MODULE 4

MARKETING AND

CONSUMER BEHAVIOR

Production of a good or service is obviously not the only concern of an entrepreneur. Once he has a product or service, he must have a market to sell it to and he must have ways in order to make this market aware that such a product or service is being sold by him. More so, he must understand how his consumers behave and why must he take steps in order to satisfy these people.

OBJECTIVES:

After studying this module, the student should be able to:

1.      Define marketing and explain the concept of exchange;

2.      Identify and enumerate the difference marketing and selling;

3.      Explain the different marketing concepts;

4.      Explain the management process in marketing;

5.      Define what consumer behavior is;

6.      Identify why consumer analysis is the basis for marketing management.

BROAD DIMENSION OF MARKETING

Ordinarily marketing is considered an activity or function performed by business firms. However, marketing also can be carried out by other organizations and even by individuals.  Whenever you try to persuade somebody to do something, you are performing a marketing activity.  You engage in marketing when you ask someone to donate to the Philippine Red Cross, fasten a seat belt, vote for your candidate, or treat you out to a snack or dinner.

Within this broad dimension, there is a great variety with respect to (1) marketers, (2) what they are marketing, and (3) their potential market.  The category of marketers might include, in addition to business firms, such diverse social units as a political party trying to market its candidate to the public, the director of an art museum providing new exhibits to generate greater attendance and financial support, a labor union marketing its ideas to the members and to company management, and colleges trying to shift demand from overenrolled to under enrolled courses and majors.

In addition to the range of items normally considered as goods and services, what is being marketed may be ideas, such as reducing air pollution or contributing to a charitable institution; people, such as an entertainer or a political candidate; places, such as industrial plant sites or a place to go for a vacation.

In this general context, markets encompass more than the direct consumers of products.  For example, a state university’s market is made up of legislators who provide funds, citizens living near the university who may be affected by university activities, and alumni.  A firm’s markets may include government regulatory agencies, environmentalists, and local tax assessors.

The Concept of Exchange

Broadly viewed, the essence of marketing is a transaction—an exchange.  Marketing occurs any time one social unit (person or organization) strives to exchange something of value with another social unit.  Thus marketing consist of all activities designed to generate and facilitate any exchange intended to satisfy human needs or wants.

Exchange is one of three ways in which a person can satisfy a need.  Suppose you want some clothes.  You can make them yourself.  Or you can steal them or use some form of coercion to get the clothes.  Or you can voluntarily offer something of value (perhaps your money, your services, or another good) to another person who will voluntarily exchange the clothes for what you offer. It is only the third alternative that we can exchange in the sense the marketing is occurring.

Within the context of marketing, the following conditions must exist for an exchange to occur:

·         Two or more social units – people or organizations—must be involved.  If you are totally self sufficient in some area, there is no exchange.

·         The parties must be involved voluntarily, and each must have wants to be satisfied.

·         Each party must have something of value to contribute in the exchange, and each party must believe it will benefit from the transaction.

·         The parties must be able to communicate with each other.  Assume that you want a new sweater and a clothing store has sweaters on sale.  If you and the store are not aware of each other—you are not communicating—then there will be no exchange.

Marketing is a total system of business activities designed to plan, price, promote, and distribute want-satisfying products to target markets to achieve organizational objectives.

This definition has two significant implications:

·         The entire system of business activities should be customer-oriented.  Customers’ wants must be recognized and satisfied effectively.

·         A marketing program should start with an idea about a new product (good, service, idea, person, or place) and should not end until the customers’ wants are completely satisfied, which may be some time after the sale is made.

Difference Between Marketing and Selling

Many people, including some executives, still do not understand the difference between selling and marketing.  In fact, many think the terms are synonymous.  However, as shown below, there are vast differences between the two activities.

When selling is emphasized, a company makes a product and then persuades customers to buy it.  In effect, the firm attempts to alter consumer demand to fit the firm’s potential supply of the product.  When marketing is practiced, a much different approach is taken.  The firm finds out what the customer wants and then develops a product that will satisfy that need and still yield a satisfactory profit.  In this case the company adjusts its supply to the will of consumer demand.

The Marketing Concept

As business people recognized that marketing is vitally important to the success of any organization, a new philosophy of doing business developed.  Called the marketing concept, it emphasizes customer orientation and coordination of marketing activities to achieve the organization’s performance objectives.

Nature and Rationale

The marketing concept is based on three fundamental beliefs:

·         All planning and operations should be customer-oriented.  That is, the organization and its employees should be focused on determining and satisfying customers’ needs.

·         All marketing activities in an organization should be coordinated.  In reality this beliefs means that marketing efforts (such as advertising, product planning, and pricing) should be combined in a coherent and consistent way and that one executive should have overall authority and responsibility for the complete set of marketing activities.

·         Customer-oriented, coordinated marketing is essential to achieve the organization’s performance objectives.

The marketing concept is equally applicable to businesses and nonprofit organizations.  Of course, objectives may be fundamentally different defending on whether the organization is in the business or nonprofit sector.  A business firm’s objectives, unlike those of a nonprofit organization, ordinarily revolve around profits.

Customer orientation and coordinated marketing activities are the means used to achieve the end that is sought, namely achievement of the organization’s performance objectives. Sometimes the marketing concept is simply stated as “The Customer Is King (or Queen)!” As helpful as it is to stress customer satisfaction, however, this motto must not be allowed to replace the achievement of objectives as the fundamental rationale for the marketing concept.

The Societal Marketing Concept

Off and on for more than 20 years, the marketing concept has come under fire.  There have also been calls to make the concept more socially responsible.  Its critics charge that, although implementing it may lead to business success, it may encourage actions that in some way conflict with a firm’s responsibility to society.

From one point of view, these charges are true.  A firm may totally satisfy its customers (in line with the marketing concept), while also adversely affecting society. 

Actually the marketing concept and a company’s social responsibility can be quite compatible.  The key to compatibility lies in extending the breadth and time dimensions of the marketing concept.  With this revision we would have, in effect, a societal marketing concept.

When the concept’s breadth is extended, a company recognizes that a market includes not only the buyers of a firm’s products but also other people directly affected by the firm’s operations. 

An extended time dimension means that a firm should take a long-term view of customer satisfaction and performance objectives, rather than concentrating only on tomorrow.  For a company to prosper in the long run, it must do a good job of satisfying customers’ social and economic demands.

Thus the marketing concept and a company’s social responsibility are compatible if management strives over the long run to (1) satisfy the wants of its product-buying customers, (2) meet the societal needs of others affected by the firm’s activities, and (3) achieve the company’s performance objectives.

The Management Process in Marketing

To successfully apply the marketing concept, whether the traditional or societal version, an organization has to effectively manage its marketing activities.  It must engage in skillful marketing management.  The marketing part of the term marketing management was defined earlier, but what about the management part?  Management is the process of planning, implementing, and evaluating the efforts of a group of people working toward a common goal. 

What Is the Management Process?

The management process, as applied to marketing, consists basically of (1) planning a marketing program, (2) implementing it, and (3) evaluating its performance.  The planning stage includes setting goals and selecting strategies and tactics to reach these goals.  The implementation stage includes forming and staffing the marketing organization and directing the actual operation of the organization according to the plan.  The evaluation stage is a good example of the interrelated, continuing nature of the management process.  Evaluation is both a look back and a look ahead—link between past performance and future planning and operations.  Management looks back to analyze performance in light of organizational goals.  Findings from this analysis of the past performance are then used to look ahead in setting the goals and plans for future periods.

WHAT IS CONSUMER BEHAVIOR?

Consumer behavior is a young discipline: the first textbooks were written in the 1960s.  Its intellectual forefathers, however, are much older.  For example, Thorstein Veblen talked about conspicuous consumption in 1899.  Similarly, in the early 1900s writers began to discuss hoe psychological principles could be used by advertisers.  In the 1950s ideas from Freudian psychology were popularized by motivation researchers and used by advertisers.  It was not until the enunciation of the marketing concept in the 1950s, though, that the need to study consumer behavior was recognized.  As stated by Theodore Levitt, the marketing concept embodies “the view that an industry is a customer-satisfying process, not as a goods-producing process.  An industry begins with the customer and his needs, not with a patent, a raw material, or a selling skill.”  The general acceptance of the concept that businesses function to fulfill consumer needs and wants by thoroughly understanding their exchange partners (i.e., customers) makes the study of the consumer essential.

Consumer behavior is defined as the study of the buying units and the exchange processes involved in acquiring, consuming, and disposing of goods, services, experiences, and ideas.  Within this simple definition, a number of important concepts are introduced.  First, included in the definition is the word “exchange.”  A consumer is inevitably at one end of an exchange process in which resources are transferred between two parties.  For example, an exchange takes place between a doctor and a patient.  The physician trades medical services for money.  In addition, however, other resources, such as feelings, information, and status, may also be exchanged between parties.

When exchange occurs, the possibility exists that ethical improprieties can occur.  Both marketers and consumers can violate ethical norms.

The exchange process is a fundamental element of consumer behavior.  Exchanges occur between consumers and firms.  Exchanges also occur between firms, such as in buying situations.  Finally, exchanges occur between consumers themselves, such as when a neighbor borrows a cup of sugar or a lawn mower.

Consider again the definition of consumer behavior.  Notice that the term “buying units” is used rather than “consumer.”  Purchases may be made by either individuals or groups.  An important area of study for consumer researchers is that of organizational buying behavior.  Particularly in business-to-business marketing, the purchase decision maker may be a group of individuals in a buying center rather than a single decision maker.  Fortunately, the same basic principles apply to organizational buying behavior as to consumer behavior.  While the focus of this text is on consumer buying, specific applications to organizational buying and business-to-business marketing will be identified in the “highlights” throughout the text.

The definition of consumer behavior also reveals that the exchange process involves a series of steps, beginning with the acquisition phase, moving to consumption, and ending with the disposition of the product or service.  When investigating the acquisition phase, researchers analyze the factors that influence the product and service of consumers.

Much of the research in consumer behavior has focused on the acquisition phase.  One factor associated with the search for and selection of goods and services is product symbolism.  That is, people may acquire a product to express to others certain ideas and meanings about themselves.  For example, some men wear earrings to makes symbolic statement to others about who and what they are.

The consumption and disposition phases have received much less attention by consumer’s researchers than the acquisition phase.  When investigating the consumption phase, the researcher analyzes how consumers actually use a product or service and the experiences that the consumer obtains from such use.  The investigation of the consumption process is particularly important for service industries.  In some industries, such as restaurants, amusement parks, and rock concert promotions, the consumption experience is the reason for the purchase. 

The disposition phase refers to what the consumers do with a product once they have completed their use of it.  In addition, it addresses the level of satisfaction that consumers experience after the purchase of a good or service.  For example, one critical problem faced by physicians and patients concerns the level of satisfaction with the results of the medical procedure.  If consumers have unrealistic expectations, the anticipated outcomes are not likely to occur, and dissatisfaction will result.  From the surgeon’s perspective, such customer dissatisfaction is likely to increase the likehood that the lawsuits will be filed.  For the patient, unfulfilled expectations may result in a loss of self-esteem and possibly even more cosmetic surgery.  For example, the woman who after five face lifts had her sideburns behind her ears was still searching for a plastic surgeon to correct the problem.

The student consumer behavior will be struck by the diversity of the field.  It incorporates theories and concepts from all the behavioral sciences.  When studying the acquisition, consumption, and disposition of products, services, and ideas, one also explores the discipline of psychology, social psychology, sociology, anthropology, demography, and economics.

Why Study Consumer Behavior?

Possessing an understanding of consumers and the consumption process provides a number of benefits.  These benefits include assisting managers in their decision making, providing marketing researchers with a knowledge base from which to analyze consumers, helping legislators and regulators create laws and regulations concerning the purchase and sale of goods and services, and assisting the average consumer in making better purchase decisions.  In addition, the study of consumers can help us to understand more about the psychological, sociological, and economic factors that influence human behavior.

Consumer Analysis As a foundation of Marketing Management 

The importance of understanding the consumer is found in a definition of marketing as a “human activity directed at satisfying needs and wants through human exchange processes.”  From this definition emerge two key marketing activities.  First, marketers attempt to satisfy the needs and wants of their target market.  Second, marketing involves the study of the exchange process in which two parties transfer resources between each other.  In the exchange process, firms receive monetary and other resources from consumers.  In return, consumers receive products, services, and other resources of value.  For marketers to create a successful exchange, they must have an understanding of the factors that influence the needs and wants of consumers.

Indeed, one can argue that the principle of consumer primacy represents the central point on which marketing is based.  The concept states that the consumer should be at the center of the marketing effort.  As Peter Drucker, the well-known management scholar, stated, “Marketing is the whole business seen from the point of view of its final results, that is, from the customer’s point of view.”  Similarly, in his critique of General Motors Corporation, Ross Perot proclaimed that for the company to turn around, managers must perceive that “… the consumer is king!”

Public Policy and Consumer Behavior

A knowledge of consumer behavior can also assist in the development of public policy.  As it pertains to consumer behavior, public policy involves the development of the laws and regulations that have an impact on consumers in the marketplace.  In its legislative, regulatory, and judicial roles, the federal government often deals with issues involving consumers.  For example, proposals have periodically surfaced to limit, or even cut off entirely, commercials accompanying television programming aimed at young children.  Work done by consumer researches concerning the impact of advertising on children has figured prominently in the formulation of the regulations.

Consumer Behavior and Social Marketing

The ideas and concepts of marketing may also be applied to nontraditional business areas.  For example, various nonprofit groups, such as political parties, religious organizations, and charitable groups, all engage in consumer research; however, rather than marketing tangible products, these organizations tend to market intangible ideas.  Another example of the nontraditional use of consumer behavior concepts is found in efforts of the AMC Cancer Research Center to influence women’s actions in order to lower the high incidence of breast cancer.  One element of the strategy has been use high-profile celebrity endorsers.

The Personal Value of Consumer Behavior

A general knowledge of consumer behavior also has considerable personal value. It can help people become better consumers by informing them of the way in which they and others go about their consumption activities.  In addition, it can assist consumers in the buying process by informing them of some of the strategies used by companies to market their products.  Knowledge of the factors influencing consumption also has intrinsic value for many people.  It is simply fun to know why product rumors start, why subliminal advertising messages are unlikely to influence buying and why some product endorsers (e.g., the ex-basketball player Michael Jordan) are so much more effective than others (e.g., the basketball player Kobe Bryant).  Finally, being able to understand one’s own personal consumption motivations as well as those of others is satisfying and is part of being a well-rounded, educated person.

As overall statement, the study of consumer behavior provides three types of information: (1) an orientation, (2) facts, and (3) theories.  The study of consumer helps to orient the managers and public policy makers so they consider the impact of their actions on consumers.  The field also provides facts, such as the size of various demographic groups.  In addition, the study of consumer behavior provides theories.  “Theory” tends to be ridiculed with statements such as: “That’s only theory; it has nothing to do with what really happens.”  In fact, nothing is more practical than a theory.  Detectives develop theories for why a crime was committed.  Medical doctors develop theories for why a person get sick, and managers develop theories for why a product fails to sell.

A theory is a set of interrelated statements defining the causal relationships among a group of ideas.  Theories may be big or small, but all should have research support.  A major practical reason for studying a consumer behavior is that the field has a variety of theories that do have research support and that can be used to understand and solve managerial and public policy problems.

An Organizing Model of Consumer Behavior

To provide an overview of the broad field of consumer behavior, an organizing model is developed.  The consumer model has five primary components that form the field’s core areas of study: the buying unit, the exchange process, the marketer’s strategy, the individual influencers, and the environmental influencers.  The buying units are connected to the marketer’s strategy via an exchange relationship.  Buying units may consist of an individual, a family, or a group that makes a purchase decision.  The term “marketer” is used extremely broadly in the model; a marketer could be a firm selling a good or service, a nonprofit organization, a governmental agency, a political candidate, or another consumer who wishes to borrow or trade something.  The marketers seek to create an exchange with consumers by implementing a marketing strategy through which it attempts to reach its long-term customer and profit goals.  A marketing strategy is implemented by creating segmentation and positioning objectives.  A marketing mix, consisting of product, price, promotion, and distribution factors, is then developed to execute the overall strategy.

A major focus of the text wll involves identifying how an understanding of the exchange process, the individual influencers, and the environmental influencers can be used to develop marketing strategy.  In the development of strategy, the marketers employ environmental analysis to anticipate the likely effects of the environmental influencers.  Market research is used to obtain information on individual consumers.  Based upon the environmental analysis and market research, managers develop positioning and segmentation strategies, which are implemented through the marketing mix.  The consumer behavior connects the buying unit to both the individual influence factors and the environmental influencers.  The individual influence factors represent the psychological processes that affect individuals engaged in acquiring, consuming, and disposing of goods, services, experiences.  The environmental influencers represent those factors outside of the individual that affect individual consumers, decision-making units, and marketers.

For pedagogical purposes, the individual influencers and the environmental influencers have been divided into two distinct groups.  However, a more accurate statement is that they lie on a continuum that moves from a narrow micro to a broad macro focus.  The continuum begins at the individual level with the most basic psychological processes involving perception and learning.  As one moves along the continuum, the analysis moves to the study of personality, attitudes, persuasion, and finally consumer decision making. At this point, the emphasis changes from the study of the individual to investigations of the impact of situations and groups of people on consumer behavior.  At the broadest levels of the continuum, consumer researchers examine how people in different nations and cultures acquire, consume, and dispose of goods, services, experiences, and ideas.

Questions To Answer:

1.      Define marketing and explain the concept of exchange.

2.      Identify and enumerate the difference marketing and selling.

3.      What are the different marketing concepts? Explain each thoroughly.

4.      What is the role of the management process in marketing.

5.      Define consumer behavior.

6.      Why is consumer analysis is basis for marketing management?