Sheth Sample

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  • P A R T 1CustomerBehaviour: Power,Scope, and Context

    NEL 1

    CHAPTER 1 The Customer: Key to MarketSuccess

    CHAPTER 2 Determinants of CustomerBehaviour: Personal Factors andMarket Environment

    CHAPTER 3 Trends in Determinants ofCustomer Behaviour

    P A R T

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  • Across Canada, all symphony orchestras are faced witha major dilemma: on one hand, their traditional audi-ences are shrinking and getting older; on the other, theyounger audiences have many different tastes in music,have been weaned on MuchMusic, and spend a largepart of their discretionary income on popular culture(e.g., CDs, concerts, etc.). Statistics Canada estimatedthat in 2001, accumulated deficits for orchestrasamounted to more than $18 million.

    Consumer-oriented organizations, like theVancouver Symphony Orchestra (VSO) and the TorontoSymphony Orchestra (TSO), are finding ways to attractnew audiences. Audiences for the VSO were down30 percent by 2002, with a deficit of $1.3 million. TheVSO is the fourth largest orchestra and the seventhlargest performing arts company in Canada. Ticketsales account for 43 percent of revenues, 24 percentcoming from fund raising, and the rest from government

    subsidies. About 20 percent of the $9.1 million budgetis spent for marketing activities.

    The VSOs research showed that the younger audi-ences disliked traditional dress codes and wanted to seeand interact with the conductor (instead of watching hisor her back). New types of events included a mix ofeclectic concerts such as Goldie Hawn introducing amusical tribute to the Dalai Lama, a concert by world-renowned cellist Yo-Yo Ma, and afternoon kids concerts,with kids going up on stage to try out different instru-ments and compose their own music, which is thenplayed by a musician. Also, Musically Speaking (spon-sored by Telus) is a series in which music directorBramwell Tovey talks to the audience about various com-posers and their music, with interactions, video screensthat show close-ups of musicians performances, andinterviews with soloists about their work and their viewson music. Musically Speaking is marketed via brochures

    C H A P T E R


    The Customer: Key to Market Success

    After reading this chapter you should be able to:LO 1 Understand the concept of customer

    orientationLO 2 Define customer behaviourLO 3 Identify the three roles of the customer

    LO 4 Explain role specializationLO 5 Define needs and wants, and identify their

    determinantsLO 6 Describe the classification of market valuesLO 7 Describe the characteristics of

    customer values.

    2 NEL

    Who Are the SymphonyOrchestras Customers?

    C H A P T E R 1

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  • distributed through restaurants, cafs and communitycentres, ads in repertory cinemas, and by Telus to its sub-scribers via a link with the website Theseconcerts are all sold out and attracting 2535-year-oldaudiences, many of them first-time concert-goers whoare clearly enjoying the new experience. As a result, sub-scriptions and ticket sales are up for the 2004 season,and the VSO is expected to make a small surplus.

    For the TSO, the key to the solution was to exploitthe ethnic diversity of the Greater Toronto Area (GTA),some of whose residents view acquiring a good musicaleducation and going to concerts as part of their tradi-tions. At first the TSO focused on Chinese familiesbecause they have a higher musical literacy than theaverage family in Canada; about 70 percent of their chil-dren take music lessons, and their parents stronglybelieve that it is good for their childrens development.In developing a marketing promotional program for theTSO, care was taken to integrate advertising, publicrelations, the box office, incentives and promotions, andthe use of the correct Chinese languages (Mandarin andCantonese). The TSO is producing brochures in Chinese,has modified its website to include a Chinese section,

    and advertises regularly in Chinese newspapers and onChinese radio programs. For example, while the TSOmotto is Were All Yours, a motto was developed inChinese to mean Your Orchestra, Your World of Music.A public relations campaign was developed whichincluded: communications with Chinese music schoolsand community centres; information about the youthtraining program at the TSO; placing articles about con-certs, and about famous performers such as Yo-Yo Maand Lang Lang, in the Chinese media; kids concerts;and discount programs ( From tar-geting the Chinese families, the TSO moved to Italian,Korean, and Russian families.1

    The above examples show that even for a sym-phony orchestra, marketing is not easy these days. Itrequires a customer orientation. This is true of everycompany in the marketplace, whether it caters to house-hold or business customers. Several companies havefailed in the market because their products were toocomplex or too expensive; in short, because they did nothave a customer orientation, and consequently did notoffer any value advantage to customers. Understandingcustomer behaviour is critical for market success.

    NEL 3

    WHY UNDERSTANDING CUSTOMER BEHAVIOUR ISIMPORTANTJust as in the case of the Vancouver and Toronto Symphony Orchestras, businesses everywhereare recognizing the importance of understanding customer behaviour as a key to their success.It is the first step toward meeting the challenges of the exciting world of business. Specifically, ithelps companies (a) satisfy customers, (b) adopt their marketing concept, and (c) gain legitimacyin society. Let us discuss each in turn.

    Satisfying the CustomerPeter F. Drucker believes that the purpose of business is to create and retain a satisfied cus-tomer.2 He argues that making money is a necessity, not just a purpose. Moreover, a busi-ness makes money only if it satisfies its customers by catering to their needs. This has ledcompanies to adopt a customer culturea culture that incorporates customer satisfactionas an integral part of the corporate mission and includes an understanding of customerbehaviour and its importance to all its marketing plans and decisions. Lands End, the second-largest catalog clothing retailer in North America, operates with high inventorylevels. Its managers would rather carry excess inventory than fail to fill an order and risklosing a customer. If we dont keep the customer for several years, we dont make money,said the companys CEO at the time, William End. We need a long-term payback for the

    Customer cultureA culture that incor-porates customersatisfaction as anintegral part of thecorporate missionand plans.

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  • expense of coming up with a buyer.3 As we move from a traditional to an Internet economy,customers become more demanding, more time-driven, more information-intensive, andmore individualistic.4 They will evaluate marketers on the latters ability to deliver totalcustomer conveniencehassle-free product information search (e.g., advertising-on-demand), hassle-free acquisition (e.g., home delivery), hassle-free consumption (e.g., prod-ucts that are durable, reliable, and easy to use), and hassle-free disposal. A report by BostonConsulting Group (BCG) states that customers who have had a satisfying first-purchaseexperience online are likely to spend more time and money online; on average, the satisfiedfirst-time purchaser engaged in 12 online transactions and spent $500 during the previous12 months; the dissatisfied first-time purchaser engaged in only four transactions and spentonly $140 on online transactions.5


    4 PART 1 Customer Behaviour: Power, Scope, and Context

    LO 1

    Selling conceptA firm focuses onpersuading the cus-tomer to buy what itmakes and offers.

    Marketing conceptA firm focuses onmaking what thecustomer wants.

    Adopting the Marketing ConceptAccording to Philip Kotler, the marketing concept is an improvement over the selling concept.6

    In the selling concept, the firms focus is on finding a buyer for its product and somehowselling that customer into parting with his or her cash in exchange for that product. In con-trast, under the marketing concept, the firms obsession is to make what the customer needsor wants. The marketing concept can bring a firm greater market success because customerswill seek out such products, and these products will meet customer needs better.

    Also, the marketing concept entails the market-oriented firm focusing on under-standing its customers dynamic needs and wants. That is, instead of pushing a product on thecustomer, the firm now assumes a consultative role, helping customers identify products thatwould best meet their needs. The Window on Research box presents the role that marketingwill play in the network economy as a customer-consulting function.

    Gaining Legitimacy in SocietyIf making money is the only goal of an organization, that is not a legitimate reason for societyto support businesses. Rather, a society supports businesses because they serve its members bycatering to their needs and wants. Focusing on the customer leads to better serving thesocietys needs. Paying attention to customer behaviour and fashioning a business to respondto customer needs, desires, and preferences amounts to business democracy for a nations cit-izens, and serves both public and private interests.7 The changes taking place in EasternEurope and China demonstrate how economic democracy is taking a foothold in countriesaround the world, benefiting both businesses and newly liberated (in both political and eco-nomic terms) citizens (i.e., customers).8

    CUSTOMER BEHAVIOUR AND CUSTOMER ORIENTATIONThe principles of customer behaviour serve a company best when they are applied to