What is Consumer Behavior?

How many times throughout the day do people make product decisions? If you stop to think about it, many product decisions are made every day, some without much thought. What should I wear? What should I eat? What am I going to do today? Many product decisions are answered routinely every day and they help move the economy of cities, countries and ultimately the world.

Product decisions also shape life for the consumer. How can simple decisions be so important? Why do marketers spend millions of dollars to uncover the reasons behind these decisions?

To define consumer behavior: it is the study of consumers and the processes they use to choose, use (consume), and dispose of products and services. A more in depth definition will also include how that process impacts the world. Consumer behavior incorporates ideas from several sciences including psychology, biology, chemistry and economics.

"All marketing decisions are based on assumptions and knowledge of consumer behavior," (Hawkins and Mothersbaugh, 2007). 

 Researching consumer behavior is a complex process, but understanding consumer behavior is critical to marketers-they can use it to:

• Provide value and customer satisfaction.
• Effectively target customers.
• Enhance the value of the company.
• Improve products and services.
• Create a competitive advantage
• Understand how customers view their products versus their competitors' products.
• Expand the knowledge base in the field of marketing,
• Apply marketing strategies toward a positive affect on society (encourage people to support charities, promote healthy habits, reduce drug use etc.)

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Value Chain Analysis - What is Value Chain Analysis?

The value chain is a systematic approach to examining the development of competitive advantage. It was created by M. E. Porter in his book, Competitive Advantage (1980). The chain consists of a series of activities that create and build value. They culminate in the total value delivered by an organisation. The 'margin' depicted in the diagram is the same as added value. The organisation is split into 'primary activities' and 'support activities.'

Primary Activities.

Inbound Logistics.

Here goods are received from a company's suppliers. They are stored until they are needed on the production/assembly line. Goods are moved around the organisation.

Operations.

This is where goods are manufactured or assembled. Individual operations could include room service in an hotel, packing of books/videos/games by an online retailer, or the final tune for a new car's engine.

Outbound Logistics.

The goods are now finished, and they need to be sent along the supply chain to wholesalers, retailers or the final consumer.

Marketing and Sales.

In true customer orientated fashion, at this stage the organisation prepares the offering to meet the needs of targeted customers. This area focuses strongly upon marketing communications and the promotions mix.

Service.

This includes all areas of service such as installation, after-sales service, complaints handling, training and so on.

Support Activities.

Procurement.

This function is responsible for all purchasing of goods, services and materials. The aim is to secure the lowest possible price for purchases of the highest possible quality. They will be responsible for outsourcing (components or operations that would normally be done in-house are done by other organisations), and ePurchasing (using IT and web-based technologies to achieve procurement aims).

Technology Development.

Technology is an important source of competitive advantage. Companies need to innovate to reduce costs and to protect and sustain competitive advantage. This could include production technology, Internet marketing activities, lean manufacturing, Customer Relationship Management (CRM), and many other technological developments.

Human Resource Management (HRM).

Employees are an expensive and vital resource. An organisation would manage recruitment and s election, training and development, and rewards and remuneration. The mission and objectives of the organisation would be driving force behind the HRM strategy.

Firm Infrastructure.

This activity includes and is driven by corporate or strategic planning. It includes the Management Information System (MIS), and other mechanisms for planning and control such as the accounting department.

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