Transcript Customer Behavior

Customer Behavior
Module Four
Market Context
Module 4
Market context
The economy and other aspects of the market context are created by humans as
members of an organized society.
The economic conditions in your own country, state, or city can affect your purchase
behavior. Government policy can create or collapse markets and their competitive
structures.
Climate
Topography
Ecology
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Economy
Government
Technology
Figure 1 Environmental Determinants of Customer Behavior
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Economy
refers to the state of national economy with respect
to levels of employment, wages, inflation, interest
rates, currency exchange rates, and aggregate
household savings and disposable income.
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The economic climate affects customer behavior by
three mechanisms:
1.
By directly expanding or shrinking the financial resources
of a household, or the buying power of these resources, the
national economy encourages or constrains customer
purchases at the individual household levels as well as for
business customers.
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2.
By influencing consumer sentiment – optimism or
pessimism about the future – it encourages or dampens
customers
spending.Financial
ResourcesCustomer
SentimentBusiness CyclesUsersBuyersPayers
3.
By driving business cycles
Financial Resources
Users Buyers
Customer Sentiment
Payers
Business Cycles
Figure 2 Mechanisms by which the economy shapes customer behavior
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Financial Resources
George Katona, a well-known economist, classified all
household expenditures as either necessary or discretionary.
The important point, however, is that in hard economic times,
consumers would cut down on what they consider to be
discretionary purchases, limiting their purchases to necessary
items.
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Customer Sentiment
The effect of national economy on household purchase
behavior occurs through customer expectations. More than the
current financial circumstances, expectations about the near
future determine what customers will or will not buy.
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Business Cycles
Is When total retail sales are rising, the economy is said to be
in boom: with declining sales, the economy is said to be in
recession Often, a nation’s business goes through a cycle of
boom and recession
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are caused by fluctuations in the economic environment (rate
of unemployment and inflation).
The economic environment influences customer purchasing
behavior. But this influence is circular: customer-purchasing
behavior in turn influences economic environment. This is
what leads to business cycles.
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How the business cycle work
when the economy is doing well and is growing, the
unemployment rate is low and total production is high,
Consumer spending is on the increase, causing high demand.
Due to rising demand as well as rising wages (which raise the
cost of production), consumer prices increases, resulting in
inflation. With inflation, interest rates go up, which makes
consumers wants to save more and reduce spending.
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Reduced spending leads to manufacture inventory build up, which in
turn leads to manufacturers cutting back on production and to worker
lay offs. Consequently, unemployment rises and consumer spending is
further reduced, leading to recession. Eventually, piled up inventories
begin to deplete, and manufacturers begin to return to pre-recession
level of production, giving the economy its recovery, and later is
boom. Thus the business cycle is completed.
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Government Policy
Interest Rates
Tax Laws
Spending Programs
Users
Fiscal
& Monetary
policy
Buyers
Payers
Constraints on choices
Mandates of choices
Consumer protection
Setting up facilitative
infrastructures
Public
Policy
Figure 3 Mechanisms by which government shapes customer behavior
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Constraining Choices
public policy restricts business customers buying behavior.
Government regulations monitor negligent consumer behavior
Negligent behavior puts a person or others at risk and imposes
heavy costs on society or otherwise deteriorates its quality of
life in the long run.
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Government controls what products may be consumed in
public places, for example, by prohibiting smoking, drinking,
and gambling in public buildings.
Business customers buying behavior is similarly restricted.
Some countries prohibit construction companies from using
certain building materials (e.g. asbestos) unless they install
certain pollution control devices.
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Protecting the Consumer
Government also can play a very intense role in
enacting and enforcing laws to protect consumers
against personal injury or fraud. In effect, all
elements of the marketing mix (product, promotion,
price, and place) are covered in various laws meant
to protect the customer.
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Facilitative Infrastructure
This final mechanism by which government policy shapes
customer behavior is the development of infrastructure.
Governments can influence customer behavior by establishing
incentives and infrastructures to encourage certain behaviors.
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Technology
Increased access to
information
Users
Buyers
Payers
Product Innovations
More Flexibility & Control
Customized products
& Services
Figure 4 Mechanisms by which technology shapes customer behavior
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Avenues of Impact
Advanced in technology affect customer behavior through
several avenues:

By altering the flow of and access to information about
marketplace alternatives

By making available newer generations of products and services

By automating processes that give customers greater flexibility
and control as well as improve productivity

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By making customized products economically feasible
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Increased Access to Information
Technology brings new mass media into being media
that offer customers information about the
marketplace.
Before the advent of newspapers, the only sources of
market information were town criers, billboards, and
word-of-mouth
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each advancement meant a significant improvement
in consumer access to information about products
and services available at the time.
the first avenue of the impact of technological
advances on customer behavior is through increasing
customer access to marketplace information.
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Product Innovations: New
Options
Is the second avenue of impact technology on
customer choices is via the availability of new
products and services based on advances in
technology.
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More Flexibility and Control
Technology
also
affects
customer behavior by
delivering freedom from the confines of space and
time.
Customers have come to expect-and will even more
so in the future - "anytime, anywhere" availability of
the products and services
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Customized Products and
Services
One of the most exiting technological developments in recent
years
are
the
manufacturing
arena,
namely
flexible
manufacturing. The marketing benefit of the technology is mass
customization-producing a product after the customer order has
received, and tailoring the product to the customer specific
needs without sacrificing the speed or cost efficiencies of
conventional mass production methods.
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Market Context and the Three
Customer Roles
For the users, the economy affects the purchase of the
discretionary products and luxuries (wants). In booming
economies, users want to increase their possession and use of
more discretionary items.
Government incentives and disincentives (including mandatory
prohibition against certain products) influence customer choice.
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