Chapter 2

Value and the Consumer

Behavior Framework

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 Learning Objectives
By the end of this chapter, you should be able to:

2-1 Describe the consumer value framework, including its basic components.

2-2 Define consumer value and compare and contrast two key types of value.

2-3 Apply the concepts of marketing strategy and marketing tactics to describe the way firms
go about creating value for consumers.

2-4 Explain the way market characteristics like market segmentation and product
differentiation affect marketing strategy.

2-5 Analyze consumer markets using elementary perceptual maps.

2-6 Justify consumers’ lifetime value as an effective focus for long-term business success.

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 2-1
The Consumer Value Framework
and Its Components

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 2-1 The Consumer Value Framework and Its
Components (1 of 8)
• Consumer behavior is multifaceted and involves multiple disciplines.

The Consumer Value Framework

• Consumer Value Framework (CVF) – consumer behavior theory that
illustrates factors that shape consumption-related behaviors and ultimately
determine the value associated with consumption
• Exhibit 2.1, on the next slide, displays the CVF.
• Each aspect of the CVF is related in some way to other components of the
model.

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Exhibit 2.1 Consumer Value Framework
(CVF)

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 2-1 The Consumer Value Framework and Its
Components (2 of 8)
Value and the CVF Components
• Value is at the heart of experiencing and understanding consumer behavior.

RELATIONSHIP QUALITY
• Customer Relationship Management (CRM) – a systematic information management system
that collects, maintains, and reports detailed information about customers to enable a more
customer-oriented managerial approach

• Relationship quality – the degree of connectedness between a consumer and a retailer,

brand, or service provider

• Loyal customers are more profitable than customers who consider switching brand or providers
each time they make a purchase.
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 2-1 The Consumer Value Framework and Its
Components (3 of 8)
CONSUMPTION PROCESS
• Consumers must decide to do something before they can receive value.
• The consumption process can involve a great deal of decision making and thus
represents a consumer decision-making process and the results of service.
• Service – an organization’s efforts and resources applied toward value creation
• Many factors influence this process, and these factors can be divided into
different categories, such as internal and external influences.

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 2-1 The Consumer Value Framework and Its
Components (4 of 8)
INTERNAL INFLUENCES: THE PSYCHOLOGY AND PERSONALITY OF THE
CONSUMER
The Psychology of the Consumer
• Internal influences – things that go on inside the mind and heart of the consumer or that are
psychologically a part of the consumer

• The psychology of the consumer involves both cognitive and affective processes.
− Cognition – thinking or mental processes that go on as we process and store things that can
become knowledge
− Affect – feelings associated with objects or activities

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 2-1 The Consumer Value Framework and Its
Components (5 of 8)
The Personality of the Consumer
• Every consumer has certain characteristics and traits that help define them as an individual.

• Individual differences – characteristic traits of individuals, including demographics,

personality, and lifestyle

• Individual differences help determine consumer behavior.

• Consumer researchers focus increasingly on the self-identity of consumers.

• Individual differences shape the value experienced by consumers and the reaction consumers
have to consumption.

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 2-1 The Consumer Value Framework and Its
Components (6 of 8)
EXTERNAL INFLUENCES
• In many cases some external influence triggers the consumption process or
provides information necessary for a consumer to make a decision.
• Zero moment of truth – the point when a shopper moves from passive to
active and seeks out exchange alternatives
• External influences – the social and cultural aspects of life as a consumer

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 2-1 The Consumer Value Framework and Its
Components (7 of 8)
Social Environment
• Social environment – the elements that specifically deal with the way other
people influence consumer decision making and value
• Some influence is personal, some is impersonal, and some is virtual.
• Any time a consumer chooses to do something, at least in part, to please or
appeal to another consumer, the social environment plays a role in that
process.
• Group influence is one mechanism through which social influences work.

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 2-1 The Consumer Value Framework and Its
Components (8 of 8)
Situational Influences
• Situational influences – the things unique to a time or place that can affect
consumer decision making and the value received from consumption
• Situational influences include the effect that the physical environment has on
consumer behavior.
• Timing also plays an important role.
• More enduring temporal factors, such as the economic condition at any given
time, also affect the value of things.

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 Discussion 1

Recall a recent solitary shopping experience. Then, recall a shopping

experience with friends or family members. How was the solitary shopping
experience different from the shopping experience with a group? Does shopping
with peers or family members influence your buying decisions? Do you prefer
one type of shopping over the other? Are there other external influences that
may affect your buying behavior?

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 Discussion 1 Debrief

Do most people in the class find that shopping with others influences their
buying?
Which shopping experience do most people in the class prefer?

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 2-2
Value and Its Two Basic Types

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 2-2 Value and Its Two Basic Types (1 of 5)

• The core concept of CB is value.

• Value – a personal assessment of the net worth obtained from an activity
• Value is what consumers ultimately pursue, because valuable actions address
motivations that manifest themselves in needs and desires.
• Value captures how much gratification a consumer receives from consumption.
• Everything we do in life we do in pursuit of value.

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 2-2 Value and Its Two Basic Types (2 of 5)

The Value Equation

• Exhibit 2.3, on the next slide, reveals some components of value and how a
consumer might put these together to determine the overall worth of something.
• Value can be modeled by playing the “what you get” from product consumption
against the “what you have to give” to get the product.
• Opportunity costs play a role.
• Even in simple situations, all the components of the CVF are subtly in play.
• A very useful value typology distinguishes utilitarian value from hedonic value.

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Exhibit 2.3 The Value Equation

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 2-2 Value and Its Two Basic Types (3 of 5)

Utilitarian Value
• Utilitarian value – the gratification derived because something helps a
consumer solve a problem or accomplish some task
• When consumers buy something in pursuit of utilitarian value, they can typically
provide a clearly rational explanation for the purchase.
• Actions that provide utilitarian value are worthwhile because they provide a
means to an end.
• Actions provide value because the object or activity allows something else good
to happen or be accomplished.

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 2-2 Value and Its Two Basic Types (4 of 5)

Hedonic Value
• Hedonic value – the value derived from the immediate gratification that comes
from some activity
• The value is provided entirely by the actual experience and emotions associated
with consumption, not because some other end is or will be accomplished.
• Hedonic and utilitarian types of values are not mutually exclusive.
• The very best consumer experiences are those that provide both high utilitarian
value and high hedonic value.

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 2-2 Value and Its Two Basic Types (5 of 5)

• Marketers can do well by concentrating on providing either hedonic or utilitarian

value. In the best-case scenario, they provide high levels of both.
− Amazon retail epitomizes a brand that does well by concentrating on providing utilitarian
value.
− Netflix entertains and, as a consequence, provides hedonic value.
− Trader Joe’s offers a narrow assortment of high-quality grocery products in an upbeat
atmosphere—high utilitarian and hedonic value.
− Sears is in the unfortunate position of offering low levels of both utilitarian and hedonic
value.

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May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Group Activity 1

1. Form a team with two to three other students.

2. As a group, discuss how you believe the following companies provide value to
consumers.
− Home Depot
− Apple
− Barnes and Noble
− Panera Bread

3. When discussing value, consider the positive consequences (benefits) as well

as the negative consequences (sacrifices, opportunity costs).

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 Group Activity 1 Debrief

• Did the members of your group agree on how the different companies provided
value?
• Did anyone think of a value provided in a different way than others in the group?
• Did the class, as a whole, come to the same conclusions regarding the value
offered by the companies?

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 2-3
Marketing Strategy and Consumer Value

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 2-3 Marketing Strategy and Consumer Value
(1 of 7)
• One way that a company can enhance the chances of long-run survival is to
have an effective marketing strategy.
• Strategy – a planned way of doing something to accomplish some goal

Marketing Strategy
• Marketing strategy – the way a company goes about creating value for
customers
• A complete understanding of the value consumers seek is needed to effectively
develop and implement a strategy.

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 2-3 Marketing Strategy and Consumer Value
(2 of 7)
• Marketing myopia – a common condition in which a shortsighted company
views itself in a product business rather than in a value- or benefits-producing
business
• Corporate strategy – the way a firm is defined and its general goals
• Marketing tactics – the ways marketing management is implemented; involves
price, promotion, product, and distribution decisions
• Together, marketing strategy and marketing tactics should maximize the total
value received by a company’s customers.

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 2-3 Marketing Strategy and Consumer Value
(3 of 7)
Total Value Concept
• Products are multifaceted and can provide value in many ways.
• Exhibit 2.7, on the next slide, illustrates that market share is not determined by
offering comparable products.
• Augmented product – the actual physical product purchased plus any services
such as installation and warranties necessary to use the product and obtain its
benefits

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Exhibit 2.7 Market Share for Athletic Shoes

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 2-3 Marketing Strategy and Consumer Value
(4 of 7)
• Every product’s value proposition is made up of the basic benefits, plus the
augmented product, plus the “feel” benefits.
• Total value concept – the business practice wherein companies operate with
the understanding that products provide value in multiple ways
• Many products and brands provide some benefits that produce utilitarian value
and some that provide hedonic value.
• Value helps instill a brand’s meaning in the consumer psyche.

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 2-3 Marketing Strategy and Consumer Value
(5 of 7)
The Total Value Concept Illustrated
• The Ferrari Portofino value proposition:
− Transportation
− The Ferrari service plan
− The feelings associated with driving the car
− The positive feelings that go along with ownership
− The feelings of status and pride that come with ownership
− The negative feelings that go along with ownership

• For most, the Ferrari does not offer enough benefits to make the necessary sacrifice.

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 2-3 Marketing Strategy and Consumer Value
(6 of 7)
Value Is Co-Created
• The marketer cannot create value alone.
• Consumers add resources in the form of knowledge and skills to do their own
part in the consumption process.
• Value co-creation – the realization that a consumer is necessary and must play
a part in producing the value
• The consumer and marketer are active in turning the offer into value.
• A bad consumption experience is often not entirely the fault of the business.

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 2-3 Marketing Strategy and Consumer Value
(7 of 7)
Liquid Consumption
• The sharing economy and social media present other ways that consumers
extract value from use.
• Liquid consumption – captures the notion that today’s consumers extract
value more from immediacy and virtual connections than from ownership or
networks of family and friends
• A network of friends on social media can help satisfy self-esteem in a way that
we formerly thought material objects led to esteem.

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 Group Activity 2
1. Form a team with two to three other students.

2. As a group, use Internet resources (such as corporate and corporate-sponsored sites,

articles, and blogs) to learn about the corporate and marketing strategies of the following
companies.
− Home Depot
− Apple
− Barnes and Noble
− Panera Bread

3. From your research, does it seem that they truly understand the value that consumers desire
from companies in their respective industries? Provide evidence that supports your stance.

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 Group Activity 2 Debrief

• What did you learn about each companies’ understanding of the value that
consumers desire from them?
• How does the total value concept apply to these companies?

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 2-4
Market Characteristics: Market Segments
and Product Differentiation

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2-4 Market Characteristics: Market Segments
and Product Differentiation (1 of 4)
• Marketing management involves managing the marketing mix and deciding to
whom the effort will be directed.
• Marketing mix – the combination of product, pricing, promotion, and
distribution strategies used to implement a marketing strategy
• Target market – the identified segment or segments of a market that a
company serves
• Target marketing requires managers to identify and understand market
segments.

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 2-4 Market Characteristics: Market Segments
and Product Differentiation (2 of 4)
Market Segmentation
• Market segmentation – the separation of a market into groups based on the different demand
curves associated with each group

• Elasticity – the degree of how sensitive a consumer is to changes in some product

characteristic

• A market for any product is really the sum of the demand existing in individual groups or
segments of consumers.

• Market segmentation is critically important to effective marketing.

• Exhibit 2.8. on the next slide, depicts the market segmentation process.

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Exhibit 2.8 Total Market Sales and Sales
within Market Segments

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May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2-4 Market Characteristics: Market Segments
and Product Differentiation (3 of 4)
• Backward sloping demand – a positive relationship between price and
quantity
• Although a positive relationship between price and quantity may seem unusual,
backward sloping demand is hardly rare.
• A market segment for many products will feature a positive price-to-quantity
demanded relationship.
• Market segments are associated with unique value equations just as they are
associated with unique demand equations.

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2-4 Market Characteristics: Market Segments
and Product Differentiation (4 of 4)
Product Differentiation
• Product differentiation – marketplace condition in which consumers do not
view all competing products as identical to one another
• We refer to commodities very often as products that are indistinguishable
across brands and/or manufacturers—that is, no matter who produced them or
where they were produced.
• Most markets are characterized by product differentiation and market
segmentation.

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 Discussion 2

Select a high-priced product, such as a car. Be specific (for example, a sports

car or a family car). List the product’s characteristics and attributes. Based on
these characteristics, identify some possible target markets for the product.
Justify your answers. What are the characteristics (for example, age, income,
geography, and lifestyle) of the members of the target market you chose?

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 Discussion 2 Debrief

What product was selected?

Are you included as part of the target market for the product selected?

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May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 2-5
Analyzing Markets with Perceptual Maps

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 2-5 Analyzing Markets with Perceptual Maps
(1 of 3)
• Product differentiation becomes the basis for product positioning.

• Product positioning – the way a product is perceived by a consumer

• A standard marketing tool is a perceptual map.

Perceptual Maps
• Perceptual map – the tool used to graphically depict the positioning of competing products

• Blue ocean strategy – positioning a firm far away from competitors’ positions so that it creates
an industry of its own and, at least for a time, isolates itself from competitors

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 2-5 Analyzing Markets with Perceptual Maps
(2 of 3)
Illustrating a Perceptual Map
• Ideal point – combination of product characteristics that provide the most value to an individual
consumer or market segment

• Perceptual maps are widely used to plot the way consumers view competitors in an industry and
are used in practically every competitive industry, including the nonprofit sector.

• They are very useful for spotting opportunities in the marketplace.

• Strategy canvas – a perceptual mapping technique involving more than two dimensions used
to identify uncontested market space

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Exhibit 2.9 A Perceptual Map for Alternative
Tourist Attractions

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 2-5 Analyzing Markets with Perceptual Maps
(3 of 3)
Using Consumer Behavior Theory in Marketing Strategy
• Businesses are constantly using consumer behavior to make better strategic
and operational marketing decisions.
• Students, and practicing managers for that matter, sometimes struggle with the
application aspect of CB.
• Checklists can be a powerful aid to decision making as a way to develop more
creative, thoughtful, and logically sound marketing strategy and tactics.

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 Knowledge Check 1

Match each term with the correct description:

1. Perceptual map A. A perceptual mapping technique involving
more than two dimensions used to identify
2. Strategy canvas uncontested market space
3. Ideal point B. A combination of product characteristics that
provide the most value to an individual
consumer or market segment
C. The tool used to graphically depict the
positioning of competing products

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 2-6
Value Today and Tomorrow—
Customer Lifetime Value

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 2-6 Value Today and Tomorrow—
Customer Lifetime Value
• Marketing makes exchange more likely.
• Consumers enter an exchange seeking value, and so do marketers.
• Not every customer is equally valuable to a firm.
• Customer Lifetime Value (CLV) – the approximate worth of a customer to a
company in economic terms; overall profitability of an individual consumer
CLV = npv (sales – costs) + npv (equity)
• Marketers can maximize the value they receive from exchange by concentrating
their marketing efforts on consumers with high CLVs.

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 Knowledge Check 2
How do marketing firms assess the value of a given customer?
a. Consumer Value Framework
b. Relationship quality
c. Customer Relationship Management
d. Customer Lifetime Value

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