Management Consulting/ms 61 Consumer Behaviour
QUESTION: sir please help me for assignment
1. You are the marketing head of leading retail chain dealing in electronic items. Your company has planned to launch the online store for the same. What segmentation approach would you use to effectively segment the market and why?
2. Explain the concept of culture and subculture. Discuss the relevance of sub cultural
segmentation in case of the following.
(a) Food chains (Restaurants)
(b) Women apparels
3. You are a member of the purchase committee that has been formed to purchase fifty laptops
for your company. Being a member of purchase committee, what criteria would you suggest
to select the supplier for the same? Explain.
4. ‘Certain products require high degree of pre purchase information search’. Justify the
statement by giving suitable examples. Also give marketing implication of this pre-purchase
search behavior of consumers.
5. Briefly discuss the perception process. Being the marketer of a range of cosmetic products
meant for upper income group people, how would you use the concept of perception while
designing marketing mix for your product?
6. Discuss Nicosia’s model of consumer behavior. Also explain its relevance for a marketer.
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1.You are the marketing head of leading retail chain dealing in electronic items. Your company has planned to launch the online store for the same. What segmentation approach would you use to effectively segment the market and why?
The segmentation in use
Technology Adoption Segmentation System
Technology has brought about immense changes in the lives of consumers. Eight-in-ten adults access the Internet today and seven-in-ten use email; nine-in-ten have at least one mobile device and four-in ten send text messages. While many wholeheartedly embrace new technology and adopt it quickly, others take a bit longer to adjust before integrating new devices and technology into their lives. The Technology Adoption segmentation system delivers the mindset of consumers providing vivid detail of their use and adoption of technology. This new segmentation system is available includes the following four distinct segments:
• Wizards: “Technology is life.” Technology plays an important and broad role in Wizards’ life. These individuals cannot live without the Internet or imagine life without new electronic gadgets. Wizards are enthusiastic and adventurous users of new technology. Technology and new gadgetry helps them keep track of their social calendars and makes leisure time more interesting. This group still wants more from technology and their desire helps to move the industry forward. Wizards’ hunger for new technology fuels a future for potential new features, benefits and devices.
• Journeymen: “Technology is an important part of my life.” Journeymen have become skilled users of new technology. They are very confident with and knowledgeable about technology and are willing to experiment with few features, benefits and devices. Adoption of new technology allows Journeymen to continually improve upon the way they use it. The
Internet is a source of information, commerce, entertainment as well as a means of connecting with others. While cutting-edge electronic devices may help Journeymen organize their busy lifestyles, new technology is not always their top priority.
• Apprentices: “Technology is changing my life.” Apprentices take advantage of technology, using the Internet often to get needed information. New gadgets enhance their lives to a large extent, but there is still room for them to expand their usage. Apprentices are willing to learn and incorporate new technology into their lives, but they are sensitive to price and often make their purchase decisions based on this rather than desire alone. In fact, affordability is one of the few barriers that prevent this group from buying the newest technology.
• Novices: “Technology has a limited impact on my life.” Novices are disconnected from emerging technology and resistant to adopting a new technology-focused life. They may have a desire for new digital products and services if they are simple and easy to use. This group does not understand what kinds of opportunities and experiences technology can provide them and, therefore, they have a very limited engagement with new technology.
Economic Outlook Segmentation System
Media companies, advertising agencies and advertisers need to know how the relationship between the consumer and the economy is changing over time. That is, they want to know how consumers perceive their current and near-term personal financial outlook as well as how they feel about the future of the economy. These financial outlook-based attitudes directly affect the spending behaviors of the consumer. Economic Outlook Segmentation to help marketers to better understand how different segments of the population evaluate their personal financial situation and how marketers need to evolve their messaging strategies to make it all work in the real economy. This system consists of five unique clusters.
The five Economic Outlook consumer segments now available include:
• Confident Spenders: Consumers of this group remain largely untouched by the current economic downturn. They are confident about their current economic condition, financially secure and even willing to take investment risks. They are confident spenders. Their purchasing behavior has not been significantly influenced by the economic downturn; they continue their regular spending or even spend more on big- and medium-tickets items. Many have plans to improve their homes or buy/lease a new car.
Outlook: Spending more, taking risks, and optimistic
• Fiscally Fit: Consumers of this group are more flexible and adaptive to changes in the market than others. They are fiscally fit and well positioned during the current economic downturn. They feel financially secure and their consumer confidence is high. They are optimistic about the future of the economy and their own financial health. While they’re always looking for better financial opportunities, they generally do not take risks. They keep their spending under control with few big- or even medium-ticket items planned in the near future.
Outlook: Cautious with spending, but optimistic
• Financial Nesters: While Financial Nesters are trying to maintain their lifestyle with –a “business as usual” outlook, they haven’t lost sight of the changes taking place in the economy. This group has been padding their financial nest egg in anticipation of retirement and they intend to stick to that plan despite external events. Even though they don’t expect the American economy or their personal financial situation to improve anytime soon, they continue to purchase medium-ticket items, spend on household essentials, make home improvements and live their lives according to plan.
Outlook: Continuing to spend, but not optimistic
• Facing Challenges: Consumers in this group are facing challenges and all the realities of the current economic situation. Their consumer confidence and propensity to purchase everything from big ticket items to household essentials is low. The financial situation of Facing Challenges is worse than it was 12 months ago and they are neither hopeful about their personal financial future nor that of the economy.
Outlook: Spending less and not optimistic
• Economically Indiferent: Consumers of this group are out of the mainstream. They are economically indifferent to the economic downturn. They do not have a sense that the economy is slowing down or getting better. Their modest financial situation is not a result of the current economy.
Outlook: Holding spending steady to cutting back, not economically aware
Mobile Consumer Segmentation System and Psychographic Scales
Mobile devices have become an essential part of everyday life. Today, nine in ten adults have at least one mobile device. The Mobile Users segmentation system and Mobile psychographic scales give clients superior insights into world of communication, information and entertainment needs.
The five Mobile Users consumer segments now available include:
• Mobirati: Mobirati represent the mobile generation. They grew up with cell phones and cannot imagine life without them. Cell phone devices are a central part of their everyday lives.
• Social Connectors: Communication is central in the lives of Social Connectors. Their cell phone allows them to keep up-to-date with friends and social events. The cell phone device is the bridge to their social world.
• Mobile Professionals: Mobile Professionals are multiple feature users. Their cell phone helps them keep up with their professional life in addition to their personal life. Members of this segment are more likely to own a smart phone. Their cell phone has become their all-in-one device for their communication and information needs.
• Pragmatic Adopters: Cell phones came to life for Pragmatic Adopters in their adult years. They are the ones who are still learning there are other things to do with your phone beyond just saying “Hello.” Cell phones are more a part of their everyday life than before but still more functional than entertaining to them.
• Basic Planners: Basic Planners are not into cell phones or the world of technology. They use their cell phone just for the basics. The cell phone is just another communication device for this group.
Tipping Point Segmentation System
Growing use of viral campaigns, social media networking and other innovative new marketing strategies highlight the unchanged power of word-of-mouth advertising. Experian Simmons Tipping Point allows you to precisely target the most influential consumers and tailor your messages for each of the different Tipping Point Segments.
How Little Things Can Make a Big Difference, the Tipping Point Segmentation System exponentially leverages your marketing spend by focusing on the small group of influential people,who take an idea, trend or behavior and help it spread like wildfire.
the key characteristics of each Tipping Point Segment were defined.
• Connectors: Possessors of an extensive network of friends and acquaintances, these are the individuals who provide the links between people.
• Mavens: Recognized by their peers as reliable information sources who give the facts and let people make their own decisions.
• Salespeople: Persuaders who can motivate people to believe or try things through their energy and their enthusiastic personality and style.
• Innovators: People who are in at the birth of a new trend, they embrace whatever can set them apart from others, pioneer new products and categories, and respond to opportunities to provide positive change.
This approach will help the marketer
-to focus on the niche market, first.
-to make an economical entry, with required marketing cost.
-use the marketing resources to move to the next segment.
2. Explain the concept of culture and subculture. Discuss the relevance of sub cultural segmentation in case of the following.
(c) Food chains (Restaurants)
(d) Women apparels
Culture , generally refers to patterns of human activity and the symbolic structures that give such activity significance.
Key components of culture
A common way of understanding culture sees it as consisting of four elements that are "passed on from generation to generation by learning alone":
1.Values comprise ideas about what in life seems important. They guide the rest of the culture.
2. Norms consist of expectations of how people will behave in various situations. Each culture has methods, called sanctions, of enforcing its norms. Sanctions vary with the importance of the norm; norms that a society enforces formally have the status of LAWS.
3. Institutions are the structures of a society within which values and norms are transmitted.
4.Artifacts—things, or aspects of material culture—derive from a culture's values and norms.
In general, it refers to human activity; culture reflect understanding, or criteria for valuing, human activity.
1."the total way of life of a people"
2. "the social legacy the individual acquires from his group"
3. "a way of thinking, feeling, and believing"
4. "an abstraction from behavior"
5. a theory about the way in which a group of people in fact behave
6. a "storehouse of pooled learning"
7. "a set of standardized orientations to recurrent problems"
8. "learned behavior"
9. a mechanism for the NORMATIVE regulation of behavior
10. "a set of techniques for adjusting both to the external environment and to other men"
11. "a PRECIPILATE of history"
12. a behavioral map, sieve, or matrix
For the purposes of the MARKETING , culture is defined as the shared patterns of behaviors and interactions, cognitive constructs, and affective understanding that are learned through a process of socialization. These shared patterns identify the members of a culture group while also distinguishing those of another group.
WHEN WE APPLY THE MARKETING CONCEPT TO ORGANIZATION /BUSINESS,
STUDY OF CULTURE BECOMES NECESSARY / ESSENTIAL BECAUSE IT
GIVES THE MARKETER A BETTER UNDERSTANDING OF
-LIFE STYLE BEHAVIORS
WHICH INFLUENCES THE BUYING DECISIONS
WHICH IN TURNS HELPS THE MARKETER A BETTER UNDERSTANDING OF
WHAT THE BUYERS WANT
WHEN THEY WANT
HOW DO THEY WANT
WHERE DO THEY WANT
WHICH PLACE DO THEY WANT
HOW MUCH DO THEY WANT
AND HENCE HELPS TO CREATE CONSUMER SATISFACTION.
THIS IS HOW STUDY OF CULTURE HELPS MARKETING.
CULTURE IS THE FULL RANGE OF LEARNING HUMAN
What is culture?
In relation to international marketing, culture can be defined as “the sum total of learned beliefs, values and customs that serve to direct consumer behaviour in particular country market” . Culture is made up of three essential components:
• Beliefs which is a large number of mental and verbal processes which reflect our knowledge and assessment of products and services.
• Values which are the indicators consumers use to serve as guides for what is appropriate behaviour, they tend to be relatively enduring and stable over time and widely accepted by members of a particular market
• Customs which are modes of behaviour those constitute culturally approved or acceptable ways of behaving in specific situations. Customs are evident at major events in one‟s life like birth, marriage, death, and at key events in the year like Christmas or Easter .
Beliefs, values and customs are the three components of culture which influence the international marketing . These three components affect consumption behaviours and the purchase pattern of the individual. Each individual buy products thanks to some references in his own culture. Beliefs, values and customs send direct and indirect messages to consumers regarding the selection of goods and services; it is the cultural message . The culture a customer live determines and affects its decision process. Companies must adapt their product and promotion to suit their area of operation.
However, there are also eight characteristics of culture as you can see in the figure 1 which form a convenient framework for examining a culture from a marketing perspective. For explaining the impact of these factors on international marketing, we are going to explain some of the eight characteristics of culture. For the characteristic education is easy to understand that the degree of literacy play an important role on the labeling of product. For the characteristic aesthetics, a firm needs to ensure that use of
colour, music, architecture or brand names in their product and communications strategies is sympathetic and acceptable to the local culture .
A CULTURE FRAMEWORK
When we define culture, it seems to be easy to identify, characterize and differentiate a culture from another one. In reality, culture is more complex and composed of a “visible and invisible part of the culture”. Indeed, culture can be described like an iceberg. The part of the iceberg that you see above the water is only a small fraction of what is there. What you cannot see are the values and assumptions that can sink your ship if you mistakenly run into them. Daily behaviour is influenced by values and social morals which work closer to the surface than the basic cultural assumptions. The iceberg model of culture implies that the visible parts of culture are just expressions of its invisible parts. It also highlights the difficulty of understanding people from different cultural backgrounds because although we may see the visible parts or their “iceberg” we cannot immediately realize what the foundations are (Selfridge & Sokolik, 1975). So, it can be difficult for marketers to find immediately the real needs of a particular culture. Indeed, if the major part of the culture is “under the water” marketers don‟t have other solutions than learn about the culture of their customers to target their fundamental needs. Take time to know and understand the culture is the only way to access a better level in the iceberg.
Having identified what is culture, we need to interpret it in relation to marketing. This requires a clearly understanding of what basics assumptions are and in this way the use of two cultural frameworks. The first one is Hofstede‟s five cultural dimensions; he presents four plus one cultural dimensions which are relevant for understanding the influence of culture on international marketing.
In international business it is sometimes amazing how different people in others cultures behave. We tend to have a human instinct that deep inside “all people are the same”, but they are not. Therefore, when a businessman works into another country and makes decisions based on how (s)he operates in her/his own country, the chances are (s)he will make some very bad decisions .
Geert Hofstede‟s research gives us insights into others cultures so that we can be more effective when interacting with people in others countries. Moreover, he gives the edge of understanding which translates to more successful results. According to Hofstede (1980), the way people in different countries perceive and interpret their world varies along four plus one dimensions:
• Power Distance Index (PDI) that is the extent to which the powerless members of organizations and institutions (like the family) accept and expect that power is distributed unequally (Hofstede, 1980).
• Uncertainty Avoidance Index (UAI) deals with a society‟s tolerance for uncertainty and ambiguity; it ultimately refers to man‟s search for Truth. It indicates how members of a culture fell uncomfortable or comfortable in unstructured situations (novel, unknown, surprising, different from usual) .
• Individualism (IDV) on the one side versus its opposite, collectivism, that is the degree to which individuals are integrated into groups. On the individualist side we find societies in which the ties between individuals are loose: everyone is expected to look after him/herself and his/her immediate family .
• Masculinity (MAS) versus its opposite, femininity refers to the distribution of roles between the genders .
• Long-Term Orientation (LTO) versus Short Term Orientation: This cultural dimension has been criticized by Fang (2003), it is argued that there is a philosophical flaw inherent in
this “new” dimension. Given this fatal flow and other mythological weaknesses, the usefulness of Hofstede‟s fifth dimension is doubted. It can be said to deal with Virtue regardless of Truth. Values associated with Long-Term Orientation are thrift and perseverance; values associated with Short-term Orientation are respect for tradition, fulfilling, social obligations, and protecting one‟s face (Hofstede, 1980).
The study of Dwyer, Mesak, and Hsu‟s (2005) outcomes provide additional tactical implications with respect to the marketing mix—the “how” of product launch decisions—to facilitate the adoption of innovations by consumers. Marketing management efforts, particularly with respect to promotion, should be focused on and should communicate to the core cultural values that each target country possesses, whether it is individualism, masculinity, power distance, long-term orientation, or some combination of these cultural dimensions. By focusing on these core values, marketing efforts can be leveraged to achieve more rapid consumer adoption of the newly introduced product. Each population of each country is characterized by Hofstede‟s four plus one cultural dimensions. The study of these cultural dimensions can give very important information to marketers for the standardization or the adaptation of the marketing mix. Indeed, the behaviour of the customers change depending of this cultural dimensions and an adaptation of the marketing mix is in this way needed or not (Dwyer, Mesak, & Hsu, 2005). In this regard, Dwyer, Mesak, and Hsu (2005) conclude by providing global marketers specific marketing examples linked to each of the cultural dimensions as you can see in the table 2. Collectivism influences innovativeness, service performance and advertising appeals. Uncertainty avoidance impacts information exchange behaviour, innovativeness and advertising appeals. Power distance affects advertising appeals, information exchange behaviour, innovativeness and service performance. Masculinity impacts sex role portrays, innovation and service performance. Finally, long-term orientation influences innovativeness.
Table 2: Influence of the four plus one Hofstede‟s dimensions
Performance appeals behavior
Another important framework to explain is high/low context approach because he stresses that the communication and therefore the promotion of the product is influenced by cultural aspects.
Edward T.Hall (1960) introduced the concept of high and low contexts as the way of understanding different cultural orientation between societies.
• Low-context cultures rely on spoken and written language for meaning. Senders of messages encode their messages, expecting that the receivers will accurately decode the words used to gain a good understanding of the intended message
• High-context cultures use and interpret more of the elements surrounding the message to develop their understanding of the message. In high-context cultures, the social importance and knowledge of the person and social setting add extra information, and will be perceived by the message-receiver.
Managing cultural differences
Having identified the most important factors and components of cultures, thanks to the two models above, we can now understand the difficulties for marketers to manage with cultural differences.
James Lee (1966) used the terms self-reference criterion (SRC) to characterize our unconscious reference to our own cultural values. This author suggested a four-step approach to eliminate SRC.
• 1-Define the problem or goal in terms of home country culture, traits, habits and norms.
• 2-Define the problems or goals in terms of the foreign culture, traits, habits and norms.
• 3-Isolate the SRC influence in the problem and examine it carefully to see how it complicates the problem
• 4-Redefine the problem without the SRC influence and solve for the foreign market situation
It is therefore of crucial importance that the culture of the country is seen in the context of that country. It is important to regard the culture as different from, rather than better or worse than, the home culture. In this way, differences and similarities can be sought and explained.
Every Culture contains some variables important to consider while conducting marketing research.
a. Supplier’s motivation to get the product finished correctly
Supplier’s understanding of your research need
Communication with supplier
Developing representative samples
Abilities of moderators or interviewers
Interpretation of results
Translation of research instruments
3. Power Distance
Unfamiliarity with research techniques
Unwillingness to respond
Giving the expected response
Understanding the rating scales
Taboos against discussion of certain subjects
Adapted techniques for maximum respondent comfort in research technique (RT).
Adapted techniques for maximum respondent comfort in respondent-related problems (RRP).
Lengthened scheduled in RT.
Developed personal relationships in RT.
Lengthened schedule in RRT.
Developed personal relationships in RRT.
6. Uncertainty Avoidance
More selective recruiting of respondents: RT.
Reworded discussion guides for questionnaires: RT
Listened more carefully to in-country suppliers of consultants: RT
Counteracted research bias through training: RT.
More selective recruiting of respondents: RRP.
Reworded discussions guides to in-country suppliers of consultants: RRP.
Listened more carefully to in-country suppliers of consultants:
RESTUARANTS AND DRESSES
Socio-sub cultural segmentation divides consumers on the basis of culture, sub-culture, cross-culture, religion, social class, and family life cycle. Use-related segmentation divides consumers on the basis of usage rate, awareness status, and brand loyalty. Use-situation segmentation involves segmenting consumers on the basis of time, objective, location, and person. Benefit segmentation segments consumers on the basis of the benefit they seek like prestige, confidence, health, nutrition etc.
Multi-segmentation involves combining segmentation various variables to effective segmentation. Some popular multi-segmentation tools are psychographic-demographic segmentation, geodemographic segmentation, and SRI Consulting’s Values and Lifestyle System (VALS). Segmentation yields positive results only if the right segment is chosen. While choosing a target segment care should be taken that the segment is measurable (quantifiable in terms of market size), substantial (commercially viable), accessible (easy to reach and address to), and differentiable (different in some way from the other segments).
After selecting the relevant segment(s), the marketer has to formulate a marketing mix. The marketers may choose to cater to a single segment or multiple segments, with single or multiple products – single product-single segment strategy (concentration strategy); single product-multiple segments (product specialization strategy); single segment-multiple products (market specialization strategy); and multiple products-multiple segments (selective segmentation strategy).
Big marketers, at times, may also employ a full market coverage strategy, which may further be differentiated (different marketing mix for different products) or undifferentiated (single marketing mix for all products). Sometimes marketers adopt too many micro segments, which later become redundant. In such a case, all segments are clubbed together with a single marketing mix (counter segmentation).
Cultural and subcultural influences on consumer behavior
How do Culture and Subculture Affect Consumer Behavior?
How does culture affect the needs we recognize, how we search, our evaluation of alternatives, our shopping habits, consumption habits, how we dispose of products?
Parts of Culture
Culture: norms, roles, beliefs, values, customs, rituals, artifacts
Culture classifies things into discontinuous units of value in society
Codes classified units, develops behaviors, specifies priorities, legitimizes and justifies the classifications
Consumer socialization - the process by which people develop their values, motivations, and habitual activity
Culture creates meanings for everyday products
We study how the use and/or collections of products and their meanings move through a society
Nature of Culture—Components
Norms: rules that designate forms of acceptable and unacceptable behavior
Customs: behaviors that lasted over time and passed down in the family setting
Mores: moral standards of behavior
Conventions: practices tied to the conduct of everyday life in various settings
Ethnocentrism: the tendency to view one’s own culture as better or superior to others
Key Points about Culture
It is learned: transmitted from generation to generation
It rewards acceptable behaviors
It stays the same, yet can change
Family, Religion, School and Peers: what is the relative influence of each?
Values Transfusion Model shows how these combine
Will any become more, less relevant?
Consumer socialization: the acquisition of consumption-related cognitions, attitudes, and behaviors.
What is similar about . . .
Division of labour
Family / kinship groups
Magic / luck superstitions
Music and dance
These are called “cultural universals”
Culture is pervasive
It’s in most every corner of people’s lives
High-context style—it is where the communication has most of the information in either the physical way it’s presented or the person receiving it already knows the meaning
Low-context style—the knowledge of the ins and outs of the society is not as widespread
Culture is functional
The “Languages” of Culture
Color choice that signifies death varies across regions of the world
The color red
Colors and fashion
Self-time, interaction time, institutional time
Approaches: economic, socio-cultural, psychological, measurement, physiological
Orientation: a person’s perception of the importance of the past, present, or future
Activity level: monochronic versus polychronic behavior – see PAI
Time processing: economic or linear, procedural, circular or cyclical
Other “Languages” of Culture
What is the acceptable personal space across cultures?
Gestures, postures, or body positions
Friendship and agreements
Government and Laws
Certain Dimensions of Culture are Relevant to Consumer Behavior
Power distance: equality and informality vs. distance and formality
Uncertainty avoidance: comfort with not knowing
Masculine vs. feminine: are there rules of behavior related to being a man? Being a woman? Are their nurturing behaviors that are valued? Aggressive behaviors?
Individualism vs. collectivism: does country X emphasize the growth and rights of the individual or of the group?
What Myths and Old Wives Tales Do You Know?
Throw salt over your _____ shoulder when _____
Always eat ____________ on New Year’s Day
Always ______________for someone’s birthday
Always give _____________ for Valentine’s day
When sending wedding invitations, how many envelopes are used? __________
Eat __________ when you have a cold
How do these Myths relate to Consumer Behavior?
People may just use products because they think that they have to
People may not understand if there is a reason for such use - is chicken soup really good for a cold?
People may not accept your product if there is a better alternative, even if it’s not in the same product class – we find this in bringing innovations to new markets
There may be certain expected behavior for the giver and for the receiver
For instance. . .
What determines a “hot” lunch and why it is desirable
What determines holiday foods?
What is a breakfast food? Colors of foods?
Correct clothing for various events
Why do you turn around when entering an elevator?
Why do men wear ties and women do not?
Why do people shake hands, and not touch elbows?
Why do you know what constitutes “good” vs. “bad” manners?
Function, form, and meaning are defined by one’s culture
What does the product do for us? What are the benefits?
What should the product look like? What should it be made of?
When should it be used? By whom? Can it be given as a gift?
Who shops? Who is exposed to ads? Who traditionally uses the product?
Core Values in Marketing
What are the basic food groups? For Whites? Blacks? Hispanics? etc?
What about the aspects of consumer behavior? Consumer research?
EG - Is the decision process carried out the same way?
Are the structure of attributes the same? Compensatory vs. Noncompensatory?
Does someone’s membership in a cultural group affect their consumer behavior?
Let’s consider the “Core American Values
Do you agree with these?
Will they continue?
What do they mean for marketers?
What would they mean for food, clothing, entertainment?
Core values define how products are used in a society
Core values provide positive and negative valences for brands and communication programs
Core values define acceptable market relationships
Core values define ethical behavior
Do you belong to any Subcultural Groups?
Subculture is a distinct cultural group which exists as an identifiable segment within a larger, more complex society
Ethnic subcultures – Blacks, Hispanics, Asian Americans, Euro Americans, Native Americans, etc
Some Hard Facts
It is difficult to discuss common needs and practices in subcultural groups without sounding stereotypical and biased.
Summaries just reflect commonly-held behaviors, practices, and norms
Oftentimes various ethnic minorities live in areas where there is low income, little shopping opportunities, and great inequality - look at Camden
Regardless, people who belong to a specific group are likely to have identifiable preferences and needs
Acculturation: measures the degree to which a consumer has learned the ways of a different culture compared to how they were raised
“Consumer acculturation”- how people learn consumer behaviors in another culture
Consumer behaviour is the dynamic interaction of affect and cognition, behaviour and environmental events by which human beings conduct the exchange aspects of their lives.” Companies are interested in consumer behaviour because they can develop marketing strategies to influence consumers to purchase their products based on consumer analysis. The success of a company’s marketing strategy will depend on how buyers react to it. To find out what satisfied customers, marketers must examine the main influences on what, where, when and how customers buy goods and services . By understanding these factors better, marketers are better able to predict how consumers will respond to marketing strategies. Ultimately, this information helps companies compete more effectively in the marketplace and leads to more satisfied customers.
Consumer decisions can be classified into three categories (1) routine response behaviour, (2) limited decision-making and (3) extensive decision-making.
A consumer uses
routine response behaviour when buying frequently purchased, low cost, low risk items that require very little search and decision effort
Which elements of consumer behaviour do Morrison need to understand?
For the food retail industry, market segmentation is one of the most important factors in consumer behaviour analysis. Market segmentation is the process of dividing markets into groups of similar consumers and selecting the most appropriate groups and individuals for the firm to serve . Consumers vary in terms of product knowledge, involvement and purchasing behaviour.
The Five-Stage Model of the Consumer Buying Process as a model of the 'typical buying process' and is a way to explain how consumers make their purchases.
The five-stage process includes
-evaluation of alternatives,
However, a consumer does not necessarily go through all the steps and can in some cases even reverse the order . When a consumer buys a low-involvement product that is considered to have a low risk s/he usually has a preferred brand and will stick to this, even though there might be a broad selection of other brands. In that case the consumer goes straight from the problem recognition stage direct to make the purchase decision, skipping the information search and evaluation of alternatives . There are also several other situations where this model does not fully apply, such as when consumers make spontaneous purchases, are under a time constraint or have a certain attitude towards the product. Companies find it difficult to control the consumer buying decision process, however, they can get hints from consumer segmentation analysis because marketers’ group consumers are similar in some dimensions therefore a particular product will appeal to and satisfy them better. also identified five major types of segmentation including geographic segmentation with bases including city size and population. Companies can research areas in order to find out the social make – up of the area then select suitable products to match the social make – up.
If the company knows the number of people living in particular area, it will help it in considering whether to open a new branch or not as the case may be. Demographic factors such as age, sex, race, ethnic origin and family life cycle can also be considered. Socio-cultural segmentation can be categorized into four major areas (1) roles and family, (2)reference group, (3) social class and (4) culture and sub-culture. Psychographic segmentation includes motives, learning and attitudes. Behavioural segmentation looks at brand loyalty and usage rates. Morrisons have to link all these elements when considering their marketing strategies.
Consumer needs and wants change all the time in context with the issues raised above. The next stage for the company is to analyse the marketing mix based on consumer segmentation analysis. The marketing mix consists of product, price, promotion and channels of distribution. These are primary elements marketing managers can control to serve consumers. The aim is to develop a consistent mix where all the elements work together to serve the target market. Selecting target markets and developing marketing mixes are related various tasks.
These are the important elements that one should be considering if it wants to improve
Ø How many variations, models and sizes of the product are needed to satisfy the various target customers.
Ø In order to launch new own label products, what types of packaging and labelling information would best serve consumers and attract them to purchase the product.
Ø How much are consumers in a target market willing to pay for a particular product?
Ø What kind of price range is needed for that particular area.
Ø In order to achieve a successful advertising campaign, the company need to know which would be the best media format for reaching the target market.
Ø What image should advertising try to create about the company.
Ø What types of distribution channels would the consumer prefer to purchase a product in? Stores or other channels?. Morrisons is not currently offering online shopping. However, competitors such as Tesco, Sainsbury and Waitrose all offer online shopping and their sales of ecommerce are rapidly increasing.
Ø What kind of atmosphere might influence consumer preferences? Store layout, signs and display formats all influence consumer cognition.
There are two main reasons companies to issue loyalty cards. The first reason is consumers who have loyalty cards literally become more loyal and therefore become repeat customers. The research shows that when consumers were given a choice between two stores, they were more likely to shop at the one where they could earn rewards. The second reason is that companies can analyse consumer behaviour via the loyalty card database. Each time the card is swiped, companies get information about what customers bought, where and how customers paid. All this goes into a databank profile of individual purchase history. The data gained from each transaction can turn companies into “customer-centric” businesses. In addition, when the people signed up for the card, they gave personal information about their address, how many people live in the house, employment status, number of children and so on. Companies can analyse consumer segmentation based on this database.
In addition, retailers use loyalty card knowledge to find new markets, such as planning new range rollouts and managing fresh food. In the process they can save a fortune in costs. Another benefit is companied may save in advertising and outsourcing market research costs because now the company has its own database to analyse the individual customer.
The focus of customer relationship management has evolved from customer satisfaction to the creation of values for the customer. It is important to look at customers from the customers’ point viewpoint and not from the product or multiple channels.
Consumer behaviour is affected by many uncontrollable factors therefore issuing loyalty cards can help in understanding consumer behaviour.
However, it is now believed that the combination of added value for consumers and the useful data that can be gathered has persuaded the supermarket to introduce a loyalty scheme. Secondly, using this database to analyse consumer segmentation can help match consumer needs and wants. Thirdly, this database can be used to create a new marketing mix strategy in terms of the right product at the right price through the right channels and promoted in the right way.
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3. You are a member of the purchase committee that has been formed to purchase fifty laptops
for your company. Being a member of purchase committee, what criteria would you suggest
to select the supplier for the same? Explain.
4. ‘Certain products require high degree of pre purchase information search’. Justify the
statement by giving suitable examples. Also give marketing implication of this pre-purchase
search behavior of consumers.
5. Briefly discuss the perception process. Being the marketer of a range of cosmetic products
meant for upper income group people, how would you use the concept of perception while
designing marketing mix for your product?
6. Discuss Nicosia’s model of consumer behavior. Also explain its relevance for a marketer.
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3. You are a member of the purchase committee that has been formed to purchase fifty laptops for your company. Being a member of purchase committee, what criteria would you suggest to select the supplier for the same? Explain.
BUSINESS MARKETS AND BUYING BEHAVIOR
The business market includes firms that buy goods and services in order to produce products and services to sell to others. It also includes retailing and wholesaling firms that buy goods in order toects resell them at a profit. Because asp of business-to-business marketing apply to institutional markets and government markets, we group these together. The business marketer needs to know the following: Who are the major participants? In what decisions do they exercise influence? What is their relative degree of influence? What evaluation criteria does each decision participant use? The business marketer also needs to understand the major environmental, interpersonal, and individual influences on the buying process.
A. What is a Business Market?
The business market comprises all the organizations that buy goods and services for use in the production of other products and services that are sold, rented, or supplied to others. It also includes retailing and wholesaling firms that acquire goods for the purpose of reselling or renting them to others at a profit. In the business buying process business buyers determine which products and services their organizations need to purchase, and then find, evaluate, and choose among alternative suppliers and brands. Companies that sell to other business organizations must do their best to understand business markets and business buyer behavior.
B. Characteristics of Business Markets
In some ways, business markets are similar to consumer markets. Both involve people who assume buying roles and make purchase decisions to satisfy needs. However, business markets differ in many ways from consumer markets. The main differences, are in the market structure and demand, the nature of the buying unit, and the types of decisions and the decision process involved. Business markets also have their own characteristics. In some ways, they are similar to consumer markets, but in other ways they are very different. The main differences include:
1. Market structure and demand.
Business markets typically deal with far fewer but far larger buyers. They are more geographically concentrated. Business markets have derived demand (business demand that ultimately comes from or derives from the demand for consumer goods). Many business markets have inelastic demand; that is, total demand for many business products is not affected much by price changes, especially in the short run.
A drop in the price of leather will not cause shoe manufacturers to buy much more leather unless it results in lower shoe prices that, in turn, will increase consumer demand for shoes. Finally, business markets have more fluctuating demand. The demand for many business goods and services tends to change more—and more quickly—than the demand for consumer goods and services does. A small percentage increase in consumer demand can cause large increases in business demand. Sometimes a rise of only 10 percent in consumer demand can cause as much as a 200 percent rise in business demand during the next period.
2. Nature of the Buying Unit:
Compared with consumer purchases, a business purchase usually involves more decision participants and a more professional purchasing effort. Often, business buying is done by trained purchasing agents who spend their working lives learning how to make better buying decisions. Buying committees made up of technical experts and top management are common in the buying of major goods. Companies are putting their best and brightest people on procurement patrol. Therefore, business marketers must have well-trained salespeople to deal with well-trained buyers.
3. Types of Decisions and the Decision Process
Business buyers usually face more complex buying decisions than do consumer buyers. Purchases often involve large sums of money, complex technical and economic considerations, and interactions among many people at many levels of the buyer's organization. Because the purchases are more complex, business buyers may take longer to make their decisions. The business buying process tends to be more formalized than the consumer buying process. Large business purchases usually call for detailed product specifications, written purchase orders, careful supplier searches, and formal approval.
The buying firm might even prepare policy manuals that detail the purchase process. Finally, in the business buying process, buyer and seller are often much more dependent on each other. Consumer marketers are often at a distance from their customers. In contrast, business marketers may roll up their sleeves and work closely with their customers during all stages of the buying process—from helping customers define problems, to finding solutions, to supporting after-sale operation. They often customize their offerings to individual customer needs. In the short run, sales go to suppliers who meet buyers' immediate product and service needs.
C. Business Buyer Behavior
The model in Figure suggests four questions about business buyer behavior: What buying decisions do business buyers make? Who participates in the buying process? What are the major influences on buyers? How do business buyers make their buying decisions?
a. A Model of Business Buyer Behavior
At the most basic level, marketers want to know how business buyers will respond to various marketing stimuli. Figure shows a model of business buyer behavior. In this model, marketing and other stimuli affect the buying organization and produce certain buyer responses. As with consumer buying, the marketing stimuli for business buying consist of the four Ps: product, price, place, and promotion. Other stimuli include major forces in the environment: economic, technological, political, cultural, and competitive.
These stimuli enter the organization and are turned into buyer responses: product or service choice; supplier choice; order quantities; and delivery, service, and payment terms. In order to design good marketing mix strategies, the marketer must understand what happens within the organization to turn stimuli into purchase responses. Within the organization, buying activity consists of two major parts: the buying center, made up of all the people involved in the buying decision, and the buying decision process. The model shows that the buying center and the buying decision process are influenced by internal organizational, interpersonal, and individual factors as well as by external environmental factors.
b. Major Types of Buying Situations
There are three major types of buying situations. At one extreme is the straight rebuy, which is a fairly routine decision. At the other extreme is the new task, which may call for thorough research. In the middle is the modified rebuy, which requires some research. In a straight rebuy the buyer reorders something without any modifications. It is usually handled on a routine basis by the purchasing department. Based on past buying satisfaction, the buyer simply chooses from the various suppliers on its list. "In" suppliers try to maintain product and service quality. In a modified rebuy, the buyer wants to modify product specifications, prices, terms, or suppliers. The modified rebuy usually involves more decision participants than the straight rebuy. The in suppliers may become nervous and feel pressured to put their best foot forward to protect an account. Out suppliers may see the modified rebuy situation as an opportunity to make a better offer and gain new business. A company buying a product or service for the first time faces a new-task situation.
In such cases, the greater the cost or risk, the larger the number of decision participants and the greater their efforts to collect information will be. The new-task situation is the marketer's greatest opportunity and challenge. The marketer not only tries to reach as many key buying influences as possible but also provides help and information. The buyer makes the fewest decisions in the straight rebuy and the most in the new-task decision. In the new-task situation, the buyer must decide on product specifications, suppliers, price limits, payment terms, order quantities, delivery times, and service terms. The order of these decisions varies with each situation, and different decision participants influence each choice.
c. Participants in the Business Buying Process
The decision-making unit of a buying organization is called its buying center: all the individuals and units that participate in the business decision-making process. The buying center includes all members of the organization who play any of five roles in the purchase decision process.
• Users are members of the organization who will use the product or service. In many cases, users initiate the buying proposal and help define product specifications.
• Influencers often help define specifications and also provide information for evaluating alternatives. Technical personnel are particularly important influencers.
• Buyers have formal authority to select the supplier and arrange terms of purchase. Buyers may help shape product specifications, but their major role is in selecting vendors and negotiating. In more complex purchases, buyers might include high-level officers participating in the negotiations.
• Deciders have formal or informal power to select or approve the final suppliers. In routine buying, the buyers are often the deciders, or at least the approvers.
• Gatekeepers control the flow of information to others. For example, purchasing agents often have authority to prevent salespersons from seeing users or deciders. Other gatekeepers include technical personnel and even personal secretaries. The buying center is not a fixed and formally identified unit within the buying organization.
It is a set of buying roles assumed by different people for different purchases. Within the organization, the size and makeup of the buying center will vary for different products and for different buying situations. Business marketers working in global markets may face even greater levels of buying center influence. The buying center concept presents a major marketing challenge. The business marketer must learn who participates in the decision, each participant's relative influence, and what evaluation criteria each decision participant uses. The buying center usually includes some obvious participants who are involved formally in the buying decision.
d. Major Influences on Business Buyers
Business buyers are subject to many influences when they make their buying decisions. Some marketers assume that the major influences are economic. They think buyers will favor the supplier who offers the lowest price or the best product or the most service. They concentrate on offering strong economic benefits to buyers. However, business buyers actually respond to both economic and personal factors. Far from being cold, calculating, and impersonal, business buyers are human and social as well.
They react to both reason and emotion. Today, most business-to-business marketers recognize that emotion plays an important role in business buying decisions. When suppliers' offers are very similar, business buyers have little basis for strictly rational choice. Because they can meet organizational goals with any supplier, buyers can allow personal factors to play a larger role in their decisions. However, when competing products differ greatly, business buyers are more accountable for their choice and tend to pay more attention to economic factors. Figure lists various groups of influences on business buyers— environmental, organizational, interpersonal, and individual.
Major Influences on Business Buyers
• Environmental Factors
Business buyers are influenced heavily by factors in the current and expected economic environment, such as the level of primary demand, the economic outlook, and the cost of money. As economic uncertainty rises, business buyers cut back on new investments and attempt to reduce their inventories. An increasingly important environmental factor is shortages in key materials. Many companies now are more willing to buy and hold larger inventories of scarce materials to ensure adequate supply.
Business buyers also are affected by technological, political, and competitive developments in the environment. Culture and customs can strongly influence business buyer reactions to the marketer's behavior and strategies, especially in the international marketing environment. The business marketer must watch these factors, determine how they will affect the buyer, and try to turn these challenges into opportunities.
• Organizational Factors
Each buying organization has its own objectives, policies, procedures, structure, and systems. The business marketer must know these organizational factors as thoroughly as possible. Questions such as these arise: How many people are involved in the buying decision? Who are they? What are their evaluative criteria? What are the company's policies and limits on its buyers?
The buying center usually includes many participants who influence each other. The business marketer often finds it difficult to determine what kinds of interpersonal factors and group dynamics enter into the buying process. Participants may have influence in the buying decision because they control rewards and punishments, are well liked, have special expertise, or have a special relationship with other important participants. Interpersonal factors are often very subtle. Whenever possible, business marketers must try to understand these factors and design strategies that take them into account.
Each participant in the business buying decision process brings in personal motives, perceptions, and preferences. These individual factors are affected by personal characteristics such as age, income, education, professional identification, personality, and attitudes toward risk. Also, buyers have different buying styles. Some may be technical types who make in-depth analyses of competitive proposals before choosing a supplier. Other buyers may be intuitive negotiators who are adept at pitting the sellers against one another for the best deal.
D. The Business Buying Process
There are eight stages of the business buying process. Buyers who face a new-task buying situation usually go through all stages of the buying process. Buyers making modified or straight rebuys may skip some of the stages. We will examine these steps for the typical new-task buying situation.
a. Problem Recognition
The buying process begins when someone in the company recognizes a problem or need that can be met by acquiring a specific product or service. Problem recognition can result from internal or external stimuli. Internally, the company may decide to launch a new product that requires new production equipment and materials. Or a machine may break down and need new parts. Perhaps a purchasing manager is unhappy with a current supplier's product quality, service, or prices. Externally, the buyer may get some new ideas at a trade show, see an ad, or receive a call from a salesperson who offers a better product or a lower price. In fact, in their advertising, business marketers often alert customers to potential problems and then show how their products provide solutions.
b. General Need Description
Having recognized a need, the buyer next prepares a general need description that describes the characteristics and quantity of the needed item. For standard items, this process presents few problems. For complex items, however, the buyer may have to work with others—engineers, users, consultants—to define the item. The team may want to rank the importance of reliability, durability, price, and other attributes desired in the item. In this phase, the alert business marketer can help the buyers define their needs and provide information about the value of different product characteristics.
c. Product Specification
The buying organization next develops the item's technical product specifications, often with the help of a value analysis engineering team. Value analysis is an approach to cost reduction in which components are studied carefully to determine if they can be redesigned, standardized, or made by less costly methods of production. The team decides on the best product characteristics and specifies them accordingly. Sellers, too, can use value analysis as a tool to help secure a new account. By showing buyers a better way to make an object, outside sellers can turn straight rebuy situations into new-task situations that give them a chance to obtain new business.
d. Supplier Search
The buyer now conducts a supplier search to find the best vendors. The buyer can compile a small list of qualified suppliers by reviewing trade directories, doing a computer search, or phoning other companies for recommendations. Today, more and more companies are turning to the Internet to find suppliers. For marketers, this has leveled the playing field—smaller suppliers have the same advantages as larger ones and can be listed in the same online catalogs for a nominal fee: The newer the buying task, and the more complex and costly the item, the greater the amount of time the buyer will spend searching for suppliers. The supplier's task is to get listed in major directories and build a good reputation in the marketplace. Salespeople should watch for companies in the process of searching for suppliers and make certain that their firm is considered.
e. Proposal Solicitation
In the proposal solicitation stage of the business buying process, the buyer invites qualified suppliers to submit proposals. In response, some suppliers will send only a catalog or a salesperson. However, when the item is complex or expensive, the buyer will usually require detailed written proposals or formal presentations from each potential supplier. Business marketers must be skilled in researching, writing, and presenting proposals in response to buyer proposal solicitations. Proposals should be marketing documents, not just technical documents. Presentations should inspire confidence and should make the marketer's company stand out from the competition.
f. Supplier Selection
The members of the buying center now review the proposals and select a supplier or suppliers. During supplier selection, the buying center often will draw up a list of the desired supplier attributes and their relative importance. In one survey, purchasing executives listed the following attributes as most important in influencing the relationship between supplier and customer: quality products and services, on-time delivery, ethical corporate behavior, honest communication, and competitive prices. Other important factors include repair and servicing capabilities, technical aid and advice, geographic location, performance history, and reputation. The members of the buying center will rate suppliers against these attributes and identify the best suppliers. As part of the buyer selection process, buying centers must decide how many suppliers to use. In the past, many companies preferred a large supplier base to ensure adequate supplies and to obtain price concessions. These companies would insist on annual negotiations for contract renewal and would often shift the amount of business they gave to each supplier from year to year. Increasingly, however, companies are reducing the number of suppliers.
There is even a trend toward single sourcing, using one supplier. With single sourcing there is only one supplier to handle and it is easier to control newsprint inventories. Using one source not only can translate into more consistent product performance, but it also allows press rooms to configure themselves for one particular kind of newsprint rather than changing presses for papers with different attributes. Many companies, however, are still reluctant to use single sourcing. They fear that they may become too dependent on the single supplier or that the single-source supplier may become too comfortable in the relationship and lose its competitive edge. Some marketers have developed programs that address these concerns.
g. Order-Routine Specification
The buyer now prepares an order-routine specification. It includes the final order with the chosen supplier or suppliers and lists items such as technical specifications, quantity needed, expected time of delivery, return policies, and warranties. In the case of maintenance, repair, and operating items.
h. Performance Review
In this stage, the buyer reviews supplier performance. The buyer may contact users and ask them to rate their satisfaction. The performance review may lead the buyer to continue, modify, or drop the arrangement. The seller's job is to monitor the same factors used by the buyer to make sure that the seller is giving the expected satisfaction. We have described the stages that typically would occur in a new-task buying situation. The eightstage model provides a simple view of the business buying decision process. The actual process is usually much more complex.
In the modified rebuy or straight rebuy situation, some of these stages would be compressed or bypassed. Each organization buys in its own way, and each buying situation has unique requirements. Different buying center participants may be involved at different stages of the process. Although certain buying process steps usually do occur, buyers do not always follow them in the same order, and they may add other steps. Often, buyers will repeat certain stages of the process.
LAPTOP BUYING BY ORGANIZATION
1.Purchases are planned and needs are anticipated
2.Systematic, cost benefit analysis
4.Regional or national
5.Proposals and bids formally solicited
6.Extensive ~comparislon and ranking of suppliers
7.Time and place of delivery and frequency of order specified as part of the contract
8.Active file maintained on supplier and product performance
A BASIC MODEL OF
ORGANIZATIONAL BUYING DECISION
Product buying centre
Criteria to evaluate products
Criteria to evaluate suppliers >>>>>>Evaluation
Expectations >>>>>>alternative products >>purchase
>>>>>>alternative suppliers>> decision
About alternative products
About alternative suppliers
Trade newspapers / Word of mouth
This model can add value to the customer buying by
-creating product awareness
-making product availability
-providing after sales service
-providing effective customer service
-special pricing terms
-special inventory terms
-special delivery terms
-controlled order cycle time
-special credit terms
4. ‘Certain products require high degree of pre purchase information search’. Justify the statement by giving suitable examples. Also give marketing implication of this pre-purchase search behavior of consumers.
Pre-Purchase Processes: Need Recognition, Search, and Evaluation
The Consumer Decision Process (CDP) is a road map of consumer's minds that marketers and managers can use to help guide product mix, communication and sales strategies :
Need recognition refers to the buyer's acceptance that the category (a product or service) is necessary to remove or satisfy a perceived discrepancy between the current motivational state and the desired motivational state.
Search for information:
• Internal: retrieving knowledge from memory or genetic tendencies.
• External: collecting information from peers, family and the marketplace.
Sources of information:
• Marketer dominated: anything the supplier does to inform and persuade
• Non-marketed dominated: friends, family, opinion leaders, media, WOM.
• Exposure * Attention * Comprehension * Acceptance * Retention
Pre-purchase alternative evaluation:
• Evaluative criteria: standards used to compare different products & brands.
• Salient attributes: the most important.
• Determinant attributes: details that determine which brand or store consumers choose .
Purchase to decide whether to purchase:
• Choose one retailer (catalogues, aids on TV…)
• In-store choices (salespersons, product displays at POP…)
Consumption: the point at which consumers use the product - satisfied?
Post-consumption evaluation: possible results:
• Satisfaction: consumers' expectations are matched by perceived performance.
• Dissatisfaction: experiences and performance fall short of expectations
• Post-purchase regret: have I made a good decision? Did I consider all the alternatives? The highest the price, the highest this factor.
Variables that shape the decision process:
VARIABLES THAT SHAPE THE DECISION PROCESS
• demographics, psychographics, values, personality, lifestyle
• consumer resources (time, money attention * information reception and processing capabilities)
• knowledge (information stored in memory)
• attitudes (overall evaluation of an alternative)
• social class
• family (the primary decision-making unit)
• personal influences
• information processing
• learning (process whereby experience leads to changes in behaviour)
• attitude and behaviour change
• NEED RECOGNITION
Need recognition refers to the buyer's acceptance that the category (a product or service) is necessary to remove or satisfy a perceived discrepancy between the current motivational state and the desired motivational state. If the need is not activated, there is no business!.
Options to activate it:
• Product innovations.
• Undermine consumers' perceptions about their actual state.
• Advertising (reminding the need).
Types of need recognition that can be activated:
• Generic need (primary demand): demand for the product or service category as a whole, but it applies to all brands in the category .
• Selective need (selective demand): occurs when the need for a specific brand within a product category is stimulated.
Purchase motives that can be activated:
NEGATIVE PURCHASE MOTIVES POSITIVE PURCHASE MOTIVES
Problem removal Sensory gratification
Problem avoidance Intellectual stimulation
Incomplete satisfaction Social approval
Mixed-approach avoidance --
Normal depletion --
Once the need recognition has been activated, the consumer will proceed through the decision process depending on the importance of the need at the time it is activated .
Aspects companies must bear in mind in building up competitive maps of consumer research:
Degree: how many…?
Sequence: in what order…?
• PRE-PURCHASE EVALUATION
The alternatives considered during decision making compose the consideration or evoked set (eg: BLs only have that brand in their consideration set). Companies are very interested in gain entry into the consideration set and sometimes it is beneficial for a company that the buyer also considers competitive brands (“attraction effect”): the attractiveness of a given alternative and its odds of being chosen are enhanced when a clearly inferior alternative is also considered.
There are 2 options to evaluate the different choice alternatives:
• Rely on pre-existing evaluations: prior consumption of the product leads to the formation of evaluation that is stored in memory. If the relevant evaluations are retrieved during internal search, then each can be compared to determine which considered alternative is most liked (eg: Coke or Pepsi, Mcdonald's or Burger King…?).
• Constructing new evaluations: in many circumstances consumers may be unable or unwilling to rely on their pre-existing evaluations for making a choice (eg: NCUs). There are 2 basic processes by which consumers can construct evaluations:
• Categorisation process: evaluation of a choice alternative depends on the particular category to which is assigned (general product category: motorised forms of transportation; specific product category: Harley Davidson motorcycles). The phenomenon of “brand extensions” occurs when a well-known and respected brand from one product category is extended into other product categories.
• Piecemeal process: an evaluation is derived from consideration of the alternative's advantages and disadvantages along important product dimensions . In choosing the evaluative criteria, consumers use:
• “Cut-offs” (restrictions for acceptable performance)
• Signals (product attributes that are used to infer other product attributes * eg: higher prices are often indicators of higher quality).
Once the consumer has selected the different choice alternatives, he/she has to apply a decision rule, or evaluation strategies:
• Non-compensatory evaluation strategies: a product weakness on one attribute cannot be offset by its strong performance on another attribute (eg: if you reduce the oil and salt in chips to make them healthier, consumers won't buy them):
* Lexicographic strategy: brands are compared initially on the most important attribute. The brand perceived as superior is bought.
* Elimination by aspects strategy: the consumer imposes cut-offs (eg: must be under £2) and if only one brand passes it will be chosen, if more than one pass then the prior strategy will be applied.
* Conjunctive strategy: the consumer establishes a set of cut-offs and the brand that meets all the cut-offs will be chosen.
• Compensatory evaluation strategies: a perceived weakness of one attribute may be offset by the perceived strength of another attribute:
* Simple additive: the consumer simply counts or adds the number of times each alternative is judged favourably in terms of the set of salient evaluative criteria
* Weighted additive: the consumer now engages in more refined judgements about the alternative's performance than simply whether it is favourable or unfavourable. These judgements are then weighted by the importance attached to the attributes.
A) TYPES OF PURCHASE DECISIONS:
In the purchase stage, consumers decide whether, when, what, where to buy and how to pay. The decision to buy can lead to 3 different purchasing methods:
• FULLY-PLANNED PURCHASE: Both the product and brand are chosen in advance. It is more likely to occur with high involvement. Marketing tactics (sampling of products, price reductions, coupons, POP displays, other promotional activities…) put efforts on loyalty.
• PARTIALLY PLANNED PURCHASE: Intent to buy the product exists but brand choice is deferred until shopping, when price reductions or special displays and packaging affect.
• UNPLANNED PURCHASE: Both the product and brand are chosen at point of sale (“in-store marketing strategies”) (eg: TPS).
Sometimes, timing factors such as seasonality affect the purchase and the marketing mix:
* Products: need to be available when customers need them
* Promotions must run at the right time.
* Price: time also affects price (eg: flights, 7-Eleven…)
B) STORE IMAGE (RETAIL FACTORS) AND CHARACTERISTICS:
To make choices, consumers rely on their overall perception of a store when making choices. The way in which a store is defined in the shopper's mind (functional qualities + psychological attributes) is called “store image”, and affects the decision of purchase. Determinants of retailer success or failure:
• Location: it represents the distance consumers perceive the have to travel to reach and shop at the store and it is influenced by ease of parking, ease of driving, access…
• Nature and quality of assortment (surtido).
• Price: price promotion is not always the best strategy as it only shifts demand from one time period to another for a store (no loyalty).
• Advertising and promotion for positioning of the retail brand:
• Image advertising: uses visual components and words that help consumers form an expectation about their experience in the store and what kinds of consumers will be satisfied with the store's experience.
• Information advertising: provides detail about products, prices, hours of store operation, locations and other attributes that might influence purchase decisions.
• Sales personnel: skill levels and motivation are the main factors that make a salesperson effective. The persuasion strategies (used in the transaction relationship are important in the sales success) are: perceived knowledge & expertise; perceived trustworthiness; customer knowledge and adaptability.
• Services offered: depending on the type of outlet and consumer expectations, delivery, credit, overall good service.
• Store atmospherics (physical store attributes): the physical properties of the retail environment designed to create an effect on consumer purchases. To the marketer, a store atmospherics can help shape both the direction and duration of consumers' attention and increase the odds that a consumer will purchase products that otherwise might go unnoticed: music, elevators, air conditioning…
• POP displays: POP displays increase the odds of capturing consumers' attention and therefore stimulate purchase and increase sales. This is true especially if we are analysing low-involvement and impulse products because it is a fundamental aspect whether or not consumers are aware of a product's existence, so displays and shelf-position become foremost vehicles to induce purchasing in the store (ENGEL et al refer to it as “in-store stimuli”). It is important at the “exposure” step in the “psychological process”,
• Store layout: It is referred to the location of items within the store, related with the size of the outlet and the maximisation of the traffic flow through the store (eg: placing the tills where consumers have to walk as many aisles as possible).
• Store atmosphere (environment): aspects that affect the shopper's mood and willingness to visit and linger: lighting, presentation of merchandise, colours, music… it can affect either quick or slow purchases
• Store clientele: a customer matches one-self image with the rest of buyers in the store, and it can make it to avoid one store or to choose it.
• Consumer logistics: it is the speed and ease with which consumers move through the retail and shopping process. It contains 7 primary consumer stages:
• Preparation to shop.
• Arriving at.
• Entering the shop / store.
• Movement through the store.
• Check-out (pasar x caja)
• Travel home and home warehousing
• Inventory stock-outs
In general, stores are adding technology, personnel and training to increase service and decrease the time consumers spend waiting in the store and at check-out (eg: checkers throughout the store for customers to check prices).
Spyware is software that’s downloaded onto a computer without the permission of the owner and that collects personal information such as the user’s online activities, financial records, and passwords. Generic need recognition occurs when the need for an entire product category is stimulated. Selective need recognition occurs when the need for a specific brand within a product category (selective demand) is stimulated.
Search, the second stage of the decision-making process, represents the motivated activation of knowledge stored in memory or acquisition of information from the environment about potential need satisfiers. Internal search involves scanning and retrieving decision-relevant knowledge stored in memory. External search consists of collecting information from the marketplace. External search motivated by an upcoming purchase decision is known as pre-purchase search. This type of external search differs from ongoing search, in which information acquisition takes place on a relatively regular basis regardless of sporadic purchase needs. External search set: those choice alternatives that consumers gather information about during pre-purchase search. Haptic information represents information acquired by touch. Opinion leaders or influential’s are other consumers who are respected for their expertise in a particular product category. “Funnel” search strategy: when people begin their internet search with generic terms but eventually refine their search with terms focusing on specific products. According to a cost versus benefit perspective, people search for decision-relevant information when the perceived benefits of the new information are greater than the perceive costs of acquiring this information. Perceived risk represents consumers’ uncertainty about the potential positive and negative consequences of the purchase decision.
The manner in which choice alternatives are evaluated is the focus of our third stage of the consumer decision-making process, pre-purchase evaluation. Those alternatives considered during decision making compose what is known as the consideration set (also known as the evoked set).
Retrieval set: the recall of choice alternatives from memory. According to a categorization process, evaluation of a choice alternative depends on the particular category to which it is assigned. In contrast, under a piecemeal process, an evaluation is derived from consideration of the alternative’s advantages and disadvantages along important product dimensions. Brand extensions, in which a well-known and respected brand name from one product category is extended into other product categories, is one way companies employ categorization to their advantage. A cutoff is simply a restriction or requirement for acceptable performance. Signals are stimuli used to make inferences about the product.
• Lexicographic strategy (noncompensatory evaluation strategy): an evaluation strategy in which brands are compared initially on their most important attribute.
• Elimination by aspects strategy (noncompensatory evaluation strategy): an evaluation strategy resembling the lexicographic strategy but in which the consumer imposes cutoffs.
• Conjunctive strategy (noncompensatory evaluation strategy): an evaluation strategy employing a comparison of each brand to cutoffs that are established for each salient attribute of the brand.
• Simple additive (compensatory evaluation strategy): an evaluation strategy by which the consumer counts or adds the number of times each alternative is judged favorably in terms of the set of salient evaluative criteria.