component • Changing beliefs • Shifting performance • Adding beliefs • Changing the ideal

40. PERSONALITY AND SELF CONCEPT Characteristics of Personality Those inner psychological characteristics that both determine and reflect how a person responds to their environment • Personality reflects individual differences • Personality is consistent and enduring • Personality is conceived pf as a whole actualising itself in an environment • Personality can change

41. Personality is important to Marketers • Customers tend to purchase products that reflect their personality • Customers prefer advertisements that appeal to their personality

42. TYPES OF SELF IMAGE Actual self - How we actually perceive ourselves Ideal self - How we would like to see ourselves Social self - This is how we think others perceive us Expected self - Somewhere between actual self and ideal self Situational self - Our self image in a specific situation Extended self - Our self concept that includes the effect of personal possessions Possible selves - This is what we would like to become

43. TOPIC 4 CUSTOMER DECISION MAKING

44. CUSTOMER DECISION-MAKING Stages in the individual decision-making process (Very NB) Problem recognition Search for information Evaluation of alternatives Buying Post-buying evaluation

45. FAMILY DECISION-MAKING • Influencer • Gatekeeper • Deciders • Buyers • Preparers • Users • Maintainers • Disposers

46. THE FAMILY LIFE-CYCLE Stage Bachelorhood Honeymooners Parenthood Post-parenthood Dissolution

47. Modified to the family life-cycle • At-home singles • Starting-out singles • Mature singles • Young couples • New parents • Mature parents • Single parents • Golden nests • Left alones

48. ORGANISATIONAL BUYING BEHAVIOUR Types of buying decisions • New task buying • Buying something that was never bought before • Straight rebuy • Buying more of the same products bought before • Modified rebuy • Product specifications, prices, terms or suppliers are modified

49. TOPIC 5 CUSTOMER-FOCUSSED MARKETING

50. CONSUMER LOYALTY What is a brand? • Branding distinguishes one product from similar ones so that they can be marketed separately. • A brand is a name, symbol, or set of characteristics that enables customers to identify the goods and services of one seller from that of competitors.