JM602 Consumer Behaviour

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JM602Consumer Behaviour

• Lecture 7 Post-purchase processes, customer
  satisfaction and consumer loyalty

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In-Store Influences that Impact on Evaluation of
Alternatives, and Purchase
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In-store Influences that Alter Brand Choices

• The nature of unplanned purchases
• Function of processing information in store, or
• Completely unplanned decision
• Reminder purchases or
• Impulse purchases

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Point of purchase displays

• Considerable impact
• POP expenditure is estimated at around 3m
• Is generally a strong increase in sales when
  displays are used (POPAI 1995)
• POP displays combined with advertising can have a
  synergetic effect

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Price reductions and promotional deals

• Are almost always accompanied by use of some POP
  materials
• In-store price reductions do appear to affect
  brand decisions
• Sharp increase in sales when price is first
  reduced, followed by return to near-normal sales
  over time or after price reduction ends
  (Ehrenberg, Hammond and Goodhardt, 1994)

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Price reductions

• Sales increases from price reductions come from
• Brand users stockpiling ahead of time (and using
  more)
• Users of competing brands switching
• Non-product category buyers because the brand
  now has superior value to the substitute
• Customers who do not normally come to the store
• Source (Melila, Jedidi and Bowman, 1996)

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Store layout

• Physical location of items in the store
• Typically, the more visible the product the more
  likely is purchase

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Store Atmosphere and Shopper Behaviour
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Stock- outs Shopper Behaviour in Response to
Frequent Stock-outs
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Impact of Stockout Situation
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Additional in-store influences

• Sales personnel
• Salespersons knowledge, skills authority
• Nature of customers buying task
• Customer-sales person relationship
• Purchase
• Businesses need to simplify the purchase process
• First and last impressions are important

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Next

• Postpurchase Processes,Customer Satisfaction
  andConsumer Loyalty

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Lecture overview

• What is the postpurchase process?
• What is postpurchase dissonance?
• Why is product use is important to marketers?
• Why is product disposal is important to
  consumers?
• What do we mean by customer satisfaction?
• What is consumer loyalty?

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Postpurchase Consumer Behaviour
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Postpurchase Dissonance

• Some purchases are followed by postpurchase
  dissonance
• Probability of postpurchase dissonance, and the
  magnitude of dissonance, is a function of the
• degree of commitment and/or whether the decision
  can be revoked
• importance of the decision to the consumer
• difficulty of choosing among the alternatives
• individuals tendency to experience anxiety

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Product Use and Non-Use

• Product use
• use innovativeness
• regional variations
• multiple vs single use
• Packaging

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Unique Packaging for Competitive Advantage
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Defective products/Product Recalls - The
Incidence of Product Recalls 19982003
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Product Disposal andMarketing Strategy

• Recycling
• product
• package
• Trade-ins
• to motivate replacement
• Second-hand markets
• e.g. textbooks, clothes
• Cash Converters

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Product-Disposal Alternatives
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Purchase Evaluation

• Evaluation of a purchase is influenced by
• expectations
• perceived performance

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Disconfirmation of expectations (Oliver 1980)
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Dissatisfaction Responses

• Possible outcomes of a negative purchase
  evaluation
• Taking no action
• Switching brands, products or stores
• Warning friends and colleagues

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Actions Taken by Consumers in Response to Product
Dissatisfaction
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Marketing Strategy andDissatisfied Consumers

• Marketers need to satisfy consumer expectations
  by
• creating reasonable expectations through
  promotional efforts
• maintaining consistent quality so that these
  reasonable expectations are fulfilled

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Repeat Purchase Behaviour

• Note the difference between
• Brand loyalty
• implies a psychological commitment to the brand
• and
• Repeat purchase behaviour
• simply involves the frequent repurchase of the
  brand

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Brand Loyalty is

• biased
• a behavioural response
• expressed over time
• where a consumer selects a brand over alternative
  brands
• a function of psychological processes

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Relationship Marketing

• is a philosophy of doing business that focuses on
  keeping and improving current customers
• does not necessarily emphasize acquiring new
  customers
• is usually cheaper (for the firm)--to keep a
  current customer costs less than to attract a new
  one
• goal to build and maintain a base of committed
  customers who are profitable for the organization
• thus, the focus is on the attraction, retention,
  and enhancement of customer relationships

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Customer Goals of Relationship Marketing
Enhancing
Retaining
Satisfying
Getting
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Relationship Marketing

• The five key elements
• 1. Developing a core product/service on which to
  build
• 2. Customising the relationship to the individual
  customer
• 3. Augmenting the core product/service with extra
  benefits
• 4. Pricing in a manner that encourages loyalty
• 5. Marketing to employees so that they perform
  well for customers

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A Loyal Customer is One Who...Ziethaml Bitner
(2005) Services Marketing (3rd ed.)

• Shows Behavioral Commitment
• buys from only one supplier, even though other
  options exist
• increasingly buys more and more from a particular
  supplier
• provides constructive feedback/suggestions
• Exhibits Psychological Commitment
• wouldnt consider terminating the
  relationship--psychological commitment
• has a positive attitude about the supplier
• says good things about the supplier

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Benefits to the Organization of Customer Loyalty

• loyal customers tend to spend more with the
  organization over time
• on average costs of relationship maintenance are
  lower than new customer costs
• employee retention is more likely with a stable
  customer base
• lifetime value of a customer can be very high

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Benefits to the Customer

• inherent benefits in getting good value
• economic, social, and continuity benefits
• contribution to sense of well-being and quality
  of life and other psychological benefits
• avoidance of change
• simplified decision making
• social support and friendships
• special deals

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Levels of Retention Strategies Ziethaml Bitner
(2005) Services Marketing (3rd ed.)
Stable Pricing
Volume and Frequency Rewards
Bundling and Cross Selling
I. Financial Bonds
Continuous Relationships
Integrated Information Systems
Excellent Quality and Value
IV. Structural Bonds
II. Social Bonds
Personal Relationships
Joint Investments
Shared Processes and Equipment
Social Bonds Among Customers
III. Customization Bonds
Customer Intimacy
Anticipation/ Innovation
Mass Customization
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Value of Customer Loyalty

• Increased purchases of the existing product
• Cross-purchases of your other products
• Price premium due to their appreciation of your
  added-value services
• Reduced operating cost because of familiarity
  with your service system
• Positive word-of-mouth which refers other
  customers to your firm

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• Loyal customers expect a good price, but they
  crave value most of all.
• (Palmer, 1996)

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Measuring Customer Satisfaction

• Qualitative measurement techniques
• Focus groups
• Monitoring surveys

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A model of consumer behaviour
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Model of consumer behaviour

• Successful marketing decisions require a thorough
  knowledge of consumer behaviour
• The consumer behaviour model is conceptual and
  organisational
• Provides logical way of organising the many
  variables which influence consumers and their
  decision making processes

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A model of consumer behaviour the consumer
decision process (Neal et al p. 19)
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Situational influence

• All those factors particular to a time and place
  of observation which do not follow from a
  knowledge of personal (intra-individual) and
  stimulus (choice-alternative) attributes and
  which have a demonstrable and systematic effect
  on current behaviour

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Types of situations

• Communication situation
• Purchase situation
• Usage situation
• Disposal situation

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What are the five dimensions of situational
influence?

• Physical surroundings
• Social surroundings
• Temporal perspectives
• Task definition
• Antecedent states

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Marketing applications

• How do situations affect consumer behaviour?
• Pervasive
• Impact on all areas of marketing decision making
• Marketers need to consider the impact of
  situation in the development of the full range of
  marketing strategies

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Problem recognition

• Consumers decision processes change with their
  level of purchase involvement
• Problem recognition is the first stage in the
  decision process
• Marketers
• Need to know what problems consumers are facing
• Need to develop the marketing mix to solve
  consumers problems
• Activate problem recognition, and
• Suppress problem recognition

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Information Search

• Marketers want to know
• How consumers seek information what sources
  they use
• Active versus passive/low level learning
• Internal versus external
• What factors affect the amount of information
  search
• Market, product, consumer characteristics
• Situational influence
• Cost of information search

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Information search marketing strategy

• Sound marketing strategy takes into account the
  nature of information search in which the target
  market engages
• Level of search (h,l,e)
• Brands position inside or outside evoked set
• Potential information strategies maintenance,
  disrupt, capture, intercept, preference and
  acceptance

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Evaluative criteria selection

• Various features a consumer looks for in response
  to a problem
• The performance level or characteristics
  consumers use to compare different brands in the
  light of their problem
• The number, type and importance of evaluative
  criteria used differ across consumers and product
  categories

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How do we measure evaluative criteria?

• Marketers need to establish
• Which evaluative criteria are used by consumers
• How consumers perceive alternative products in
  terms of each criterion
• The relative importance of each criterion

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Decision Rules Used by Consumers (cont.)
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Marketing applications of decision rules
Understanding target buyers decision rules to
achieve product positioning
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Outlet selection and choice

• Decision sequence is important
• Factors affecting retail outlet selection
• Store
• Stores image
• Amount of retail advertising
• Outlet location and size
• Consumer characteristics
• Shopping orientation
• Risk orientation
• In-store influences
• POP displays, price reductions, store layout,
  sales personnel, stock-outs

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Post purchase processes

• Postpurchase dissonance, product usage and
  disposal are potential influences on purchase
  evaluation process
• Customer satisfaction
• Relationship marketing
• Next week Influences on consumers

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Next Lecture

• Perception