CUSTOMER BEHAVIOUR

CUSTOMER BEHAVIOUR Facilitator: Neels Bothma Email: bothmch@unisa.ac.za

CUSTOMER BEHAVIOUR Topic 1: Introduction to customer behaviour Topic 2: Determinants of customer behaviour Topic 3: The customer’s mind set Topic 4: Customer decision-making Topic 5: Customer focused marketing

TOPIC 1 INTRODUCTION

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

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

TYPES AND ROLES OF CUSTOMERS Types of customers: • Households • Business markets Roles of customers: • Buyers • Users • Payers

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

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

CREATING VALUE FOR THE CUSTOMER • Three meanings of value: • Pricing value • Customer value • Strategic value

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 • Investigate and adapt • Investigate deviations and adapt the strategy

MARKET SEGMENTATION • Bases of market segmentation: • Geographic • Demographic • Psychographic • Behaviouristic • Needs/benefit • Market value

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

TOPIC 2 EXTERNAL FACTORS INFLUENCING CUSTOMER BEHAVIOUR

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

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.

TRANSMISSION OF CULTURAL ELEMENTS 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.

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.

DO YOU FIND THE FOLLOWING OFFENSIVE?

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

TYPES OF REFERENCE GROUPS • Formal and informal • Primary and secondary • Membership and non-membership • Aspirational and dissociative reference groups

AN INDIVIDUAL AS A REFERENCE GROUP

TOPIC 3 INTERNAL FACTORS INFLUENCING CUSTOMER BEHAVIOUR

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

THE CUSTOMER’S MINDSET Customer perception and learning The Nature of Perception Perception is the way buyers interpret the world surrounding them 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

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

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

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

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

SOURCES OF INFLUENCE ON ATTITUDE FORMATION • Direct experience • Influence of family and friends • Exposure to mass media

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

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

CHANGING CUSTOMER ATTITUDES • Changing the affective component • Classical conditioning • Positive effect • Mere exposure • Changing the behavioural component • Changing the cognitive component • Changing beliefs • Shifting performance • Adding beliefs • Changing the ideal

CHANGING THE AFFECTIVE COMPONENT BY MEANS OF A POSITIVE EFFECT

CHANGING CUSTOMER ATTITUDES….cont • Changing the product • Packaging • Change of services • Change of properties • Attitude of sales person • Perceptual change • New information • Promotion • Strength of the attitude • Market segmentation

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 partially created and influenced by the environment • Personality can change

PERSONALITY IS IMPORTANT TO MARKETERS • Customers tend to purchase products that reflect their personality • Customers prefer advertisements that appeal to their personality

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

TOPIC 4 CUSTOMER DECISION MAKING

CUSTOMER DECISION-MAKING Stages in the decision-making process Problem recognition Search for information Evaluation of alternatives Buying Post-buying evaluation

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

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

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

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

TOPIC 5 CUSTOMER-FOCUSSED MARKETING

CUSTOMER LOYALTY What is branding: • 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. • Customers attach value to brands based on their product/brand experience and perception of quality. • Customers use brands as a form of security, for quick decision-making, as predictive cues for product performance.

REPEAT BUYING, BRAND LOYALTY AND VARIETY SEEKING • Repeat buying involves buying the same brand often (possibly based on availability or price). • Repeat buying of a brand does not imply brand loyalty towards it. • For brand loyalty to exist, there must be psychological commitment to the brand. • Hence, repeat buying behaviour refers to customers buying the same brand over time but brand loyalty includes psychological and evaluative processes. • Brand loyalty is the opposite of variety-seeking behaviour. • Variety seeking is the cognitive commitment to purchasing different brands. • Variety seeking arises out of the desire to try new things, curiosity, novelty, creativity or the need to overcome boredom with the same choice.

BRAND PREFERENCE • Brand preference is the tendency to select a brand/product from among a set of known available brands. • When faced with a choice of brand, the customer is more positive towards one brand than to others. • Brand preference reflects the knowledge-attitude-behaviour (KAB) model of customer behaviour. • The model emphasizes that customers have knowledge (K) of several brands and holds positive attitudes (A) towards a few of them, which will result in behaviour (B), reflected in the act of purchasing the most preferred brand. • Brand preference may change as a result of marketing efforts eg. Price reductions, product changes, promotional strategies.

BRAND PREFERENCE AND BRAND SWITCHING • A change in brand preference is called brand switching. • Brand switching is a result of customers having problems or experiencing dissatisfaction with a product or service. • The aim is to get rid of the problems experienced in the previous purchase.

FORMATION OF BRAND LOYALTY • People become brand loyal in different ways eg. by trying different brands until they find one that optimally satisfies them. • Hence, becoming brand loyal is a learning process which takes place over a period of time. • Brand loyalty occurs as a result of:- • Exposure to information concerning the brand. • Favourable experience in buying and using the brand. • The extent of its use by peers and social/reference groups. • The degree of brand loyalty is influenced by numerous factors. Brand loyalty is lower when:- • More brands are available for customers to choose from. • More products are bought of greater value. • Prices are rather active amongst competing brands. • Customers use a number of brands at the same time.

BRAND LOYALTY AND VULNERABILITY • One may distinguish between brand loyal customers and vulnerable customers. • Brand loyal customers like and buy the brand. • Vulnerable customers are those who buy a brand but like other brands equally well or better and hence, are vulnerable to these other brands and may buy them. • Brand loyalty and vulnerability are therefore, based on the interrelationship between:- • the buying pattern of a particular brand. • the attitude toward the brand. • Brand loyal customers are not vulnerable because they consistently buy the same brand, hold strong beliefs about the quality of that brand, are devoted to the brand and resist competitors’ efforts to persuade them to buy other brands.

CUSTOMER BEHAVIOUR