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CUSTOMER BEHAVIOR: A MANAGERIAL PERSPECTIVE PART 2: Foundations of Customer Behavior CHAPTER 4 The Customer as a Perceiver and Learner Copyright © 2002 1 All rights reserved. The Internal Influences on Customer Behavior Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 Perception Learning Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 2 Perception and Learning Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 Stimulus Characteristics Learning • • • • Cognitive learning Classical conditioning Instrumental conditioning Modeling Perception Buyer User Context Characteristics Payer Customer Characteristics Copyright © 2002 All rights reserved. • Sensation • Organization • Interpretation Copyright © 1999 by Thomas Southwestern. All rights reserved. 3 The Customer as a Perceiver Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 The customer’s perception of a product or a brand is what matters Perception is the process by which an individual selects, organizes, and interprets the information he or she receives from the environment Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 4 The Process of Perception Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 Sensation Organization Interpretation Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 5 Factors that Shape Perception Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 Stimulus characteristics The nature of information from the environment Context characteristics The setting in which the information is received Customer characteristics Personal knowledge and experiences Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 6 Stimulus Characteristics Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 Sensory Stimulates any of the five senses Information content Moves the perceptual process beyond sensation or stimulus selection towards organization and interpretation Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 7 Context Characteristics Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 In perceiving a stimulus with a given set of characteristics, customers will also be influenced by the context of the stimulus Example: blind-taste test studies Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 8 Customer Characteristics Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 Perceptions are influenced by what customers already know and feel about the stimuli Such prior knowledge and feelings become expectations Expectations influence perceptions in that we often end up seeing what we expect to see Since customer expectations color the perception of reality, users, payers, and buyers are also likely to see a product or service differently Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 9 Biases in the Perceptual Process Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 Customers become “selective,” thus biasing their perceptions of incoming information through three processes: Selective exposure Selective attention Selective interpretation Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 10 Perceptual Threshold Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 The minimum level or magnitude at which a stimulus begins to be sensed The just noticeable difference (j.n.d.). The magnitude of change necessary for the change to be noticed Weber’s law The magnitude of change needed for it to be noticed depends on the base quantity Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 11 Managerial Uses of the Perceptual Process Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 Three special areas of managerial concern where customer perceptual processes are complex and highly consequential are: The psychophysics of customer price perceptions Country-of-origin effects Managing the corporate image Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 12 Psychophysics of Price Perceptions Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 The psychophysics of price refers to how customers psychologically perceive prices Reference price Assimilation and contrast The price that consumers expect to pay This principle states that customers have a latitude of acceptance and rejection Price as a quality cue A basis for making inferences about the quality of the product or service Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 13 Country of Origin Effects Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 Country-of-origin effects refer to the bias in customer perceptions of products and services due to the country in which these products and services are made This perception of country-of-origin can vary across cultures and across processing conditions Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 14 Perceived Corporate Image Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 Corporate image refers to the public perception of a corporation as a whole Customer perceptions of corporate image affect everything a firm does Companies are known to be: Copyright © 2002 All rights reserved. Producers of high or low-quality products or healthy products Users of high-pressure tactics or soft-selling approaches Socially conscious or utterly selfish merchants Copyright © 1999 by Thomas Southwestern. All rights reserved. 15 The Customer as a Learner Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 Learning is a change in the content of long-term memory Human learning is directed at acquiring a potential for future adaptive behavior Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 16 Consumer Navigation Behavior Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 Flow - a cognitive state occurring during network navigation Experiential activity When the customer is surfing the net without a purposive goal, flow produces latent learning Goal-directed activity When the customer surfs the net to complete a particular task, flow leads to more informed decisions Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 17 Mechanisms of Learning Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 Cognitive learning Classical conditioning Modeling Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 18 Cognitive Learning Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 Acquiring new information from written or oral communication Rote memorization Information is rehearsed until it gets firmly lodged in long-term memory Problem solving Actively processing information Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 19 Classical Conditioning Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 The process in which a person learns an association between two stimuli due to their constant appearance as a pair…(i.e., Pavlov’s dog) Unconditioned stimulus (UCS) A stimulus toward which a customer already has a preexisting specific response, so the response to it does not have to be conditioned Conditioned stimulus (CS) A stimulus to which the customer either does not have a response, or has a pre-existing response that needs modification, so a new response needs to be conditioned Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 20 Instrumental Conditioning Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 We learn to respond in certain ways because a response is instrumental to obtaining a reward Behaviorism theory (B.F. Skinner) Marketers use this learning mechanism most effectively by making the product its own intrinsic reward Copyright © 2002 All rights reserved. Coupons Sweepstakes Rebates Frequent flier programs Copyright © 1999 by Thomas Southwestern. All rights reserved. 21 Modeling Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 We learn by observing others Four classes of people likely to be imitated by others: Persons superior in age-grade hierarchy Persons superior in social status Persons superior in intelligence ranking system Superior technicians in any field Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 22 The Psychology of Simplification and Complication Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 PSYCHOLOGY OF SIMPLIFICATION • Problem solving • Habitual purchasing • Desire to limit decision problem CHAPTER 4 PSYCHOLOGY OF COMPLICATION • Boredom • Maturation • Forced irrelevance of current alternatives Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 23 Customer Acceptance of Change: The Ultimate Learning Experience Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 Innovation Adoption Customer response to new products and services Customers adopt an extensive process of deliberation, sometimes actively resisting the new product Customers do not rush to purchase these products, no matter how promising they look Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 24 Innovation Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 A product is an innovation if it is new in some sense “Newness” has two dimensions: Uniqueness: How different it is from existing products what matters more than the absolute newness is whether the customer perceives it as unique Age: How long it has existed in the marketplace what matters more than the product’s chronological age is when the customer was first exposed to it Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 25 Categories of Adopters Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 Some customers are quick to adopt Some customers are very slow to adopt 2½ % Innovators 13½ % 34 % 34 % Early adopters Early majority Late majority Copyright © 2002 All rights reserved. 16 % Laggards Time of Adoption of Innovations Copyright © 1999 by Thomas Southwestern. All rights reserved. 26 Innovators and Opinion Leaders Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 Opinion Leaders Innovators Risk takers Variety seekers Upper socioeconomic status Product interest Less well integrated with other members of the society More individualistic and independent in their thinking Copyright © 2002 All rights reserved. CHAPTER 4 High product involvement Recognized as leaders Socially well integrated More exposed to a variety of media sources, especially news and information media programs Leaders and formal office holders in social, political and community organizations Copyright © 1999 by Thomas Southwestern. All rights reserved. 27 Illustrative Measures of Opinion Leadership Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 Q. Compared to your friends, are you more likely to be asked, less likely to be asked, or about as likely to be asked about ____? Q. During the past six months, how many people have you told about ___? a) Told no one ___. b) Told a number of them. Q. In your discussions with your friends and neighbors about ___, are you more likely to a) give information/receive information? b) be used as a source of advice/not used as a source of advice? Q. My friends and neighbors often ask my advice about ___ (agree/disagree). Q. I influence the types of ___ my friends by (never/sometimes/often). Q. I look to my friends for advice on ___. Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 28 Illustrative Measures of Innovativeness Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 INNOVATIVENESS (YES OR NO?) On a five point agree/disagree scale • I like to take a chance • I like to try new and different things. • When it comes to taking chances, I would rather be safe than sorry. • I like to wait until something has been proven before I try it. • If people quit wasting their time experimenting, we would get more accomplished. • When I see a new brand on the shelf, I usually pass right by. • In general, I am the first (last) in my circle of friends to buy a new ___ when it appears. • I like to buy new ___ before others do. Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 29 Innovators Among Business Customers Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 Lead Users Lead users use the products of today in ways that predict how those products should be modified to meet the needs of tomorrow Lead users use existing products to their maximum capacity with some unmet needs Marketers can study these users and their needs, and implement innovations in those products Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 30 Adoption Process Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 AIDA Awareness Interest Desire Action The customer’s active mental processing: Copyright © 2002 All rights reserved. Exposure Information gathering Evaluation Trial adoption Acceptance or rejection Copyright © 1999 by Thomas Southwestern. All rights reserved. 31 Desirable Characteristics of Innovations Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 Relative Advantage Perceived Risk Complexity Communicability Compatibility Trialability Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 32 Innovation Resistance Determinants of Customer Behavior: Personal Factors and Market Environment PART 2 CHAPTER 4 Risk Low 1. NO RESISTANCE INNOVATIONS Weak H A B I T 3. RISK RESISTANCE INNOVATIONS (New and improved versions of established products; fads and fashions) 2. HABIT RESISTANCE INNOVATIONS Strong High (Discontinuous and replacement innovations) 4. DUAL RESISTANCE INNOVATIONS (Continuous and replacement innovations) (Social programs) Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 33 The Perceptual Process Among the Customer Roles Determinants of Customer Behavior: Personal Factors and Market Environment PROCESS USER PART 2 PAYER CHAPTER 4 BUYER PERCEPTION PROCESS General Process Usage experience biased by prior expectations based on brand name, price, or consumption situation. The price-value perception depends on brand-name and store contexts. Perceptions of alternative brands biased by price, brand name, store, etc. Store distance perceptions are often biased. Just noticeable difference (JND ) “New and improved” products must cross the JND barrier. Price variations below JND are not noticed. Package size reductions below JND are not noticed. Assimilation and contrast Distance to destinations, wait in service settings, etc., are assimilated or contrasted. Price discrepancies from expected levels may be assimilated (acceptable) or contrasted (not acceptable). Store distances and customer service variations may be assimilated or contrasted. Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 34 The Learning Process Among the Customer Roles Determinants of Customer Behavior: Personal Factors and Market Environment PROCESS USER PART 2 PAYER CHAPTER 4 BUYER LEARNING PROCESS Cognitive Learning User learns about the use of products and services by reading about them. Payer learns about used-car prices from the NADA usedcar price book. Buyers learn about new stores by word of mouth and about brand ratings from Consumer Reports. Classical conditioning Food preferences are acquired in early childhood. Perceived fairness of price levels is classically conditioned. Buyers are conditioned through continued patronage of the same vendors. Instrumental conditioning Users adopt new products and services if they find them beneficial. Payers “buy cheap” at first, then experience shoddy performance and learn to “invest” more. Buyers learn they can get better terms by changing vendors. Modeling Users model their clothing and car choices after people they admire. Budgeting decisions mirror those of admired companies. Payers learn norms for tipping by observing others. Buyers may switch preferences to stores and vendors that are trendy. Adoption of innovation Users adopt product and service feature innovations. Payers adopt financing innovations (e.g, leasing, debit cards). Purchasers adopt purchase procedure innovations (e.g., buying through the Internet). Copyright © 2002 All rights reserved. Copyright © 1999 by Thomas Southwestern. All rights reserved. 35